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Asia is set to overtake Western markets as the number one inkjet user in the world. What are the ramifications for manufacturers in the West? Sean Smyth investigates how long-term relationships between Western companies and Chinese manufacturers are improving Asian products and performance.
With a projected growth of 71.5 per cent over the next five years, Asia will overtake Europe as the leading region using industrial inkjet printing. Booming economic growth, surplus workforce and penny-low manufacturing costs mean Asian manufacturers have been able to undercut and replicate Western inkjet printers, leading to serious dents in Western profits.
Although cheap, the replicated versions of imported designs are lower quality and unreliable. For the leading inkjet companies, having operations in Asia has become somewhat a necessity, and forging relationships with would-be replicators has helped stem haemorrhaging sales. Markets such as signage are spurring on the growth of inkjet in Asia, but how are these new forged cross-continent friendships running, and how will this effect the markets as a whole? Asia is home to almost 3.5 billion people, some 58 per cent of the world's population. Japan is the economic powerhouse and the most advanced economy, along with Singapore, Hong Kong, Taiwan and South Korea, while the others, particularly China and India, are developing rapidly.
Wide-format inkjet printing circles the globe, but its use is concentrated in Western Europe, the US, Canada, Japan and Australia. Eastern Europe, Latin America, South Africa, and South East Asia are also adopting wide-format inkjet printing. Pira's 2005 report on the future of wide-format inkjet printing provided the following market breakdowns.
With projected growth of 71.5 per cent over the next five years Asia will overtake Europe as the leading region using industrial inkjet printing.
The geographical revenue split of Xaar, one of the leading suppliers of industrial inkjet heads, is informative in demonstrating the growing importance of the Asian region in their sales, as seen in Table 1. Additionally Xaar technology is also used widely by licensees including ToshibaTec, Brother and KonicaMinolta in Asia, which suggests the supply side market is more advanced than the user market in Asia.
China newsWith a population of 1.3 billion and the highest consistent growth rate of any major global economy over the last 16 years, China will be a major shaper of the future world economy. In terms of purchasing power parity, China is already the second largest economy in the world. China has a huge consumer market, with a large low-cost and highly skilled labour force. Many developed economies have outsourced much production and assembly to take advantage of the low-cost manufacturing available in China.
Local companies are copying the mechanical designs of imported machinery at lower quality, similar to the Japanese economic model of the post-war years. In many markets the Chinese companies will then undercut the imported model significantly, offering prices at levels of 50 per cent of the Western equipment. The quality and reliability of the locally produced equipment may not be up to Western market standards, but the pricing enables fast growth of market share through benefits of low-cost manufacturing in many sectors from toys to mobile phones and computer equipment.
The opening of the market provides opportunities for overseas companies to develop partnerships with Chinese companies and entrepreneurs. Since China has entered the World Trade Organization (WTO) and will, over the next three years, move through the necessary phases of implementation, its restrictive import taxes will erode, which removes barriers to Chinese manufacturers sourcing good-quality Western raw materials and components. We can also expect to see greater transparency of business transactions in China and increasing opportunities for Western companies to invest directly into the market, with reasonable protection under Chinese law. Some Chinese players may even become owned by Western investors.
 Figure 2. Yaselan YSL-D3500VE printer.
Inkjet print producersThe Chinese graphic arts sector has undergone huge change as the market opened up and enjoyed the fastest growth of any economy in the world. Many non-time-sensitive print products such as greetings cards and books are being exported into Europe and North America. The entrepreneurial new owners and managers of free market companies enthusiastically adopted any resources they could get hold of to produce and serve their new customers.
The Chinese graphic arts sector is different to those of Western developed markets, as is the general economy and advertising industry. A key sector is the outdoor poster market that is worth some 17 per cent of the total advertising revenue compared to the 6 per cent share in many Western markets.
