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Wide Format Forecast 2013

A Transition to Higher Utilization and Productivity

By Mark Hanley

 

This is analyst firm I.T. Strategies’ 19th wide format graphics inkjet forecast, wrapping up nearly two decades worth of experience. The trends year-over-year aren’t surprising. Growth continues—a rarity in markets for print that in general are suffering attrition. What is surprising is the slowdown in equipment sales.

 

Aqueous wide format printers are now mainly a replacement market; one where lifecycles are extending and unit sales are in slight decline. Eco-solvent/latex printer unit sales continue to grow, with some brands significantly faster than others. In aggregate equipment, placement growth is projected at less than five percent annually. Even UV-curable printing equipment projected growth is now in the single digits.

 

These slowing growth numbers are not an indicator of a market in trouble—but rather a shift to higher utilization and productivity. The life of the typical wide format inkjet printer in the installed base is extending. What once might have been an average four to five year life is now a seven to eight year life, and in some cases even longer. Print shop owners are delaying next generation equipment purchases and squeezing more volume out of existing devices. Compounding the slowdown in equipment growth is the greater productivity offered by new printers on the market. Simply put, with faster printers fewer are needed. 

 

Substrate and Ink Consumption

A better indicator of health is substrate and ink consumption rates. In both cases they greatly exceed the growth projection rates of unit installations. I.T. Strategies projects substrate volumes to grow in excess of seven percent and ink liters in excess of eight percent annually through 2017. Note this doesn’t mean that ink costs are increasing; in fact the opposite is happening. Ink revenues are projected to grow at four percent during the same period. Effectively this causes ink prices to decrease about three percent annually across all wide format graphics technologies. What it implies is that total market expenditures are decreasing three percent annually. This decrease is in part the result of a shift from higher cost per liter aqueous inks to lower cost per liter eco-solvent and latex inks, as well as even lower cost UV-curable inks at the high end of the market.

 

While the industry experienced remarkable improvement breakthroughs in print quality, productivity, and equipment costs, similar breakthroughs are not apparent in ink pricing. One reason is that the economies of scale continue to work against wide format inkjet inks. Unlike offset inks, which are manufactured in the billions of liters annually, there were only four million liters of aqueous, 2.3 million of UV-curable, and seven million liters of eco-solvent/latex wide format graphics ink manufactured worldwide in 2012.

 

At those levels it is too difficult to gain any buying power in dispersions and additives, given that those components are more refined and sophisticated than the ones found in offset inks. 

 

Output Value

While ink cost is a perpetual topic of conversation, the value of output that those inks enable is multiple the value of those applications created with offset ink. The average retail-selling price across all wide format inkjet technologies ranges from $2.75 for UV-curable printed output to $4.40 for aqueous ink printed output per square foot. The profit margin—the balance left after paying for hardware, ink, and substrates—ranges anywhere between 2.7 to six times for wide format output. There are very few offset document applications where this type of margin is still enabled. This peaks interest in many print providers considering a move from traditional technologies to digital wide format print.

 

Worldwide the retail value of output created by all wide format printers exceeded $39 billion in 2012. While a small portion of the over $600 billion was generated from other graphics/document print applications, its profits may be as large if not larger than all the profits of other production print applications.

 

Total Wide Format Market

In general, as the overall market matures it is more useful to look at revenues and revenue growth rates than unit sales numbers alone. This is because print service providers (PSPs) retain systems for longer and because users in general seem to be running at a greater capacity on the systems they own. Additionally the system mix is changing in new sales favoring higher volume machines printing more, but fewer of them.

 

Thus total revenues from 2012 to 2017 are growing three times as fast as unit sales at nearly three percent against one percent.

 

The following analysis from I.T. Strategies summarizes each separate wide format technology sector—aqueous, solvent, and UV. Latex is included under eco-solvent as in 2012 it remained almost a single vendor sector and to split it out would reveal the one single vendor’s market share.

 

Aqueous

Aqueous markets are truly mature now and have become replacement markets with an overall decline in units and revenues, with revenues declining the fastest as low cost systems come into the market from below and as competition becomes tighter.

 

The aqueous less than 36 inches in width market grew over five percent in units sold in 2011 through 2012, though this is likely to be as much due to competitive price cutting as to underlying demand. These systems are in fact all 24 inches wide and represent a kind of low-end convenience market, which did not become as successful as some of the vendors had wished among consumers. The market is still important to those in it as inks are very profitable and the competitive activities of the market participants conspire to sustain the interest of users.

