Japanese imaging and optical equipment maker Canon plans to return 50% of its production on-shore by the year 2015. Chairman and CEO Fujio Mitarai cited the weak yen and expenses of manufacturing overseas as the main reasons for moving back production to Japan.
Mitarai noted that the company’s “overseas production ratio is too high,” and so most operations should be brought back locally. Though less than 50% of the company’s manufacturing is done domestically, it has not gone below 40%, unlike its competitors Nikon and Ricoh, whose Japan production ratios are within 10-30% only. As costs of taking production offshore is getting higher with workers demanding for higher pay, Canon found that moving towards automation will maintain their costs at a reduced level than if they were paying employees to do the job a machine can do. Just last year, the switch to “robots” was made to build camera lenses. Under the conventional cell production style, a worker must be able to multi-task to finish everything.
The switch to a man-machine has led to faster work output and lesser cost, as purchase of the machine will only be a one-time expense as opposed to a monthly-waged employee. However, employees who have lost their production jobs to robots are still needed in other tasks such as sourcing materials, assembly of high-end products and of course, managing the robots who have replaced them.
Canon’s penchant for capital spending has kept the company ahead of its rivals at a gross profit margin of 50%. The 2008 financial crisis hardly made a dent on the company because of its very high margin in operating profit. However, the advent of smartphones has drastically brought down the company’s digital camera sales. As such, Mitarai said that increase in sales would be in other sectors such as medical equipment.
[via Nikkei Asian Review]