Signage is the fastest growth sector for users of inkjet printing. Visitors to China notice the popularity of outdoor posters. There are an estimated 1.1 million sites in China compared to 400,000 in the US. China also has extensive use of building wraps, exhibition graphics and transport graphics. The silkscreen and offset printing industries used old, analogue technology, and as the demand for colour print exploded they were unable to meet the growing demand. Entrepreneurial Chinese print companies enthusiastically embraced new technology, particularly wide-format industrial inkjet printing. In 2004, inkjet accounted for almost 55 per cent of the Chinese poster market compare to 14-16 per cent in Western markets. As a result, the Chinese have more solvent inkjet printers than any other country and the Chinese market has developed to become probably the most competitive on earth. Inkjet manufacturersWestern suppliers sold many wide-format inkjet printers into China during the 1990s, only to see much of this business evaporate as local Chinese manufacturers replicated the imported printers. The Chinese manufacturers sourced components they could not replicate, such as heads, and integrated them into new equipment at a fraction of the cost of the imported machines. The established suppliers observed this trend but saw an inferior product, in terms of quality, reliability and performance, being produced by the replicating outfits.
Since 2000 these domestic manufacturers have come to dominate their local market, reducing the combined sales of Western manufacturers to a fraction of their former levels in China. In 2004 the total market for solvent-based inkjet printers in China was estimated at $286 million (€240 million), with Chinese brands taking a share of some 82 per cent of the market, equating to $233 million (€196 million). Outside China, however, the Chinese brands accounted for just under 4 per cent of the market share - some $53 million (€45 million) out of a total €1.15 billion sales. Pira projects that China will more than double the number of wide-format inkjet printers it manufactured in 2004 by 2009, the majority destined for its domestic market.
As the Chinese domestic market enjoyed new machine entrants after 2001, a price war resulted - some printers dropping in price by more than half - which affected the profitability and cash flow of participants.
Low margins in the domestic market led more Chinese manufacturers to turn towards exporting, some selling into emerging markets of Asia, Latin America and Eastern Europe. Although there was demand for goods in these regions, acceptance with printer purchases in the developed Western and Japanese printers was slow. Western markets lacked confidence in the reliability of the Chinese machines and questioned whether the models could be effectively serviced and maintained a view reinforced by some early experiences. When distributors added their service costs and margins to the printer costs, and Western manufacturers launched newer models engineered to lower selling prices, the Chinese value proposition was not as attractive as before.
In an attempt to manage the quality of products, leading Western brands are now using Chinese companies as contract manufacturers of their designs. These are the most stringent customers for Chinese suppliers and are driving product performance forward.
In February 2005 Scitex Vision announced that they had entered into a strategic partnership agreement with Beiren Group, the largest printing press manufacturer in China. The agreement initially covers the manufacturing and assembly of the Grandjet Classic, the entry-level grandformat inkjet printer, and paves the way for joint product development and other manufacturing to create new opportunities for both companies.
At the time Dov Ofer, CEO of Scitex Vision commented, "The alliance with Beiren demonstrates commitment to the Chinese market in general and the super-wide-format market in particular. Our partnership with Beiren will enable us to offer to the industry even more cost-effective products, while successfully developing brand awareness and competitiveness in China and the rest of Asia."
The subsequent takeover of Scitex Vision by HP adds another dynamic. This announcement was the latest of many other joint ventures in the wide-format inkjet sector. This announcement was the latest of many other joint ventures in the wide-format inkjet sector, where the activities of Asian, and particular Chinese suppliers, is key to the market sector.
 Table 1. Geographical distribution of Xaar revenues.
These cross-continental partnerships are not without problems, as the engineering standards expected by the Western suppliers are not always achieved by the manufacturer. The latest DuPont DCC20 has seen several delays before DuPont was satisfied with the product. Chinese exporters face the challenges of increased shipping delays from the shortage of shipping containers, heightened port security and disruptions of commerce due to dock strikes and flu epidemics. Asian upstartsWhile China is enjoying the headlines there are other important Asian developments. Japan is a leading developer of digital printing technology providing primary inkjet developments through Epson, Sharp, Panasonic, Brother, KonicaMinolta, ToshibaTec, Hitachi and Ricoh. Japan, with Europe, is pioneering environmentally friendly alternatives to solvent-based inks with Japanese ink-makers such as DIC. Fujifilm owns Sericol, and Toyo Ink is supplying inks for inkjet applications.
