As product intelligence manager John Penney reeled out an impressive series of sales statistics, one number stuck out.

While high definition camcorder sales were up 152% and high-end digital SLR cameras up 51%, sales of compact digital cameras had only increased by 3% last year.

The market appears saturated and Penney said replacement buyers were now the key driver in the compact segment.

With the quality of cameras now being squeezed into mobile phones improving rapidly, it is becoming a very crowded market and firms like Canon are starting to look elsewhere for growth.

Canon is clearly banking on a strategy of moving up the value chain, citing the 'advanced amateur' as one of its main target markets. With that in mind, its new compact models such as the PowerShot SX100 IS, Ixus 860 IS and Ixus 960 IS are now packing features such as the ability to detect and track a particular face to ensure that it is kept in focus while the photographer composes the shot.

While Canon made a song and dance about its new professional level EOS 1-Ds mark III, the success of the mid-range EOS 40D digital SLR will probably decide the success of its strategy, since it is pitched at the 'advanced amateurs' the company has made so much of. Expected to retail for near 950, it provides 10.1 megapixel image quality and can take 6.5 frames per second in 75 frame bursts.

Canon UK and Ireland director Alessandro Stanzani said that social networking via sites such as Flickr and YouTube had played a key role in deciding the industry's future. "It's important to us because it is built on user generated content. Uploading photos is now the fifth most popular online activity in the UK and this rapid rise is leading to a generation of more advanced photographers. Changes in consumer behaviour bring changes in expectations, " he said.

Stanzani told the Sunday Tribune that the company isn't particularly concerned about camera phones eating into its market, though. "If you look at the advanced markets, like Japan or the US, they certainly are eating into the low end, now that we are seeing three to five megapixel phones. But while people use camera phones in a spontaneous manner, they are still buying cameras for holidays or special events. We've made a strategy decision not to play in the lower end of the market and so far we don't have too many concerns, " he said.