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Sigma CEO leads premium push in camera market (Q&A)

Under CEO Kazuto Yamaki, Sigma has helped transform the Japanese company so most of its revenue comes from higher-end products. Too bad about the camera business, though.

Sigma CEO Kazuto Yamaki Photokina shows the new company's new 150-600mm lens at Photokina.
Sigma CEO Kazuto Yamaki Photokina shows the new company's new 150-600mm lens at Photokina. Stephen Shankland/CNET

COLOGNE, Germany -- Things are going right for Sigma.

For years, the Japanese lensmaker sold second-tier lenses for SLRs, cheaper but lower-quality alternatives to the in-house models from giants like Canon and Nikon. That's all changed now.

CEO Kazuto Yamaki, 46, took over as chief executive of the family-owned, 1,600-employee business in January 2012. Since then, a recent spate of high-end, high-priced lenses have given Sigma new cachet.

Those include the 35mm f/1.4 DG HSM, the 50mm f1.4 DG HSM and the 18-35mm F1.8 DC HSM . Those are compact models, but at the Photokina conference, Sigma announced two much larger supertelephoto zooms to come, the higher-end 150-600mm F/5-6.3 DG OS HSM Sports, set to arrive in October for $2,000 (£1,600, AU$2,200), and a somewhat smaller 150-600mm F/5-6.3 DG OS HSM Contemporary, whose particulars remain undisclosed.

Yamaki sat down with CNET's Stephen Shankland at the Photokina show here this week to discuss the change in the company's business strategy.

Question: Your new lenses are very well received. But why did you only make this move toward higher-quality products now?
Kazuto Yamaki: We have two reasons behind that. First, Sigma is still a private company, family owned. I have a responsibility for all employees and employees' families. My first priority is to protect the employees. We still produce all products in Japan. In the middle of the 1990s, the Japanese yen appreciated so much, and production costs are so high in Japan, that many companies offshored their production to places like China, Thailand, or Malaysia. We wanted to stay in Japan and protect employees. We cannot stay in the low end of the business. We have to go to the high end even though the production cost is so high. We had to change our production from the volume zone to the mid- to high-end.

Hasn't the exchange rate improved a lot in the last couple years, from the perspective of Japanese manufacturing?
Yamaki: Yes, compared to three years ago. Still, the production cost is so high. And that's just one reason. The other reason is that the business isn't just a matter of the money and profit. It's also a matter of passion. We like photography and cameras. It's more a pleasure to make such a good-quality product and please the customers. We could do that because of our engineers' and factory staff's accumulated know-how and experience.

How has the ratio of low-end to high-end product sales changed for Sigma?
Yamaki: Ten years ago, the volume business was maybe 80 to 90 percent of total business. Now, maybe more than 70 percent of our revenue consists of higher-end products.

Fifteen years ago, our market share in the shipment volume was much higher than our market share in value: We were selling cheaper products than average. Now our market share in value is much than our share in units.

With smartphones destroying the market for lower-end cameras, is the photography industry shifting toward enthusiasts and professionals, the people who still want images smartphones can't deliver?
Yamaki: Yes, you are right. The digital camera market is heavily affected by smartphones. The digital camera market expended up to 120 million units per year, but this year, it's below 30 million -- about one fourth. If you look at figures of film cameras, it was quite stable at 20 million to 30 million. In my opinion, it was expanded too much, and now it is coming back to the normal situation. The market has been shrinking a lot in the last three to four years. Now it's stable. The people who like photography stayed the same. It was a bubble economy for the digital camera market.

Ten years ago, the top priority was to supply lenses that worked on Canon and Nikon SLRs, since they were the dominant makers of cameras with interchangeable lenses. But things are much more complicated with compact camera systems from Fujifilm, Sony, Samsung, Panasonic, Olympus, Pentax, and now Nikon and Canon as well. How hard is it to build lenses for all those different types of camera bodies?
Yamaki: It's very healthy that the market has diversified and people have a choice. I think the market is becoming richer than before. It's a good situation.

Sigma is not a big company, we don't dominate the market. We don't need to support all of those customers. Our mission is to supply good quality lenses for serious photographers.

But of all the new ecosystems with these smaller new mirrorless cameras, what's your top priority?
Yamaki: It doesn't have to be a specific system, but instead high-end cameras like the Sony Alpha 7 or the Olympus OM-D series , the Panasonic GH series , or Fujifilm's X series . That type of customer should be our customer.

How much can you recycle the design of one lens from one camera system to another?
Yamaki: It's a matter of image circle [the size of the circle of light comes out of the lens; it must be big enough to cover the camera image sensor corner to corner]. A lens for APS-C sensors [a size used in Sony, Samsung, and Canon mirrorless cameras] can be used for Four Thirds [a somewhat smaller size used by Olympus and Panasonic].

