By Mark Hanley
The wide format graphics digital print market as a whole still satisfies a persisting and growing demand for color graphics supporting retailing, merchandizing, event marketing, and specialist decorative markets. Digital shows great strength as a means of diversifying businesses’ communication to customers.
Vendor revenues for hardware and ink reached $4.4B and grew year over year (YOY) just under two percent by a conservative estimate, which given competitive pressures in this highly efficient market, is not a bad performance.
An increasing share of that number is going to non-OEM ink suppliers. The market eats up over 77,000 systems in a year—undercounting up to ten percent small and local non-mainstream suppliers. That number is replacing a part of the 270,000 installed of systems worldwide. This is with fewer, more efficient systems at a lower unit cost to cover the existing and new demand for output.
Inside the overall market in terms of technology sectors the most action in terms of growth and innovation is coming from the UV sector, which addresses the market’s needs for above-average growth in production volumes. There is growth at the high end in flatbed systems within this sector, but above all there is growth in low-end roll-to-roll (R2R) systems where the economic and price gap between low-end flatbed systems and high-end eco-solvent/latex systems is being progressively filled.
Topline Number Analysis
The statistics in Chart A depict the overall size of the wide format inkjet market—excluding soft signage—worldwide with some projections to 2022. The revenue data is measured at the level of pricing from vendors or dealers to users according to the different channels used. Retail graphics, followed by event-related specialty graphics, is finding a newer creative outlet thanks to the beneficial and enormous diversity of the highly fragmented print provider base of up to 200,000 sites worldwide. This allows for a truly localized offering everywhere.
Furthermore, there is now a clear linkage between print color graphics and a wider deployment of digital communications in other modes. Full marketing campaigns based on the backbone of live social media-fed data allow advertising, retail graphics, events, packaging, labeling, and print/digital communications functions to be increasingly integrated. That in itself boosts growth. This development is in its early, not-very-efficient days, with the prospect that maturation of the process of integration is a further spur to growth.
Chart B illustrates projections from 2017 through 2022 and provides a snapshot of YOY 2016 to 2017 development of the statistics presented. The difference between the projected five year growth rate and the YOY number shows above average YOY growth rates. Remember that the wide format graphics market cannot be measured accurately just from year to year. Acquisition cycles and technology adoption rates are longer than a year, resulting in a growth rate that averages out over time—something more like three to five years.
Chart B refers to units of systems sold and ink and hardware revenues. Underlying these statistics is information around square meters printed in total—in turn driving ink sales for vendors. Output statistics are a truer measure of final market demand and the numbers show this in chart C. Chart D provides an updated graphic representation of the relative sizes of each wide format sector in terms of vendor revenues for hardware and ink and square meters printed.
In 2017, aqueous markets gave us more of what was in 2016, which is to say slow but clear decline in YOY sales. Even though at a total of around 40,000 sales in this ink lucrative and largely print quality-driven market, this is by most measures still healthy.
The relatively high sales numbers to some extent reflect the relatively low cost of aqueous systems, and therefore the relatively low cost of replacing older systems. Added to that is the fact that aqueous systems are rooted in core functions like proofing and photo-quality output needs, which only aqueous is perceived to be able to fulfill.
There are some product re-classifications between the professional or print for pay and corporate or print for use parts of the aqueous market, some of which are vendor driven. The upshot is that aqueous corporate as a sector is declining in significance. This may be driven by the fact that CAD systems with graphics capability have eaten into the sub-sector just by being more prevalent and available at lower costs.
Eco-Solvent and Latex
Eco-solvent puts up around 70 different competitive products against latex. That was an effective way of flooding markets in the past and distracting from the latex offerings of a single vendor. Additionally that single latex vendor spent its early market years with an indirect competitive positioning to eco-solvent. Now the lurking disadvantage of such a wide eco-solvent offering from three to four major vendors—being the cost of development of so many products and the increased competition among eco-solvent vendors it promoted—is coming home to roost. Eco-solvent vendor performance is beginning to look a little tired, especially economically speaking.
On the latex side, HP has always pursued a dual strategy of low- and high-end products. Low end is a big competitive target while high end is a vehicle for developing beyond graphics into decorative markets. Decorative markets started out small, but HP believes that they have more than average leveragability in the future by digital uniqueness in providing diversity of print content. In this area latex is perceived to have a certain drying time and odor advantage over eco-solvent.
Aggressive Solvent Market
Similar to last year, aggressive solvent systems are still out there in the install base, and Asian vendors still sell them, but they are as good as gone as new systems in Europe and North America.
UV is a sector that now pays a relatively high acquisition cost for systems capable of true burst-speed seasonal response to demand at factors of up to 20 times demand over average seasonally. UV is also a focal point for technology and platform development and just growth. It is mostly a separate sector from the low-end R2R aqueous, eco-solvent, and latex markets, though newer sub-$100K UV R2R systems are pushing down towards the upper end of the eco-solvent/latex market.
The statistics around sales units of UV systems YOY growth is exceptional from 2016 to 2017. Chart E depicts 2017 sales compared to 2016 by UV sub-sector. Chart F is the same analysis but for print output by UV sub-sector. UV is certainly growing and is healthy, but caution is advised in reading too much into annual growth rates since—especially in high acquisition cost markets like UV—the sales cycle is often spread over three to five years. So the real longer cycle rates of growth are probably significantly lower than YOY would suggest.