Japanese equipment manufacturers such as Mimaki, Mutoh, Roland and Ichinosa build and sell tens of thousands of inkjet printers annually. Dai Nippon Screen is the new parent of Inca Digital. Mimaki and Mutoh offer UV cure inkjet systems and Roland is developing an additional system. Mimaki has sold about 100 of its UV cure printing systems in Japan. Mutoh has partnered with Agfa and Xaar to produce its Cobra 100 and Agfa Anapurna 100 flatbed UV cure inkjet greyscale printers.
Several South Korean companies manufacture UV inkjet equipment as the environmental impacts of solvent-based printers are discouraged locally. Digital Graphic Inc. (DGI) has established relations with distributors in developed countries. Azero and Keundo Technologies manufacture wide-format inkjet printers in Korea along with Dream Infosys Co. There is a growing list of ink and substrate producers concentrating on the inkjet printing market. DGI established Dilli Precision as a separate company for the production and sale of UV curing inkjet equipment. Hypernics developed two UV cure inkjet devices using KonicaMinolta PIJ print heads. The Dilli Precision printers have had limited success, while the Hypernics devices have yet to find a market.
Taiwanese inkjet printer manufacturer Eastech Digital is a leading supplier to south-east Asian markets with its wide-format machines. The Scutum series uses Spectra SM-128 print heads while its Octra series uses Epson PIJ heads, offering systems in standard and lower cost 'light' versions.
FutureIndia will become the most populous nation in about 2025; it already has the largest middle class in the world. The use of English among a highly educated workforce makes the country a leading source of high-quality software.
Indian and global corporations are training its people as computer and digital systems technicians to supply computer customer service for the English-speaking world. India is the leading textile printer in the world and the use of inkjet is growing for textile, signage and packaging applications.
This upsurge is apparent through the launch of FESPA World EXPO India 2005 for the Indian and Asian wide-format digital imaging markets that will be held in New Delhi in December 2005. Xaar and Triangle Digital have signed an agreement allowing Triangle to sell solvent ink for its print heads in India. Xaar opened its first Indian office in New Delhi in 2004, as its Indian customer base is growing strongly, particularly in the solvent market.
In 1999-2000 the prices for wide- and grand-format inkjet printers ranged from €300,000-625,000 for the printing systems. After the emergence of Asian, particularly Chinese, suppliers the entry prices have dropped to €45,000, therefore making it easier for printing companies to enter the market. Western manufacturers have improved the top-level productivity of their machines in a more reliable segment to allow customers to use inkjet printing more productively.
Takeaways- Asian print markets are very different to those in developed Western markets as the economies open up and enjoy very high economic growth.
- Since 2000 China is booming in wide-format inkjet printing, with local equipment suppliers copying high-cost imported machines and selling them for a fraction of the cost.
- These machines did not have the reliability of the Western models but users in China were prepared to experiment to make them productive.
- Chinese manufacturers tried to export machines, but the developed markets were unreceptive as they did not trust the machines reliability. However, there was some penetration into other Asian, Latin America and Eastern Europe.
- Some Chinese manufacturers developed relationships with Western suppliers for contract manufacturing. These agreements demanded much higher quality than normal, boosting the performance and capabilities of the Chinese suppliers.
- China has become the workshop of the world. As it strengthens its position in the inkjet industry there will be new market opportunities, in textiles, industrial and fabrication that may be pioneered in China before they are developed in the West.
- In other areas of Asia, inkjet is growing fast. In India, a growing population, highly educated in technical and digital systems, will enable more growth of inkjet in the textile, signage and packaging applications.
- Although manufacturers continue to imitate Western products there are signs of more creative machines and inkjet solutions emerging.
- After the emergence of Asian suppliers entry prices have dropped significantly, making it easier for printing companies to enter the market.
Sean Smyth is an independent industry consultant, specialising in the graphic arts industry. He writes regularly for Pira. |
According to a Pira report, RFID and printed electronics will have a big impact on the printing and publishing industries 
A little longer than 80 days perhaps, but UV-cure inkjet is circumnavigating the globe at its own accelerating pace. 