But it's not just optics. How hard to do the electronics engineering, the stuff that's required for the lens to communicate with the camera about autofocus and aperture settings?
Yamaki: The software for Sony, Olympus' Four Thirds, and Fujifilm are totally different. It requires a lot of resources. We belong to the Micro Four Thirds consortium, and the same with Sony.

Canon won't share or license their electronics information?
Yamaki: To make a lens for Canon and Nikon, we have to use their bayonet mount and have to use some of their patents. We pay for it. But we are continuously reverse engineering [deducing how a technology works through engineering studies rather than reading specifications].

There's more, too. All the autofocus lenses have many components. If we change the focus-ring direction, we have to change the layout of those components. When we start development of a lens, we start from the optical design. We have to consider where the motor is, where the actuator should be, where the image-stabilization components should be. Everything is considered from the beginning. If we change the layout, it' s a totally totally new product.

How much has lens design changed with the advent of computer-aided design and engineering (CAD and CAE)? Surely now you can run many more simulations inside a computer to figure out the best arrangement of lens elements.
Yamaki: It changed lens design significantly. When I joined the company, an optical designer put the data in the PC and had the PC calculate the design. But it took 20 minutes or 30 minutes to make through ray tracing. Now the PC can do it in 30 seconds. Our engineers now can work quite effectively with a PC.

But the challenge is that we cannot make fine optics just by design. Polishing the lens is quite difficult. Optical manufacturability matters. For a lens manufacturer, the capability of the factory is still very important. Our Sigma factory can accept a difficult glass [elements]. That's why Sigma optical design has more options. I would not say we are the best one, but we are one of the best in the industry.

Why did you announce two separate 150-600mm supertelephoto zoom models?
Yamaki: We started as a single product. We studied what to do as a renewal of our current 150-500mm. We wanted to extend to 600mm. When we started two years ago, we set three goals. First, we wanted to achieve the best optical performance, the best image quality. Second, we wanted to have the best build quality -- splashproof and dustproof. And third, we wanted to make it lightweight and compact.

During the study of optics design we realized it's quite challenging to achieve all those three conditions at the highest level. We decided to separate. For highest image quality and build quality decided to implement the professional model, and for the compact size and light weight, we decided to implement other model.

What new models can we expect? Replacements for mainstay lenses like the 70-200mm or models that fit into the holes of your competitors' product lines?
Yamaki: We have two directions. We have to develop the traditional lenses like the 50mm f1.4, but the other direction is that I really want to make a very unique lens that never existed in the market. That is a big motivation for me. Sigma has a history of releasing unique new lenses. In the 1970s, Sigma was the first company that developed the wide-angle zoom lens. It was 21-35mm. We are always trying to some something new.

Is there anything new coming this year?
Yamaki: We have already announced our products for this year. Next year we will have several new items.

Something nobody else has?
Yamaki: Next year.

A zoom or prime [fixed focal length] lens?
Yamaki: Both. Well, we are still studying it. We're not sure we can release it to the market. A new product is quite risky. Sometimes we have to give up in the middle of the development. We were very fortunate to complete the 18-35mm f1.8 design.

What are your ambitions for camera line? It hasn't been very successful, even with your own Foveon image sensors.
Yamaki: Being a camera manufacturer was my father's dream. Since I took over his business, I have to also take over his dream. I cannot give up.

The other thing is that starting our own camera development helped a lot to improve the quality of the optics. We have the Foveon sensor that can record very high fine details. To keep such fine details in the picture, the lens must be very good. There is a synergy effect between camera business and the lens business.

How successful is the camera business for the company financially?
Yamaki: Not at all. [Laughs] We are very unique company. We develop our own sensor. It's quite costly -- usually only big companies do that, like Canon, Sony, Samsung, and Panasonic. Not many companies have their own sensor development team.

How can you improve prospects for that business? Can you sell Foveon chips to other camera makers?
Yamaki: We are interested in selling our chip to the industrial business for things like monitoring factory machining processes. We are looking for partners. So far there are no such companies. If others use our sensor, they have to develop their own image processor. So we have to support them to develop their own image processing algorithm. [Foveon chips use a different approach to recording color than the vast majority of image sensors.] We don't have such a big engineering resource. That's why we're not so active.

Nikon just announced its D750, and Canon has its EOS 6D. With these lower-cost SLRs with those big full-frame image sensors spreading in the market, are you shifting Sigma resources that direction?
Yamaki: We have to. Customers using more full-frame. We have to provide a lens for them.

But we've also consciously developed lenses for APS-C [the smaller sensors used on midrange to entry-level SLRs]. There is some advantage to APS-C: It's quite challenging to make really fine optics for full-frame when you look at the corner of the image The lens becomes bulkier and costly. The APS-C has advantages to make really good optics.