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Large Format Viewpoint

Annual State of the Industry Report

By Kim Crowley

The last few years were both exciting and volatile in the large format print space due to new technology, consolidation, economic shifts, and environmental demands. In this report, high-profile industry members address heavy stress, industry-wide environmental changes, a shifting pool of vendors, and revolutionary technology.

Dollars and Sense
While U.S. economic reports portray struggle, the large format print industry remains resilient. New products continue to stir interest and growth. The economy has yet to dramatically affect the bulk of graphic arts equipment providers.

"We find that the graphics and signage business is subject to some ebb and flow based on overall economic conditions," says Tom Black, marketing operations manager, 3M Graphics Market Center. "Unfortunately, when the economy slows, companies tend to cut back on promotional activity. However, I’m still optimistic about 2008."

KAPCO Graphic Products is not feeling strained by the economy. "The biggest thing we see—more interest from Europe. European vendors purchase U.S. products at 35 percent cheaper," notes Mike Popovich, sales manager, digital products, KAPCO Graphic Products.

Currently, some vendors’ sales numbers fuel optimism. "Interestingly enough, we’re experiencing a series of record months right now," states Randy Rickert, GM, Mutoh America, Inc. Generally speaking, "a slowdown in the economy is not critical to the graphic arts. As a market slows down, people increase advertising and marketing. As long as the banks loan to small businesses, our industry should be fine," Rickert concludes.

Christopher Howard, VP, sales and marketing, Durst Image Technology, LLC says that Durst continues to see strong sales both domestically and worldwide. "Of course in the U.S. one of the key markets many of our customers address is the retail segment, and although there is an overall economic weakness in retail, our base of clients report continued business growth. What we find is the ongoing importance for efficiencies and productivity in print production steps to allow our customers to be competitive and profitable in more difficult economic environments," explains Howard.

Has Océ North America felt the change in the economy? "Yes and no," says Sal Sheikh, VP, marketing, Wide Format Printing Systems (WFPS), Océ. "No, in the sense that our fourth quarter 2007 results were fantastic." According to Océ’s fourth quarter 2007 report, Océ WFPS showed nine percent organic growth in revenue, and the share of color increased to 33 percent of revenues versus 24 percent in 2006. "The challenge is a lot of customers are very hesitant about making capital investments when there is uncertainty looming," notes Sheikh.

Mimaki USA, Inc. is cautious. "In general we’re seeing a slowdown. There is a lot of bad economic news—whether it be in print or on TV," notes Steve Urmano, marketing manager, Mimaki. "I think we’re just at the beginning of this process."

Rising prices for raw materials and fuel impact many fronts. "We are certainly seeing cost increases in raw materials and parts tied directly, and sometimes indirectly, to higher energy costs," notes Craig Reid, director, global marketing and new business development, DuPont.

KAPCO feels the strain due to the price of oil, with the production of products like vinyl, PVC, and adhesives. Another factor creating an uncontrollable pinch is freight. "It’s the one thing you can’t get your fingers on. You have no recourse," says Popovich.

MACtac anticipates market shifts. "As advertising spending diminishes, so does our customers’ businesses, I think everyone’s found it a bit challenging," states Mary Ann Kucera, product manager, digital, MACtac. "Everyone is looking hard at economics and asking important questions. Are we buying the product that’s right for this application? If the job’s going to be up and down in six months, do I really need a four or five year product? What kind of laminate is appropriate? Can I get away with a liquid laminate? Will this be used indoors? Can I use a product less expensive that a typical vinyl laminate?" adds Kucera.

Hewlett-Packard (HP) is addressing the current financial times by providing richer solutions and new profit avenues. "We are addressing commercial printers. They need to be able to provide a better solution, better service, and better efficiency with what they are doing," says Aurelio Maruggi, GM, inkjet high-speed production solutions, graphics and imaging business, HP.

Adds Manny Kostas, VP, marketing, graphics and imaging business, HP, "It’s a matter of saying, ‘It’s not about the business that I have been bidding on for the past ten years that has gotten me to this point.’ You need to step back and say, ‘How do I redefine the value of what I can contribute.’"

Shrinking Market?
Consolidation brings dramatic change to the large format landscape. These changes may mean fewer choices for the customer, but they are making purchasing decisions less difficult. And, consolidation bolsters a strong vendor base, which in turn creates revolutionary new technology.

Market consolidation is an active force. EFI, Inc. now owns VUTEk, HP recently acquired Exstream Software, Nur Macroprinters, and MacDermid ColorSpan. "It was inevitable to some degree. There were too many competitors," says Sheikh, who predicts there will only be a handful of major players in a few years. "We’ll probably see three to five major companies driving the market."

Rak Kumar, president/CEO, Raster Printers, Inc., agrees. "Consolidation is a natural phenomenon that takes place in every industry." Kumar cites the auto and aircraft industries as other examples.

