By Mark Hanley
After gathering sales data for calendar year 2018 the read on the digital wide format graphics (WFG) market is that competitive conditions among vendors are becoming more difficult, but that user demand remains strong.
The WFG market remains the largest non-office/consumer digital print market by quite a margin. It is especially strong as a highly multi-sectoral market and continues to drive multiple new markets at its periphery. The WFG market remains an engine of creative growth for digital print graphics, decorative, and industrial applications.
Topline Numbers Analysis and
The year-on-year comparisons of market performance 2017 to 2018 measured by unit sales, vendor revenue, and physical print output all show significant declines as summarized in table A. This is a single year measurement of market performance within a market that does not move in an annual cycle, and whose cycles vary as a function of continually changing technology. In which case, some caution is called for in judging what 2017 to 2018 numbers share.
From a vendor perspective, the market is mature, and that is more a product of intra-vendor competition than demand exhaustion. That allows vendors to continue to realistically fight for share on the basis of innovation. Correspondingly, there were important and interesting shifts in vendor positioning in 2018 and in the preceding years.
It is also possible—though very hard to prove—that users are extending the life of their existing systems under what is for them more competitive pressure on margins, and therefore buying fewer new systems in a given year. If so, that is not in itself a direct commentary on demand maturity for the output.
One other factor to take into account is the fact that soft signage—not included in the numbers in table A, but separately presented later in this analysis—is a directly competitive print technology to aqueous (AQ), eco-solvent (ES), latex (LX), and UV. It now represents 20 percent of digital WFG. This is probably not all net additional growth but has to some extent eaten at the growth of the other sectors. It does on the other hand contribute significantly to overall WFG market growth more than the AQ, ES, LX, and UV numbers alone would themselves suggest.
Sectoral performance is varied and some sectors within the whole market are much bigger or have a heavier weighting effect on the overall market statistic and are more mature than others.
Four Year Growth Rates by Major Parameter
The WFG market does not run according to annual cycles. In support of that theory, a review of annual growth rates over the last four years around sales units, installed base, ink liters, ink and hardware vendor revenues, and ink and hardware vendor revenues together is provided. Each parameter is calculated by the linear average growth rate over the period. The result of the calculation is mostly decline from a vendor market perspective. This trend won’t reverse, but within the overall market product weighting shifts usually based on innovation. This is illustrated in table B.
Sectoral Performance Indices
Table C looks at the five year projections I.T. Strategies is making for the industry by the three major WFG sectors. It shows an overall flat market with decline in AQ—not controversial in itself, some growth in ES and LX, and moderate growth in UV.
This is based to some extent on throughputs on the relatively stable installed base of systems, which is for at least half of it by 2023 determined by systems already in the market. It is also based on changing product mix and the assumed mildly positive growth rates in more-productive systems sales. Usage will rise and that the demand or output market will continue to grow in UV and to a lesser extent in ES/LX as a function of continuing increasing value of WFG within the consumer economy.
However, remember that the future absolute numbers projected are lower than last year as a function of fewer systems going into the installed base in 2018. Thus, in square meters of output—illustrated in table D—the projected 2018 market, for example, is down five percent, and 15 percent by 2023. The projections necessarily take into account market maturity as indicated by the sales trends of the last few years, but at the same time there is a kind of lag in demand decline, which is expressed through modestly positive increasing more-productive systems sales growth rates.
Table D shows output projections for the major WFG sectors measured in square meters of output. This is the principle determinant of vendor revenue, though such revenues are also affected by hardware sales and competitive downward price trends, and even aftermarket ink competition in some cases.
These are the most optimistic projections in the forecast. They are mostly driven by growth weighting over time towards more productive systems and by assumptions about demand growth based on the continuing increasing productivity promoted by the use of graphics both for point of sale and decorative markets.
Tables E and F are a graphic representation of major WFG sectors by hardware and ink revenues and square meters of output.
The following information is a deep dive into the AQ, ES, LX, aggressive solvent (AS), and UV markets.
The AQ market is now less than half the size of the ES/LX market and something over half the revenues for UV. Note, this does not include computer aided design or CAD devices. It is in longer term decline even as its graphics volume in vendor revenues reach over $800M. It still commands the highest quality of print, which is critical for some specialty markets like portraiture and multi-function proofing within the print and design industries. But AQ is also expensive and not suited to external graphics, which has been the principal demand sector driving growth for the WFG market as a whole in recent years.
The ES and LX markets placed together is the largest WFG sector. They represent low acquisition cost technology capable of universal printing for internal and external graphics sectors.
To a large extent ES and LX are direct competitors in general display graphics markets, but there is some divergence due to the successful emphasis given by a single LX vendor to decorative markets, and its deployment of a high-end product format taking LX into production markets where ES is not present. That represents about 30 percent of LX output, which is not ES competitive and developed its own areas of preference where the competition even against UV is not usually direct.
The greater part of the general ES/LX segment at the heart of the whole WFG market is now showing signs of maturity probably now as a function of market saturation. ES products are still available in around 60-plus formats from over three vendors, and have been for many years.
The AS market remains of little significance in Europe and the U.S. even as an installed base still persists. Outside of these countries AS still plays a significant role.
Although 2018 unit sales on UV systems over 2017 show major declines in three out of four sectors, there was important growth in low-end UV roll-to-roll systems, especially with cutter capabilities. It does not make a massive difference over the UV segment over time, but it is a good example of creativity in intra-vendor competition.
This is the same 2018 on 2017 analysis for output of print by UV sub-sector and driven by weighting system types within the installed base. This is a linear function of what is actually sold each year by sector historically and by growth rates on continuing systems sales by sector. It is less driven by increases over the forecast period in throughput rates within separate sectors. Table G illustrates the amount of square meters printed in each UV sub-sector.
Over the last less-than ten years soft signage, or signage printed on textile substrates—mostly synthetic using dye-sublimation (dye-sub) inks for a brilliant print image—has grown from a specialty niche to a mainstream technology for most WFG print service providers. That is because of advantages textiles bring in ease of installation, recyclability, and image quality or pop from dye-sub ink technology.
The share of soft signage physical output within the overall WFG market at 20 percent is now strategic, and the growth rate of soft signage still exceeds that of any other WFG systems sector. The net result by 2023 will be at minimum soft signage retaining its share of totals even as the weighting of other systems moves to higher productivity. Statistics are summarized in table H.
Where soft signage is deployed as an output technology the following analysis suggests that productivity is higher in the new growth market where these printers are deployed than equivalent other digital technologies in the various applications listed by their share. This greater apparent use of soft signage systems can relate to their deployment often in high-usage specific vertical markets like sports leagues, where the output on dye-sub can be multi-purposed to other textile uses around clothing and promotional goods.
The message now as it has been for the 20-plus years of this market is that the bulk of WFG is still to be found in the advanced consumer economies of Europe and the U.S., in areas where economic success is callable of being strongly affected by the commercial or decorative benefits that WFG digital print can bring. In these areas people pay well to have this leverage.
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 extensively around the world, facilitating partnerships and strategic alliances between manufacturers in Europe, Japan, and the U.S.
Aug2019, Digital Output