Marco Boer, vice president of the IT Strategies consultancy, delivered a thought-provoking keynote presentation at the Japan Inkjet Technology Forum in Tokyo on where digital print manufacturers should consider investing their R&D funds.
IT Strategies, established in 1992, collects data and undertakes research in the printing industry and offers consultancy services to the vendors supplying the industry. Boer explained that the company worked with vendors across the printing spectrum. Those vendors were willing to share their data and trust the company to keep it anonymous because of the value of having good-quality industry-wide data. This has given IT Strategies a unique viewpoint on the print industry.
Given that the audience at the JITF event is primarily composed of printer vendors and components suppliers, Boer began by posing the basic question of where such companies should invest their R&D funds. He outlined three approaches that companies could take.
The first is to look at the number of pages, or volumes being output by the application, to see what is growing, and what is not. He suggested, “Is inkjet taking market share and pages from offset, for example?”
The second is to ask where your technology fits. He pointed out that one of the big markets is flexible packaging but it’s also one of the most challenging and complicated.
The third consideration is that even if you develop really good products, how are you going to sell them? He explained, “Unless you have a distribution channel and you have a reputation in that channel, then nobody will necessarily trust you.”
He warned that alongside these considerations, companies should also think about how they can satisfy any regulatory demands, noting, “We are entering a phase where sustainability is becoming an absolutely critical requirement, particularly in Europe.”
He showed a number of slides with market data but with the caveat that you have to understand exactly what that data is showing. Thus he compared the volumes produced across different market sectors to demonstrate that the biggest application outside home and office printing is document publishing, noting, “Wide format is so small that it doesn’t show up.”
A further slide forecasts the market share for each of the main print technologies up to 2028. This predicts that by 2028, 24% of all document pages will be printed by inkjet technology. But he points out that this is partly because offset volumes are going down so fast that inkjet is growing by comparison. He explains, “We are not replacing offset with digital but what’s happening is that it’s going away because we are using more electronic communications. Newspaper, magazines and catalogs are in steep decline mainly because the cost of postage makes it too expensive.”
He added, “Book printing is really good and has been remarkably steady over the last couple of years and, actually, increased in Covid.” However, he pointed out that the best-selling book in 2007, which was a Harry Potter novel, sold over 10 million copies, while the best-selling book in 2023 only sold 3 million copies. He says that book printing has shifted to digital because the economics work as there’s no color and relatively low ink coverage.
Not surprisingly, packaging is the biggest digital print application and is likely to grow further as the population increases. However, he notes, “It will take a long time for anyone to make money out of packaging. Digital is less than 1% of all packaging printing now, just a rounding error.”
He then went through some of the different market segments that make up the digital print industry, including both toner and inkjet technologies, comparing their total worldwide revenues in the period from 2021 to 2024. All the different sectors combined produced $16.3 billion in 2021, rising to $17.2 billion in 2024, which translates to just 3% of the compound annual growth rate, or CAGR. It’s a sobering assessment that shows that document printing was by far the biggest source of revenue in 2021 but with virtually no growth by 2024 because inkjet printing simply replaced toner machines like for like. Surprisingly, the wide format graphics market showed the best growth in this period.
Boer also highlighted the impact of Chinese companies, noting that Chinese vendors now dominated the ceramics market, and “are also taking over the textile market, causing the ink prices to fall so that no one is making money.” He suggested that Chinese printer manufacturers have made some gains in parts of Europe, including Britain and Spain but not so much in the US, where they typically don’t have established service, support and distribution networks.
For comparison, he also went on to offer a forecast for revenues from 2024 up to 2029. This predicts total revenues for all sectors rising to $24.6 billion, giving a 7 percent CAGR. Here, IT Strategies is forecasting a 5% CAGR for wide format graphics, up from just shy of $3,750 million in 2024. However, most of the other sectors have been broken down into smaller segments, so they start the period from a lower base. Nonetheless, digital labeling is forecast to grow from $1,250 million by 8 percent CAGR, while inkjet production printing is split into cut sheet, which is set to grow from $1,000 million by up to 18 percent CAGR, and continuous feed, which starts from around $1500 million and grows by 7% CAGR, a figure mainly driven by the demise of toner printers. Not surprisingly, there’s plenty of growth forecast for the different segments of packaging, though all are starting from low numbers. IT Strategies is predicting improvements to their CAGR by 18% for corrugated, 24% for folding cartons and 15% for flexible packaging.
The figures included 3D printing, which has a smaller-than-expected revenue, with Boer noting, “The dream of creating new parts that are lighter and stronger continues to be a dream. But it will be important at some point in time.” And Boer agreed with a question from the floor that 3D printing wasn’t a very accurate term for this technology, though as he noted, the term has stuck.
I would add that historically marketers have renamed the technology depending on the market they were trying to hit. So, in the beginning, it was referred to as rapid prototyping since the parts produced lacked any real functionality and were only as good as basic prototypes. Then as many of the original patents expired, a lot of vendors started offering cheap machines to the consumer market and hit upon the 3D printing term, which captured the public’s imagination. But with the consumer bubble having well and truly burst around 2015, the industry has moved onto its currently preferred term – additive manufacturing or AM – which is more accurate but lacks the emotive weight of 3D printing.
Boer went on to point out that costs have forced some changes in the way that vendors approach their R&D, noting, “And the development cycles have moved from four to eight years because we don’t have as much money.” He added, “We are seeing more and more joint ventures because the vendors don’t have enough money on their own.”
He went on to say, “We are starting to see a renewed interest in mergers and acquisitions.” He cited a recent example of this, with Epson’s proposed takeover of Fiery. He pointed out that although Fiery is profitable it only really deals with around ten customers: “Fiery has been in decline for around 15 years because their main revenue is copiers and more and more copier makers are developing their own DFEs.”
This leads to the question, what will Epson do with Fiery? He suggested that Epson probably overpaid, since the $591 million asking price is around 3x Fiery’s actual revenue and that Siris Capital will have pared it back since that is what private equity firms typically do, meaning that Epson will have to invest further in Fiery. He shared his view that the acquisition only makes sense if Epson follows it up by acquiring other companies to compete in more industrial markets such as wide format, textiles and labels.
He finished off by pointing out the growing levels of legislation around sustainability, warning that printers are increasingly likely to have to take back and sustainably dispose of their print jobs once they reach their end of life. He highlighted the EU’s new Deforestation Directive, noting: “In Europe, you have to prove that the wood was cut down sustainability right down to a GPS location for each tree.”
He concluded, “This will drive up the cost of paper in Europe which will probably accelerate the decline of document printing but might open up opportunities for digital.”
Overall, it was an extremely interesting presentation backed up by solid numbers. The conference room at JITF was packed, which was hardly surprising since as Boer noted: “We think that about 70 percent of all inkjet printer products get developed in Japan. This is the epicenter.”
First published on Printing and Manufacturing Journal.
Republished with permission
