By Mark Hanley
2020 was a different year, with downward consequences for this, by some distance, still largest and most fragmented single digital production print market of wide format graphics. The data is now in for 2020 on sales of new equipment as well as usage of installed systems. I.T. Strategies, Inc.’s well-researched estimate is based on good sampling and sources, and is offered this year as a basis for planning and debate. Already in a vendor-mature market, 2020 pushed things right along.
Units of Sales
While people often focus on units of sale as a measure of market share and success, it is in fact not a good measure in a mature, increasingly replacement vendor market. Overall the decline in placements in 2020 was around 15 percent, which is significantly less bad than revenues of -34 percent and printed area of -35 percent.
Higher cost systems were slower to sell than lower cost systems, which is no surprise, but it is also true that sales cycles overlapping from prior years still had momentum in 2020, and we know that especially towards the end of the year, vendors pushed hard with new products and enhanced performance-for-dollar systems combining effective discounts with new systems and products. That is all good for future years in the market. The bottom line is that unit sales trends are a product of trends over more than just a single year. Remember too that 2020 saw quite a powerful comeback in the second half of the year even in the face of subsequent COVID-19 waves.
Vendor revenues are the best measure of health from a vendor perspective, and they show a 31 percent decline in 2020. As aforementioned the crisis of 2020 met with an already maturing market, at least from a vendor perspective. This is a good representation as it measures the use of the long tail of installed systems across the market and is a kind of indicator of the leverage printers make of their long-term investment.
A component of what makes up vendor revenue is installed base, and the size of the installed base varies out of sync with new unit sales due to varying retirement rates by sector in this increasingly replacement market. It is also an indicator of end user demand for the product printers generate, which is a primary parameter of market health.
The trend is led by the largest sector, referred to as low-end solvent made up of latex and eco-solvent. Solvent is referred to in this low-end sector as it is the legacy reference to the technology, which founded this sector of eco-solvent.
But dye-sublimation (dye-sub) soft signage—now about a quarter of all wide format graphics output—also gave a good kick downwards to the statistics with its apparent high dependence on the disappearing in-person trade show sector. As a result, the overall decline for the wide format graphics market in 2020 was at around -30 percent net for a year with an okay start, a disastrous March through May, and a strong comeback in the second half of the year. It is not as if the whole year was a disaster in other words.
Printed square meters is a measure of end user demand for product on the whole legacy installed base of technology. As a result this statistic closely follows the vendor revenue statistic. In a normal year demand measured in this way grew more than vendor revenues, showing a mature vendor market driven by inter-vendor competition in pricing. This suggested a maturing vendor market, but a less mature demand market. But the convergence of the two in 2020 shows everyone was equally impacted by COVID-19. This does not necessarily mean that demand markets will not pick up again at a faster rate than vendor revenues in the near future. There may be a marked divergence as vendor competition sharpens while markets open up more from the end of this year onwards. In other words, wide format graphics offers growth but at both higher efficiencies and lower costs.
Soft signage, for all its steep declines in 2020, has in recent years rapidly come up to represent about a quarter of the whole market. That trend will re-establish itself. It also serves as a reminder that latex and eco-solvent are still the major carriers of the wide format graphics market in the extremely fragmented low-end roll-to-roll market. That leaves UV with a high production sector, but a relatively narrow print service provider (PSP) base driving an aggregate market whose volume in revenues is about one third of the total in 2020.
Forecast to 2025
The composite total wide format graphics market statistic says that while 2019 levels of hardware unit sales will return by 2024, it will only approach 93 percent of 2019 vendor revenue levels by 2025. This is a conservative view and once the assumptions are understood it is open to anyone to disagree when speculating about the future.
Vendor revenues are a composite of hardware sales revenues and consumables sales. I.T. Strategies uses a percentage rate for each forward year and applies it to the unit sales for hardware and to the average monthly print volume index for each sector in the case of consumables.
In the case of consumables, the consumption rate per machine extends beyond any baseline growth driven by the number of machines in the installed base, itself driven by the product of unit sales and retirements. This is intended to account for increased productivity of systems, and for increased raw demand for the output.
Wide Format Applications
If comparing the norm from 2019 to where applications went in 2020 there was a near-disappearance of trade shows, sports, and events matched by a great increase in informational signage focused on COVID-19 needs. Remember these are relative measures and that 2020 was 30 percent lower than 2019 in absolute volume of revenues or printed output.
Commentary by Segment
I.T. Strategies identifies the major segments of the wide format graphics market as aqueous; low-end solvent made up of eco-solvent and latex; UV including all flatbed and roll to roll; dye-sub soft signage; and super high-end flatbeds.
The aqueous wide format sector is a lucrative but small sector of wide format graphics, though it retains its separate identity through the preference users show for it in high-quality applications like portraiture, rendering, small in-house educational or retail graphics generation, or proofing. The hardware is relatively low cost, dominated by three large players, the volumes of print are low by unit and in aggregate, and the inks prices are high.
There will be a slow decline of vendor indicators in this market as a function of greater productivity within a stable end use environment. Relatively modest 2019 to 2020 decline seems partly to indicate a strong home user market in the aqueous less than 36-inch width sector, but is also influenced by including corporate aqueous into the aqueous less than 36-inch width sector.
The low-end solvent market also includes latex, which is a market at the low end where HP Inc. is not the sole supplier even as it remains the dominant supplier. The heading of latex also includes for the first time the high-end HP systems. These were calculated as a separate sector at their appropriate higher consumption rates, though the low- and high-end numbers are combined into a single summary in order to not reveal HP’s share at the high end.
