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Oct 1, 2012 12:00 AM
CHINA HAS SOME VERY BIG PRINTING AMBITIONS. The current five-year government economic plan reportedly calls for print shows to be drupa-like by 2016. Judging by the 2012 Shanghai International Print, Packaging and Paper Expo, this is a realistic goal, but it certainly promises to be an interesting quest. Let’s take a closer look at this amazing laboratory of change.
Apple will sell almost twice as many iPhones in China vs. the U.S. in 2012—and at a premium, too. When considering the printing industry, however, we have to factor in gross domestic income per capita. Although Apple is projected to sell 35 million iPhones in China, it is addressing only the top 3% of the population with high incomes. Print is a more democratized product, affordable to the many hundreds of millions of residents who cannot afford tablet PCs and smart phones. China’s high literacy rate, coupled with rising incomes, should create growing demand for newsprint, magazines and book printing.
For many years, the Chinese perceived pollution as the price of growth. But in recent years, pollution has become a national security issue. Concerns about lack of fresh drinking water, poor air quality, and safe food supply have risen to the forefront in an urgent and direct manner.
Environmental concerns have fueled a fascination with inkjet technology. The general consensus is that if China does not become involved in inkjet technology it will lag behind. Efforts to make its own ink jet printhead technology seem to have stalled; the current focus appears to be mainly on integration.
FIELD GUIDE TO EQUIPMENT MANUFACTURERS
China has built an eco-system of suppliers that western countries can’t rival. While it is probably impossible to manufacturer electronic consumer goods in a timely fashion outside of China, production printing doesn’t require millions or even thousands of units. Generally speaking, China has three kinds of printing equipment manufacturers: government owned, super capitalistic and foreign owned.
Manufacturers such as Beijing Founder typically are well capitalized and focused on R&D. Because they tend to be non-profit driven, their commercial success may not be a metric. Often, these entities enjoy a captive market among book, newspaper and magazine publishers since the government also owns those outlets.
These entrepreneurs are often opportunistic and undisciplined in business process. They represent a growing group of printing equipment suppliers, mostly in non-publishing applications such as wide-format print. Many are start-ups created by former engineers at larger printing equipment manufacturers, looking to get rich quick. But few ever break out of the pack to reach annual revenues above $5 million and fewer still can claim more than $30 million in annual revenue. This group never accumulates enough capital to invest in marketing, sales, and service beyond emerging markets, and often sacrifices improved product quality in favor of producing the lowest priced printers.
FOREIGN-OWNED CONTRACT PRINTING EQUIPMENT MANUFACTURERS
Our final category includes Taiwanese and Hong Kong-owned contract manufacturers such as FoxxCon (the producer of most of Apple’s products and soon most of HP’s consumer inkjet printers and PCs). They know how to produce high- and consistent-quality products. They, too, are driven by low cost, but through economies of scale rather than through sacrificing quality. They have little brand presence of their own (so far) and seem to have little interest in manufacturing production printers, as the volumes are low.
THE BOTTOM LINE
China is attempting to develop a strategic position in the printing equipment manufacturing business. Its core digital printing equipment-manufacturing business today is in wide-format graphics, where the business model differs greatly from the western world: All margins have to be earned from hardware, because the Chinese manufacturers don’t capture ink annuities. Ultimately, this model may be unsustainable since the business can’t scale and reinvest.
How can China raise its position on the world stage of graphics printing equipment manufacturing? Acquiring leading western printing equipment manufacturers (such as Shanghai Electric’s Goss acquisition) is one option. But few analog printing equipment manufacturers are in a position of growth. Acquiring a digital production printer manufacturer would likely be expensive/impractical (scaling up would require buying lots of small inkjet integrators).
GOING BEYOND PRINT?
Perhaps, and this is sheer conjecture, the Chinese vision for taking a leading position in print extends well beyond document and graphics. With most consumer electronic products produced in China, owning/controlling the ability to print plastic electronics for printing of solar panels, flat screen displays, etc. may be the strategic vision for print.
Marco Boer is Vice President at I.T. Strategies. Email Marco at B2MeMag.com/3MB.