Canon Moves to Avoid Trade War

With the escalating US-China trade war threatening to cause a global economic meltdown, Canon Inc is conducting feasibility studies across 40 countries, including India, to set up manufacturing plants, which it believes will help in hedging possible economic issues.

“We are conducting feasibility studies across the world in about 40 countries and are ready to set up new factories in some countries because US-China relations might affect production or business; so we always need to be prepared,” Kazutada Kobayashi, advisory director of Canon, told Business Standard.

The studies, being conducted from its Tokyo headquarters, will check the basic fundamentals of production, including infrastructure, labour quality, convenience, material supply and others.

In the case of India and a few other countries under consideration, although Kobayashi said there currently there are no concrete plans to establish production facilities, the study is underway and the final call will be taken based on how the trade war intensifies and its global repercussions.

“The timing of establishing new factories cannot be ascertained and is very unforeseeable. Any emerging thing may happen or there may be a new domain that we may step into,” he told this newspaper.

Kobayashi, who is also the president and CEO of Canon India, said most of the shortlisted countries are in South-East Asia, South America, West Asia and Africa and the plant locations needs to spread across the globe for effective hedging against the tariff war.

“It will be across the world, otherwise there hedge risk will have no meaning if you concentrate on one geography,” he said.

The US and China have imposed additional tariffs on each others’ exports. This means that a product made in China will attract additional duty in the US and vice versa, but the same product imported from another country will not attract extra duty.

Asked if Canon is prepared to shift its production lines if the tariff war intensifies, Kobayashi said, “The printers and the copiers are being produced in China, Thailand and Philippines. So, if we face difficulties in China, we can produce the same models in the other two countries – that is how we can hedge the risk. We are still watching the situation.”

Apart from four plants in China, Canon has units in more than 20 other countries at present.

India projection

In face of the current economic slowdown in India, Canon India is expecting its annual growth to be in the range of 10.1-19.9 per cent. Last year, the company had registered 16 per cent growth.

“I expect another double digit growth for 2019; the minimum is 10.1 per cent and the maximum is 19.9 per cent. I am not confident of reaching 20 per cent growth, but I am confident to reach 10 per cent,” he said.

Although Kobayashi said the imaging company’s Indian entity has clocked double-digit growth in the first half of this year, the festive season will play a crucial role in clocking the final growth rate.

“During Onam, we had a mixed business. The money is there but whether the consumer will spend it or not, that is the question,” he said.

Canon India is therefore betting on its business to business (B2B) solutions, which are largely based on commercial printing and copiers, for growth in this country.

“The camera business will perhaps stay sustainable but I do not expect too big a growth from this segment; so I think the double-digit growth may be obtained from the B2B segment,” Kobayashi concluded.

After rolling out a 200-odd consumer centered Canon Image Square, the company is focussing on growing its franchisee-based Canon Business Image Solution Lounges, which are essentially B2B showrooms.

(oringinally published at: www.business-standard.com)

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