[LRflex] Re: New, lower cost lenses, from Leica!

  • From: "Bille Xavier F." <hot_billexf@xxxxxxxxxxx>
  • To: leicareflex@xxxxxxxxxxxxx
  • Date: Mon, 13 Aug 2007 19:48:06 +0200

David All,
Your discussion over this topic brings to my mind a small comment that the sales Rep said over the phone: "we all dream of a Digital CL, same size, M lenses".
With those new lenses, the M8 may be shouldered by a small picture taker size (and look?) named CDL (Compact Digital Leica)
All guys attached to the M6 may invest, if price is not more than a mere 2000 Euros (Argh!). Inside a Digilux 3 processor, 7.5 MP..... With a Nokton 40mm F1/4 or a Zeiss 25mm or any coupled 21mm, it would be nice. 
With the latest newer lens, it would be even better....

Just an idea...
The Next R shall be a Digilux 4, with a OIS _integrated_ to the body and a 10 or 12 MP. Eventually a coupling which is intelligent (use of the ROM linked to the D bayonet).
May be directly a R ROM bayonet (the easiest). The 1.5 factor could be retained, if the larger receiver of the M8 is transplanted. Only, it needs a great cooperation between the various companies such as Kodak and Panasonic. "Last night I had a dream....."
Just speculations, of course. Just my Gusto in the matter. But honnestly, I don't think the Digilux4 would sell nice. As the DMR, I suppose. 

---------------------------------
Xavier F. BILLE
Maisons-Alfort - France.






From: David Young <telyt@xxxxxxxxx>
Reply-To: leicareflex@xxxxxxxxxxxxx
To: leicareflex@xxxxxxxxxxxxx
Subject: [LRflex] Re: New, lower cost lenses, from Leica!
Date: Mon, 13 Aug 2007 09:16:48 -0700

Frank wrote:
David... It is not the manufacturing cost reduction ( if there is one) that is the driver for Leica's lower prices on the Summarits...
You are right ... there *has* to be some sort of gross margin reduction... but I don't think it forms as significant part of the lower price as you do. Here's why...
[1] They do, indeed, need to expand into new owners. The M8 is a runaway success, despite some "teething problems" early in the game. And just now, they are running full tilt, with just about everything back ordered. But that situation cannot last. If we assume that the R10 does the same for R sales as the M8 did for M sales, that will keep them running well, for a while longer. Eventually, however, things must slow down. The M9, even if it is a magnificent camera, will not likely cause many people to switch from their M8s .... same for the R11. They must reach new markets.
[2] The cost of a product includes materials, labour (including health, pension and other benefit costs), overhead (cost of rent, heat, light, etc.) and the cost of design & tooling. This last cost can be divided by the production run. My understanding is that the average cost to design a lens and it's tooling runs to approx. US$1 million, If you are Nikon and manufacture 500,000 of that lens, the cost to design is $2 per lens. If you are Leica and build 20,000 of the lens, the design cost is $50 per lens.
[3] Of course German labour is more expensive than Chinese labour. German labour is the most expensive in the world. Carefully designing a product to require the least labour will have the most benefit to a German maker.
[4] By using common parts (something automotive makers figured out, years ago) over several models, you increase the production run on that part. Having common parts in the two pairs of Summarits, lowers the design cost, by half - on those parts. Amazingly, this is a first, for Leica!
[5] You are right ... the 200 (or so) standard glass types will cover 99% of designs. Leica, however, have had a habit of using some very exotic glass (some of which is made only for them), to get the results they want. One specialty glass, for the Noctilux, costs them US$1500 per pound! Ensuring they use only standard glasses and avoiding ASPH elements (more labour costs), can save significantly.
[6] Limiting the max aperture by a half stop makes the design process 5 to 10 times easier (read: faster, thus cheaper), while maintaining optical performance. After all, it is the outer edges of the fast designs where all the "trouble" occurs! So, as with all things, that last 10% of performance can cost you 3 to 5 (or more) times more. Traditionally, the lower priced, smaller aperture, lighter & cheaper lenses from Leica have been f2.8 (1 stop from a Summicron) or f4 (2 stops slower). Going to f2.5 means they're just a half stop slower... a brilliant move, in my opinion ... especially with the ability of the M8 to shoot well at ISO 1250 (with the latest firmware). Yet they still get the savings in design.
Now, we shift gears, and look at margins. The retail price of a product is roughly 20x it's actual cost to manufacture. If you remember the old IBM Selectric typewriters... they sold for about $600. But, their cost to produce it ... including the box, manual, packaging and the machine ... was $32. That figure did not include any profit ...but was the actual cost (including design costs), sitting on the shipping dock. (Do not misunderstand... the firms are not making this kind of money ... the rest goes into shipping costs, warehousing, duties, advertising, manufacturer, distributor and retailer profits, warranty costs, etc. Even though IBM may have only got $50 to $70 for that Selectric, the multiple works.)
So, if we can reduce the design costs of a lens (through faster design, use of common parts, etc.) and reduce the manufacturing costs (through the use of standard materials and more efficient machines, so we can make the parts with less labour input) from our mythical $50 to, say, $30, we can reduce the retail price $400 (our $20 saved multiplied by the 20x multiple), and still make the same percentage gross margin while maintaining the quality of the product!
Of course, I do not know the actual numbers, for Leica production, but you can understand the principle.
Combine that with the knowledge that the gross margins which Leica have been getting over the last few years (decades!) have not been sufficient to keep them afloat. As I mentioned, they were technically bankrupt in February of 2005. Thus, I suspect that while they may have cut their margins a wee bit, more of the price savings have come from savings in design and manufacturing. They are desperate to make money from every source. Remember, Leica is a company that has only been "in the black" for 90 days in the last 10 years! They have not got a lot of spare margin, to cut!
We have already seen price increases announced for current models, (M8 included) which are to come in October. I suspect they need to bring their margins into line with the actual costs for them to produce the products. Making a lower cost lineup of lenses makes it possible for them to reach new markets, while maintaining profits on the regular lineup.
So we disagree on how the lower price of the Summarit's is created. It really does not matter. Only Leica know, for sure, and they are saying it's through investing in new machinery (more efficient production) and lower design costs (the f2.5, standard glass, etc.). I tend to believe them (see above).
The key point, in all of this, is that they will end up with two lens lines... The APO/ASPH Summicrons, Noctuluxes, etc, for those who want/can afford perfection and (I suspect) a very, very good line, at a more reasonable cost. This lower line (so far, the Summarits) need not be perfection in optics ...the Summicrons & Noctis are for that. But, they do need to outperform their Japanese competitors. If they can do this, I suspect they will be (by Leica standards, at least) wildly successful.
If they are, you can bet a similar approach will be taken to the R lenses when the R10 comes out! After all, both Nikon and Canon have built their reputations on their "pro" lenses ... but it has not stopped them selling bundles of consumer grade lenses, as well! 

As Martha would say ... "This is a good thing."
What Leica has done is to establish a new way for potential used lens buyers 
to purchase new lenses at the same cost.  I think it is brilliant.


I agree!

---

David Young,
Logan Lake, CANADA

Wildlife Photographs: http://www.telyt.com/
Personal Web-pages: http://www3.telus.net/~telyt
Stock Photography at: http://tinyurl.com/2amll4

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