According to the Reuters report, Canon is developing a smaller DSLR camera to better compete with the mirror-less interchangeable cameras from Olympus, Panasonic, and Sony. The compact mirror-less cameras are said to have become very popular in Japan and the popularity is expected to rapidly grow.
It is not very clear if Canon’s smaller SLR camera will be mirror-less. SLR camera with optical viewfinder can certainly be made smaller.
Nikon is also rumored to be working on a mirror-less camera.
Canon and Nikon are the No. 1 and No. 2 in the industry but they cannot afford to loss a rapidly growing market segment where consumers are increasingly demanding high quality cameras that come in smaller sizes.