"Building a printer is not a black art. It’s reasonably well understood, and we see people building printers everywhere—in the U.S, China, Europe, and Korea," says Kumar. "The next thing that happens is consolidation because you have too many players, the industry clearly can’t support that many, and not everybody can make money. You either consolidate or you don’t survive."

DuPont’s Reid, with over 20 years in the market, notes, "The cyclical nature of industry consolidation seems to follow technology adoption rates by growth market segments. Inkjet digital printing in wide format and emerging specialty applications is going through tremendous growth, similar to digital prepress in the commercial printing market of the 1990s, and therefore it’s not surprising that industry consolidation is taking place."

"Wide format inkjet simply got interesting," explains Reid. "Before that, it was early adoption, so only in the past several years has it reached a point of growth and technological advancement making it attractive to big corporations," he adds.

"Consolidation is always a good/bad news sort of a situation. Because larger, stronger customers generally command more aggressive pricing, products become commoditized and therefore less expensive," notes MACtac’s Kucera. "On the other hand, commoditization tends to limit the creative process, because materials are developed with cost in mind. Ours is still a very creative market, and out-of-the-ordinary materials are still very much in demand from those of us on the supplier side."

Does consolidation mean there will be less offerings on the table? Urmano thinks it is too early to tell if recent consolidation will impact product offerings. "Most of the consolidation occurring right now is happening on the UV side of the market from my perspective. It just seems to me that there are a lot more UV product offerings than buyers." This doesn’t frighten Mimaki away from UV product development. In fact, Mimaki will launch a new addition to its UV line at SGIA 2008.

Consolidation brings challenges, notes Rick Scrimger, VP/GM, Roland Color Products Division. "It is a natural process within emerging industries. While acquisitions allow companies to expand product lines and increase revenues quickly, acquisitions often create confusion both within an organization and in the marketplace as employees and others adjust to new roles and new ways of conducting business."

Mutoh’s Rickert suggests that consolidation by larger companies can benefit the industry as a whole. "Larger companies possess more money to put into R&D, so the products tend to get better, faster, and more reliable." Rickert also predicts a lot more consolidation to come.

"Green" Heat
The color green is a trend in fashion, home décor, and automobiles. Green extends beyond dress shirts and Volkswagens, becoming symbolic of a cross-industry movement to produce more environmentally sound and biodegradable products. It is increasingly difficult to discuss business without talking about the environment and the push for product and action. Within the last eight months alone vendors posted new green standards and developed eco-friendly initiatives.

With popularity comes confusion on how to define the term green. "It seems simple, but it is very complex. Part of the problem is we don’t really have a definition of what constitutes green for products in our industry. And, I’m sorry to say, there’s a lot of ‘greenwashing’ going on. Greenwashing refers to making inaccurate or unfounded claims about the green-ness of products to try to gain marketing advantage," explains Black.

"Like many manufacturers, our own definition of what makes a digital printer green is evolving," states Roland’s Scrimger. We believe there are two parts to the equation. First, it is important to adopt sustainable manufacturing practices designed to preserve the environment. Second, we believe it is important to help our customers achieve high environmental standards."

Vendors continue environmentally friendly initiatives by revamping products. For example, 3M removed the lead from its screenprinting inks.

DuPont, one of the world’s largest manufacturers of inkjet inks, did not have to change their processes or products. "In the area of digital printing, we focus on aqueous and curable polymer ink technologies," states Reid. "We literally made a conscious choice years ago not to sell aggressive solvent inks."

Durst focuses on volatile organic compound (VOC) levels, offering a fully VOC-free inkset. "Durst is fully committed to environmentally conscious printing and manufacturing. We pursue ink technologies that fit this pattern, and only offer UV printing platforms in the large format segment," states Howard.

Howard adds that true environmental responsibility extends into the full life of the technology, from manufacturing to use, and recyclability. "For us, designing a printer that requires purging five or six times per day, which wastes 500 milliliters of ink per shift, and over the year more than 125 liters of total ink, is in breach of our environmental responsibility philosophy."

"There are either no standards or several different standards," explains Scott Fisher, VP, sales and marketing, Fisher Textiles, Inc. "This makes it difficult for customers that want to sell a green product." A portion of the ENVIRO-Tex line of fabrics from Fisher Textiles includes recycled yarn. 30 percent of the fabric must be recycled to be considered green, according to the Federal Trade Commission. In the manufacture of textiles and yarn there are drop-offs or wastes that can be easily recycled. After Fisher Textiles fabric is made with recycled yarn it is sent back to the recycled yarn supplier to be tested and certified for the percentage of recycled material used.

A revolutionary green addition is water-based HP Latex Ink. An environmental alternative for indoor and outdoor applications, latex ink produces odorless prints and, coupled with HP Thermal Inkjet Technology, the latex inks provide outdoor display permanence up to three years, unlaminated. HP demonstrated the HP Designjet L65500 printer—the first of the company’s large format units to use the latex inks—at drupa in June.

