Pentacon was the largest german camera manufacturer, and the most longlived of those of substantial size.
This firm could have formed a stronghold against the japanese competition, had it been more flexible and had it got better access to microelectronics.
Nevertheless Pentacon got into the top league with their Praktica family concerning production figures. And one may argue that by sheer mass of typically more budget cameras it was profitable nonetheless.
However the business model of Pentacon for their cameras relied on the export for valuta. With the introduction of the Deutsche Mark in the GDR this concept collapsed.
The structure of GDR industry did not yield the chance of firms to get the valuta they earned into owns hands to source directly those investment goods not available on own soil. This made keeping up often difficult.
Especially for a country with few natural goods exporting high value technical goods is of major importance. If that was realized by the government also for the photo-optical industry can be questioned.
My impression of the GDR industry is that the government had a strong inclination to just have cash cow industries running as they are.
(To be fair, there had indeed been some large investment-programs, as for the chemical industry.)
In a world becoming more and more complex technically, there easily may come up new technics that are crucial, that form bottlenecks. Microelectronics was such bottleneck.
A bottleneck that was also politically intended by the Western World (esp. the USA). Something not to be overlooked when discussing Eastern-Block industries !
Of course one may ask what would have happened if earned valuta was free to the respective firms. To be spent on possible future earnings. What would the people say if goods for their daily lifes would not have been imported instead.
Things very fast get complicated in such decision-making...