2011 Wide-Format Inkjet Graphics Forecast Analysis

IT Strategies' Wide Format Graphics Forecast has been issued annually since 1994. The forecast is based on systems sales units input of 90+ percent of vendors representing at least 90 percent of sales for the prior calendar year (this year, 2010's sales). Further data regarding pricing, consumption, utilization rates and substrate usage is gathered through secondary research and is regularly refreshed through user research among users of wide format technology each year. Various methods of cross-analysis are employed as sanity checks on individual data points, for example ink and media consumption calculations are compared against real vendor revenues after hardware.

Strictly, the 'forecast' is really a projection of the prior historical linear trend and contains an absolute minimum of assumptions about future change by intent. We model varying assumptions on a custom and confidential basis.

The forecast is divided into four major technology sectors: Aqueous (AQ), Eco-Solvent (ES), Aggressive Solvent (AS) and UV-Curable (UV). The AQ sectors are then broken down to <36-inch-wide systems (not including 17-inch systems however), >36-inch-wide systems and systems used in-house (corporate). The UV sector is also further broken down into Low End UV Flatbed (LEUVFB) for flatbed systems with acquisition price below $200K and High End UV Flatbed systems (HEUVFB) for systems with acquisition price above $200K. The same $200K threshold is applied to splitting UV Roll-to-Roll (R2R) systems into Low End and High End systems (LEUVR2R & HEUVR2R). So-called hybrid systems are usually classified into either Flatbed or R2R according to their perceived base configuration (most are seen this way as Flatbed). Latex technology is included in ES as it is a one-vendor market, and we do not of course wish to reveal that vendor's market share.

Note that dollar amounts in the forecast are partially normalized from foreign currencies and mostly do NOT incorporate discounting assumptions. We normally use list prices even though discounting of hardware and consumables is widespread. While our aggregate revenue numbers are accurate and in general conform to vendor revenues by conscious adjustment, individual positions may overstate values somewhat. In general prices are used at 'dealer' level where dealers are involved, that is to say, the price that the dealer would pay for product, including his margin. Real vendor revenues for products traded through distribution (much is NOT so traded) would be less by the amount of the dealer margin (up to 30 percent).

Aqueous Market's Strength

Aqueous markets recovered much more than anticipated. Volumes are still below 2008 level, but are up 16 percent from 2009. This is probably a function of large-scale installed base replacement and the trend will probably not continue as the market flattens. Ink revenues per printer are down somewhat probably due to a shift to lower width units in the installed base as well as to lower cost hardware bringing in lower scale users.

Total Solvent Market's Strength

Total solvent/latex numbers nearly doubled from 2009 to 2010. The main reason was the under-inclusion of Chinese vendors units before 2010. Fresh research undertaken in China has indicated a much bigger market than we thought, though with minimal penetration into developed markets. A secondary and more important reason is also that Eco-Solvent printers seem to have been largely unaffected by Latex sales. Latex did well as much as was expected and is a great success, but did not seem to cause attrition to ES sales. The ES market has effectively re-attained its 2008 volume. It may be that the relative affordability of ES as a kind of universal technology (i.e.: for indoors and outdoors display) as against UV boosted the market's performance, which would not relate to Latex. This is a speculation.

UV Graphics Market Better Than Stable

The UV Market in general appears to show some weakness in terms of sales in 2010 relative to 2009. But on the other hand 2009 was not as bad in UV as in some markets. There is also some indication that some of the bigger issues related to specific vendors' shifting positionings rather than demand or users. But the sense is there that ES may somehow be a little more competitive to UV than many assume. By contrast some specific systems and vendors did very well within the overall trend again also indicating vendor shuffling more than changes in demand patterns. Where the vendor count is limited this can affect growth rates year-on-year in ways, which are not necessarily reflective of demand pattern changes. Most of the UV market is in fact largely technologically unchallenged and is making solid progress in its coverage of the market: is in full growth mode in other words, when allowance is made for some shifting vendor positionings. The HEUVFB market is still only about 60% of what it was in 2008, which is the combined effect of attrition by lower priced UV FB systems as well as the fact that we probably included true industrial systems in our pre-2011 numbers where they may not have belonged, so that the 2008/11 difference may not be as large as it looks.

Aggressive Solvent Market Continues Developed Market Collapse

The AS market is doing well enough in non-developed territories where most of the Chinese vendors sell. Against that in the US and EU AS is being largely dropped by vendors and users alike, though it is far from dead yet (one developed market vendor actually launched a new system). The developed market trend is driven by health, safety, and sustainability issues.

Forecast is up to ~10 Percent Understated

This forecast covers the main vendors in each market. In some markets we may be missing up to 10 percent of units sold which come from minor, often regional, vendors and are NOT counted in our forecast.

Caution in Reading Year/Year System Unit Growth Rates

In general growth rates year-to-year 2009-2010 in hardware unit sales in the forecast are most subject to fluctuation and often the reasons is due to the activity, success or failure of single or small numbers of vendors. Also, the exceptional nature of 2009 as a bad year is still driving abnormal growth rates as markets in 2010 bounce back in some cases unusually well. It is better therefore to review year-to-year growth rates in installed base and ink to get a better idea of 'normalized' growth. The installed base in turn is driven by a complex and changing set of assumptions about how long systems stay in principal use. These assumptions are driven largely by separate research

Hidden Vendor Successes

There are now significant cases of success on the part of vendors included in the wide-format graphics market in industrial markets like ceramics (Durst, for example) and finished product decoration (Mimaki, for example) who have made a big impact on those markets but whose sales in those areas are NOT included in the Wide-Format Graphics Forecast (because they are not truly pure graphics products any more). The larger significance of this is the ability and desire of vendors coming out of the wide-format graphics space to generate growth outside of that market. This has a strategic significance for all vendors in wide-format graphics. Against that there are also sales of wide-format graphics systems, which are used for printing packaging board. We DO include them in our Wide-Format Graphics Forecast because today they are mostly being sold to digital PSPs rather than mainstream packaging manufacturers, and also partly because they are very close to the standard graphics application of POP. But if systems sales were to migrate in future from the wide-format graphics sector into mainstream packaging manufacturers in significant numbers that may also come to have to be considered a separate 'industrial' market.

Regional Markets Status

In 2010 in general US markets lag European markets in recovery against a European market, which starts out bigger than the US in aggregate as well, though spread among non-homogenous individual national markets in the sense of distribution and economic conditions.

Asia Pacific numbers in the summary seem to be biggest of all, but in reality you have to take out a large part of the numbers as attributable to Chinese vendors (with some Koran and Taiwanese activity as well) inside China and in other Asia Pacific countries.

Some of these systems also penetrate Latin America and the Rest of the World markets. They are not comparable to developed market products offerings either in economic, support or technology terms, even though they definitely do constitute a type of de facto competition. Thus they should always be regarded in separation for all except a total market analysis, which measures aggregate demand for wide-format graphics.

We are also hearing that in Latin America and the Rest of the World markets ES (and by the way Latex) sales are doing well in markets where credit is very limited and the cost even of Chinese AS systems (very much cheaper than developed market manufactured alternatives) goes beyond the means of today's converters, where they had bought Chinese before. ES is a much cheaper acquisition alternative. This may also go some way to explain the strong showing of ES in 2010 in general.

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