MACtac is tackling the green issue on several fronts. "First is the manufacturing side, by using products with minimal affect on the environment. Those would include polypropylene films, water-borne adhesives, and recyclable liners. These were historically used in the roll label market as printing substrates, but are infrequently used in ours due to limited exterior durability."

"We’re seeing more of corporate America requesting completely green advertising," says Rickert. Mutoh’s ValueJet 1608 Hybrid printers, which began shipping in May 2008, use Mubio Ink, a new corn-based ink technology composed primarily of renewable resources. Mubio Ink cures by air-drying and requires no special air filtration. It is recognized by the EPA Design for the Environment program.

Océ is known as an environmental advocate. "We’ve always designed and developed products in a sustainable way," says Sheikh. He also says that in order to minimize the carbon footprint his customers create, Océ manufactures sustainable products so the customer can review everything from electrical consumption to emissions, VOCs, and media.

"We don’t really have any non-green products," notes Kumar. Raster Printers’ ink strategy is to only offer UV-curable, non-solvent, green inks. "When we formed the company four years ago we put in our strategic plan that we would only offer green products."

Roland employs a cell-based Digital Yatai manufacturing system that is entirely paperless and driven in part by solar panels. "Every Roland printer today is designed and manufactured through sustainable processes that meet the company’s high environmental standards," says Scrimger. Within five years, the company expects to offer varying levels of support for green inks and media throughout its inkjet line.

How intense is the demand for green product? KAPCO’s Popovich understands that green substrates will eventually become more important. He adds, "With the exception of vehicle wraps, wide format is a short term market." KAPCO is looking at producing short term, outdoor paper products, which will last for 60 days. Although, he does note, "Vinyl is never going to go away. It’s still the most cost-effective sign material."

Although interest in green products is always present, "the willingness for people to use green media was not overwhelming," says Fisher. Fisher believes both a steady supply of materials and customer willingness to pay more will drive green popularity.

However, there is a high financial investment in developing green offerings. "Green materials tend to be more expensive than standard products. It will take a strong commitment from end users to move these types of products into common usage. In the long run, as demand increases, I expect that prices will decrease, due to competition, technology improvements, and regulation requiring that this type of product be more widely used," says MACtac’s Kucera.

Technology on the Verge
New technology entries will change the large format print landscape. Howard suggests that the technology path continues to be evolutionary rather than revolutionary in the large format market. "Evolution in the large format segment includes continued improvements in productivity with some refinement in image quality as well."

Many wonder if the economy influences product development timelines. "It’s fun to blame the economy, but in reality, development timelines were compressed for years," explains Kucera. "We all want to have the latest and greatest in the market, but we need to balance that with demonstrated performance and careful end user recommendations."

Kumar predicts three trends in the wide format printing market—heightened image quality, continued growth of UV and the green movement, and increased speed. "Near-photographic quality in wide format and superwide format will become de facto standard," he says. Kumar believes that speed will start to reach 3,000 to 5,000 square feet per hour.

Océ launched its new Océ CrystalPoint printing technology, which combines toner and inkjet printing technologies, at drupa. Océ TonerPearls toner is converted into a gel, which is then jetted and crystallized onto paper. The process is designed to produce crisp, waterfast high-quality images with extremely accurate dot placement. The first product based on the technology is the Océ ColorWave 600 system.

Another trend is ease of use. Mutoh makes its machines as user friendly as possible, marketing the ValueJet line as plug-and-play. As for future product development, Rickert sees movement in inks. "I think that changes in our marketplace will be with ink, not so much in printhead technology," he suggests.

"One trend that we are watching closely in the broader graphics market is the introduction of new, page-width printheads that offer extremely fast production speeds for smaller format graphics," says Scrimger. "Should this technology become viable in the wide format market, it will redefine the performance standards for all manufacturers currently in this space."

Specialty printing and packaging is another future growth area. "Inkjet technology—inks, printheads, equipment, and software, while already disruptive in the wide format market, are getting closer to enabling more specialty and potential packaging applications at real world speeds and quality on a greater variety of substrates. 99 percent of package printing is still done conventionally. As technology evolves, wide format inkjet printing will be disruptive to the package market," states DuPont’s Reid.

Some emerging technology trends pose challenges to the large format print industry. Perhaps more printed signage will move to electronic signs or alternative forms of advertising such as the Internet. "Certainly dynamic electronic signage is something with which traditional sign and graphics manufacturers must grapple. But we see this as more evolutionary than revolutionary," says 3M’s Black.

State of the Industry
There is no doubt that the large format print industry is feeling the push and pull of customer demands, environmental concerns, financial issues, and new technology.

Most vendors say they are holding steady, but are wary of the economy. Consolidation is shrinking the number of vendors, but growing strength and research power. From green media and inks to speed enhancements and image quality—new products continue to revolutionize large format printing.

Aug2008, Digital Output

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