All of this data together suggests that UV is growing into its own identity from starting as a convenience flatbed format, progressing to volume capability, and now developing into a highly flexible large-scale realization format. UV’s ability to generate large volumes fast—which sometimes translates to very large areas of print fast—contributes to the real development of new markets especially around sports franchises and events.
UV is beginning to go beyond just display graphics and become the platform for development of new markets derived from wide format platforms. An obvious example is the nearly-half-billion-dollar market for deep plated decoration flatbed systems from companies like EPS, Inkcups, Mimaki, Mutoh, and Roland. There are also interesting crossover-type products from Inca Digital in conjunction with Fujifilm, which are greatly enhanced print quality systems with relatively low cost positioned for commercial printers who want to do micro runs of book covers, test marketing of packaging, or print of rigid displays. Then there are the UV-based corrugated packaging systems from vendors like Durst and EFI. It goes beyond just applications into real enhancement of the UV digital print function for a range of potential markets.
At the very high end of the high-end flatbed UV market there is the sub-sub-sector, super high-end (SHE) systems, which are close to $1M or over and generally print around 5,000 square feet per hour or more. Chart G illustrates the history of sales of those systems. Sales of SHE systems are healthy and separate from ordinary high-end flatbed systems. Year to year sales fluctuate, but again a longer cycle must be understood as driving the underlying growth rate.
The SHE market projected forward to 2022 and compared to the standard install base by 2022 of high-end flatbed systems without the SHE components is in chart H. This is a good illustration of the importance of really high-end UV systems. This sub-sector can be seen as a component of the convergence of UV technology’s capabilities for new markets in the future.
As an application, soft signage is definitely part of the inkjet wide format graphics market. But some of the most important low-end systems used for soft signage are primarily sold as apparel and home furnishings printers.
Soft signage is not new, but it has seen a spurt in growth in the last five to six years to the point where its output now represents around 20 percent of all the rest of inkjet wide format graphics output. It has a high end $100K plus acquisition price and a low end $100K and under acquisition price. Its analysis is complicated by the fact that while the high-end systems are soft signage dedicated, and can be counted cleanly, the larger low end is made up of systems which are sometimes sold for soft signage but are much more often sold as apparel printers. So it is hard to sort out usage at print provider level on the simple basis of placements.
The technology used for soft signage is dye-sublimation printing, which allows for a very high quality, brilliant color gamut on synthetic fibers. This is uniquely attractive to signage users. But additionally soft signage is very light, easy to transport, store, and recycle. As a result of these factors, there is not a print outlet in wide format anywhere that does not now want to have this technology as part of their offering. There is still much latent demand in other words. A smaller amount of soft signage is and has in the past been generated by UV and latex systems, and even sometimes eco-solvent.
Chart I offers an analysis of the soft signage market in 2017 and projected forward.
Regionality of Systems Sales
In the case of nearly all sectors mentioned in this report sales to North America and Europe are over 60 percent. This pattern is elsewhere in newer digital print production markets. Underlying this weighting to North America and Europe is the fact that the benefits of wide format graphics to users relate to the high level of development of modern consumer economies such as how often people buy goods, what goods they buy, the relative cost of those goods, and where they are buying them. These unique factors open themselves to leveraging the uniqueness of digital output.
In China and second-tier economies wide format graphics are indeed also used, but supplied by vendors largely out of China—and in large numbers. These largely Chinese-supplied systems sustain their economic existence on the basis of a very different economic envelope and physical specification compared to the systems which are supplied in the majority to the first-tier economies. For example, aggressive solvent systems are still very important in those markets where in Europe and North America such systems are almost no longer sold and the install base is diminishing dramatically. This may start to change as more Chinese vendors are driven into UV systems due to Chinese government regulation around the use of hard solvent systems and inks.
Print Rates into the Future
UV systems are the leading indicator of production demand in wide format graphics and as illustrated in Chart J there is a clear trend to higher volumes of print. It should be understood that these systems do not print at constant high volumes, but are rather procured to allow print providers to undertake very high volumes seasonally or event related when maybe ten to 20 times normal print volumes are needed in a very short space of time. This ability to respond fast in a last-minute retail world is the critical factor. But even so, the occasional high rate of print still raises the average over time considerably.
In particular, the high-end UV flatbed number is heavily influenced by the SHE sub-sector. This is like saying from a vendor perspective, getting large numbers of systems in place now guarantees you a growing ink market at much higher profits down the road coming out of the ever-growing installed base of ever-faster systems.
Mark Hanley, president, I.T. Strategies, has over 20 years of experience in the electronic printing industry. He specializes in identifying new markets for digital color printing technologies. In addition to conducting research and consulting, he travels around the world, facilitating partnerships and strategic alliances between manufacturers in Europe, Japan, and the U.S.
Prior to co-founding I.T. Strategies, Hanley organized the European operations of CAP International, subsequently known as BIS Strategic Decisions. From 1990 to 1992, he was services director at BIS, responsible for the management and growth of electronic hard copy information services in Asia-Pacific, Europe, and North America.
Aug2018, Digital Output