 

The aqueous over 36 inches in width market is a core profit generator for the vendors within it. It is however showing clear signs of decline at negative three percent. Vendors in this sector depend on a high degree of daily control of the channel, and not every vendor does this well every year. Still, it is an important sector to defend as it is highly profitable in both hardware and ink terms.

 

The aqueous corporate—print for use—sector is also in decline now, though at over half a billion dollars in revenue it is also worth defending.

 

Solvent

Solvent markets are surprisingly strong. These include aggressive solvent and in that sub-sector the Chinese sales of such systems prop up the figures somewhat artificially since the conditions under which they can sustain their market are not applicable to Western competition. But even allowing for this, neither eco-solvent nor latex is in decline. It seems as if these technologies allow the smaller PSP to consolidate greater indoor and outdoor demand onto more efficient systems.

 

The eco-solvent sector, including eco-solvent and latex systems, remains robust and I.T. Strategies projects continuing growth. Eco-solvent/latex are aggregating technologies of choice for the small to medium converter. Latex itself is successful in growing print volumes and extending its print base in this way, though 2012 was not the year in which latex competitors appeared. There was some attempt but with little success. Some competitors turned to eco-solvent rather than latex in this analyst firm’s opinion.

 

Aggressive solvent ceased to be a new placements industry in the developed markets. The installed base in developing countries has however remained relatively strong—at least stronger than supposed. This is presumably because the systems are inexpensive to print with and there are many customers for whom the quality is acceptable on vinyl. Even so, preference for vinyl itself is diminishing.

 

UV

UV markets are also growing, though at a slower pace than foreseen, but again there is a shift to higher volumes and demand consolidation as well as lengthening life cycles. There is also strong competition in ink pricing. But in general the UV sector is becoming a kind of focus for production scale wide format printing as is especially illustrated by the emergence of the high-volume upper sector of the high-end flatbed market.

 

Sales in the low-end UV flatbed market in 2012 were weighted quite strongly towards lower priced products. That may suggest maturity in this market, though a lot depends on the willingness of the vendors to support lower cost products in sustaining the market in the future. There were 5.6 percent fewer systems sold in this sector in 2012 than in 2011, though I.T. Strategies expects the trend to go upward from 2012 as the product mix changes and more lower cost systems enter the market.

 

Lower cost UV flatbed systems under the $100,000 acquisition price market are perhaps economically just on the edge of being competitive with latex and eco-solvent systems for some PSPs, though this is not by any means a confirmed trend. The lower end flatbed sector is not always to be understood as a fully separate sector. PSPs are showing interest in scaling their offerings on the UV technology platform and in this way a low-end system will often be part of the product mix for customers of high-end systems.

 

The high-end UV flatbed sector has become production oriented for PSPs with high demand or at least high peak demand. The ability of UV systems to work at high volume with no drying footprint or costs and respond fast to demand is at a premium among such PSPs. Within this sector there is a further sub-sector now covering the super high-volume systems. That sub-sector accounted for system sales of 145 in 2012, a 15 percent growth over 2011.

 

The low-end roll-to-roll UV sector is driven to a significant extent by the sales of plotter/cutter systems using 100 percent solid UV ink. These systems were originally intended for label proofing, though the application seems to have spread to packaging. It is not quite mainstream commercial graphics, but it is part of the market and now an interesting specialty option.

 

The high-end roll-to-roll UV market was intended to have a bigger impact than turned out to be the case by substituting aggressive solvent roll-to-roll printing. While few new aggressive solvent roll-to-roll systems are sold in developed markets, it seems that the installed base has remained large and active, probably on the basis of economics. Some slack has been picked up by the market for very large and event-related—or time-sensitive—graphics and there is growth and strength in the market.

 

Mark Hanley is president of analyst firm I.T. Strategies. With over 23 years of experience, he specializes in researching digital color printing technologies. Hanley travels around the world facilitating relationships and strategic alliances between manufacturers in Europe, Japan, and the U.S.

 

Editor’s Note

Equipment sales may be down but output levels and ink consumption rates occurring off of installed devices are on the rise. PSPs print in large amounts with digital inkjet inks. Advancements lead to expanded substrate compatibility, which opens the door for more application options and extension into differentiating markets.

 

Aug2013, Digital Output

 

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