TOKYO — The global camera business, centered in Japan, is headed for a shakeout.

With industry revenue falling to the lowest level in a decade amid surging smartphone sales, Nikon, the world’s No. 2 camera maker, has cut prices to lure consumers. Market leader Canon may follow suit to keep pace, according to UBS, putting pressure on smaller producers and possibly leading them to retreat from the business.

“There are too many players,” said Ryosuke Katsura, an analyst at UBS in Tokyo. “It’s going to be tough for smaller camera makers even to remain in the business as competition between Canon and Nikon will likely intensify,” said Katsura, who recommends selling shares of both industry leaders.

Since Apple introduced the iPhone in 2007, Canon and Nikon stocks have lost more than half their value as demand has withered in an industry they have dominated for over a decade. Nikon is the worst performer in the Nikkei 225 index this year, falling 34 percent.

Sales of compact models have slumped as smartphones displace the point-and-shoots that were the biggest part of the market. Now higher margin single-lens reflex models — a market 80 percent controlled by Canon and Nikon — are slowing as well.

To keep sales moving, Nikon has been discounting many models. The Nikon 1 J2, introduced a year ago, now sells for as little as 23,485 yen ($240), 64 percent below its initial price, according to Japanese online comparison site The high-end D600, also introduced last September, has declined 26 percent to 145,975 yen.

Camera shipments are likely to fall 30 percent this year to 69 million units, according to Morgan Stanley MUFG Securities, even as manufacturers try to slow the decline by adding smartphone-like features such as Wi-Fi and Bluetooth. Nikon in August cut its 2013 net income target by 23 percent while Canon lowered profit and sales forecasts in July.

Nikon says it cut prices to reduce inventory as demand falls, and that the company is scaling back production to boost profitability. Canon says it doesn’t plan to chase short-term market share gains by cutting prices.

Founded in 1917, Nikon supplied binoculars and optical gear to the Japanese military. After World War II the company focused on consumer products and in 1959 introduced its first SLR camera with an interchangeable lens, the Nikon F. Today it gets 84 percent of operating profit from imaging.

Canon started in an apartment in the Tokyo district of Roppongi in 1933. The next year, the company built its first 35 mm camera. Its EOS Rebel, introduced in 1993, helped Canon cement its lead in the market by attracting a younger generation to high-end SLRs.

“Camera makers need to seek a new growth driver,” said Hirosuke Takayama, an analyst for SMBC Nikko Securities in Tokyo. Medical equipment that uses their image-capturing sensors and processors is “the area the companies are all looking at.”

Olympus, which started as a maker of microscopes and thermometers in 1919, produced its first camera in 1936. In 1950, it made an early endoscope — for taking pictures inside the body — and the company is now the world’s largest producer of such devices. Olympus plans to stop SLR development and this year closed a Beijing camera plant and suspended its cheapest compact camera line.

Smartphone cameras are getting more sophisticated. Samsung’s Galaxy S4 is equipped with a 13-megapixel sensor. Sony’s latest Xperia Z1 has a 20.7 megapixel camera and an optional zoom-lens attachment. Nokia in July unveiled its Lumia 1020 with a 41-megapixel camera. By contrast, Canon’s EOS-1D X, which sells for $6,799 on the company’s U.S. website, has an 18.1-megapixel sensor. As Nikon and Canon consider diversification, earnings are going to remain under pressure as smartphones cannibalize compacts and margins on SLRs shrink, said Amir Anvarzadeh, a manager of Japanese equity sales at BGC in Singapore.

“This is not,” he said, “going to reverse anytime soon.”

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