Canon announced plans to invest $451 million to build a new factory in Japan to double its image sensor production capacity.
A spokesman for the world's largest digital camera maker said it broke ground in May on a new building on an existing site in Kanagawa Prefecture near Tokyo and expected it to start operations in July 2008.
The factory will make complementary metal oxide semiconductors (CMOS), a component used in digital cameras and video cameras to convert light into an electric signal.
The new plant will have roughly the same annual production capacity as another factory in Kanagawa that can churn out 3 million CMOS chips a year, the spokesman said.
The CMOS chips will be used in both single lens reflex (SLR) models as well as in some compact models. Canon's compact cameras have to date used a different type of image sensor called a charge-coupled device (CCD).
Canon wants to sell 24 million digicams this year, including 3 million digital SLR cameras.