Production Roulette

In the past, the following has happened: Quakes have shut down image sensor plants. Floods have shut down manufacturing plants. Tsunamis have wiped out small parts suppliers. Fires have cut off critical parts supplies. And that's just the high-level and obvious-to-everyone stuff.

Each time one of these things occur, the camera makers who are impacted issue statements about how they're going to implement mitigation tactics so that the same problem can't recur. Guess what? The camera makers are probably more vulnerable today to event disruption than they've ever been. The pandemic is pointing that out, but the next big geological event will likely be the proof.

Nikon, for instance, had somewhat distributed manufacturing back when the 2011 quake, tsunami, and flood hit (first in Japan and then in Thailand). The Thailand plant that made most of the Nikon DSLRs was essentially rendered inoperable for months due to flooding. Meanwhile, the Nikon Sendai manufacturing plant in Japan had already been rendered inoperable earlier in the year due to the quake/tsunami. Lens production picked back up fairly quickly because it was mostly done in a different plant in a somewhat less affected area in Japan, with a few lower end lenses produced in China. The Nikon 1 suddenly became the primary focus of the company's ILC sales efforts because it was made in a plant in China that wasn't really impacted by the problems elsewhere. 

Guess what? Due to market contraction, Nikon has moved camera production out of Sendai, much of its lens production out of Japan to Thailand, and closed the China plant that made the Nikon 1. Nikon's current production has mostly been consolidated to the Thailand plant. Another flood similar to the one in 2011 would shut virtually all of Nikon's manufacturing ability down (there's a primary Sony manufacturing plant in the same industrial park right next door, by the way). 

Nikon isn't the only one in this position. Everyone has been consolidating plants and making themselves more vulnerable to disruption. The fire last October at the AKM semiconductor plant in Japan was another of those "lots of eggs in one basket" bets, and disrupted the supply chain for critical parts for months. Then in March we had another fire at a Renesas plant that caused more supply issues, though primary for the auto industry. Both plants had about a one month stockpile of parts in inventory that was not impacted by the fires, but as you might guess those are long gone now, and both plants required major reconstruction; the Renesas plant is back online now with a full capacity resurrection expected this month. Still, demand didn't stop during that downtime, and the length of the downtime means that there's now pent-up demand, so we'll feel the effects at the consumer end for awhile yet.

As if that weren't enough, China's saber-rattling regarding Taiwan raises another potential point of disruption to parts supply (and manufacturing of phones and computers). 

Personally, I'm glad I'm out of the day-to-day job of having to deal with manufacturing contingencies. There isn't a perfect answer. Create inventory and manufacturing capacity "just in case" and you risk it not ever getting used and thus eroding your margins. Create efficiency via "just in time" and plant consolidation and you risk being thrown completely out of product. The trick is to get the balance of the two approaches "just right." 

Unfortunately, the current situation shows that nobody got it just right. While some camera and lens makers are doing better than others in keeping product in stock, every maker I've looked at seems to have at least some products that have been impacted. 

You might have noticed the two results of that: (1) some products are going in and out of back-ordered status; and (2) the Instant Rebate parade of savings doesn't have many participants these days. I've talked to executives at two companies, and both have hopes—but not yet confirmation—that things will ease up by the time the serious holiday shopping starts in November. 

For popular items—Fujifilm GFX100s, Nikon D850, Sony A1, for example—I'd say just get in line if you want those models. If you don't, you risk not having one this year, as these all pretty much go out of stock as fast as the companies bring a new shipment into the US. If you get in line with a reputable dealer, you might get it sooner than you wanted it (e.g. next shipment instead of holiday present), but you stand a better chance of getting it. (I know of one dealer with incoming D850 inventory not committed to at the moment, by the way.) 

I'm sure there will be deals come the holidays. I'm just not sure what they will be on (usually at this time of year I begin hearing what products each company is going to push into discounts). My suspicion will be that aging inventory will be the thing that gets the Instant Rebates this year. Previous generation products still produced, or that recently that stopped production, which the makers want to get off their books.

If it weren't for the latest state of emergency enacted in Tokyo, I'd be predicting a large slate of new camera products hitting the shelves in the first and second quarter of 2022. I'm aware of a lot of prototyping and planning that companies want to get to production in the first half of next year. I'm not sure all of it will, though.

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