There is some questioning about whether high-end systems belong competitively with UV. I.T. Strategies does not separate them out first, for the prior reason given, but second, the firm sees high-end latex systems as having substantially a unique and separate competitive profile often not directly competitive to UV.
This composite of latex and eco-solvent is the largest single wide format graphics segment by any measure and represents the heart of the wide format graphics market through its low acquisition costs suitable to the available super large and fragmented low-end roll-to-roll channels worldwide. These technologies are easy to acquire, suit the localized small-scale structure of the aggregate large market, and are capable of universal permanence in use on films and fiber substrates. This latter is the key to the success of wide format graphics’ biggest sector since most of the growth in the last 12-plus years derives from demand for external graphics. The eco-solvent market as well has easily the largest selection of products with over 70 from a handful of established vendors. This is a well-established market that has reached early maturity, but whose future as a replacement market is assured.
This largest and low-scale roll-to-roll market has in some ways a good shot at defending itself against the COVID-19 crisis simply through the flexibility its scale affords and its ability to jump from application to application at low runs. This is where a lot of the quick-footed shifting to informational COVID-19 signage took place and very considerably mitigated the loss of retail, sport, trade show, and travel-related business.
In recent years this market also attracted some attention from low-end UV in an appropriately roll-to-roll format from companies. It is hard to say if this is direct competition to low-end solvent, but such UV products broke into the dead zone between the high end of eco-solvent/latex at about $50K and the low end of UV where prices used to start at less than $100K. At least such UV products are a ladder upwards to higher volume customers for smaller PSPs as they grow.
The UV wide format graphics market’s principal focus is volume print, a lot of it based on point of purchase (POP) at regional/national levels as well as larger scale events. These types of applications were hammered in 2020 and the sector’s dependence on larger retail chains made it vulnerable to supply chain shifts. High-end roll to roll saw a 76 percent decline in sales of new systems, though only a -21 percent decline in vendor revenues due to the large installed base.
Paradoxically, 2020 also saw some consolidation of demand into larger roll to roll and flatbed systems contraindicating other effects of decline. The trend to large scale systems for reasons of better economics and fast-response capability for larger runs was a trend before COVID-19. But for larger scale, high-end UV systems in general they occupy a somewhat narrow but unique and important area of demand through good economics and fast response capability. All of this is critical to the consumer seasonal retail markets, which remain very large and continue to do so in Europe and the U.S. and more so as other consumer markets develop in Asia. This will come back strongly relatively quickly, though under ever harsher terms of competition between multiple vendors.
The UV wide format graphics market also represents other values at its lower end through providing a bridge in roll to roll to growth from low-end roll to roll to higher volume markets and larger customers, but also through the capability of flatbed UV to offer entry to specialist decorative and packaging markets. That part of the UV market is still in a development stage.
In general while strong vendor competition limits returns on the UV market, it still cannot be called mature by a demand or technology development measure. It has also had a less tangible benefit in allowing vendors to leverage the technology to develop the referred to adjacent markets and to gather experience in the development of large-scale sheetfed systems—a kind of digital print architecture not seen nearly enough of in its home territory in the graphic arts.
Dye-Sub Soft Signage
Dye-sub for sign signage is presented in this report for the first time as an integral part of the wide format graphics forecast. The low end of soft signage hardware numbers were taken from I.T. Strategies’ textile dye-sub forecast in full and then about 30 percent of the output was devoted to soft signage as represented in this analysis—with the rest going to apparel and sportswear print. The same hardware for the other 70 percent of its output is represented separately in I.T. Strategies’ textile analysis.
This was done because soft signage now represents in terms of output about a quarter of everything else in wide format graphics. This is tantamount to saying that pretty much every PSP is now into soft signage or needs to be. It is also a market, which 2020 aside, was not yet mature in 2019. But 2020 high-end soft signage dye-sub suffered because of its apparent dependence on short-term, trade show related usage. That also extends to sports, events, and travel-related usage.
This type of usage of dye-sub reflects its value propositions of being light, easy to dispatch and install, and easy to recycle—all of which go to reduce its cost, not to mention the brilliance of its color so much loved by its users, and its pleasing semi-transparency and dynamic flow in air currents in some cases. I.T. Strategies predicts dye-sub soft signage getting beyond just a quarter of the total wide format graphics market. As a result, it will rebound very well after COVID-19 with annual growth rates settling at the ten percent level up to 2025.
Super High-End Flatbed
In years past, I.T. Strategies devoted a separate analysis to the super high-end flatbed segment. This is a small number of devices from a small number of vendors generally capable of 5,000 square feet per hour and upwards, sometimes single pass and sometimes costing over $1M.
This market reached its peak in 2016 with sales reaching about 185 units. But then it went into some decline to about 83 units in 2019. This was a result of the increasing productivity of standard display graphics flatbed UV systems sometimes from the same vendor at lower acquisition cost. But the decline also had to do in late years with the appearance of single-pass systems designed for the corrugated packaging market but going into display, and with the diversion of some standard UV display graphics systems to the corrugated market.
As vendors pushed into the corrugated packaging markets with single-pass, post-print sheet systems, some of the acquirers were display companies or corrugated packaging companies wanting to get into display who printed rigid corrugated for POP displays. Some people were surprised at the acquisition price acceptance by display companies, but it seems to have reflected the value placed by some PSPs on speed of response, as well as the snail-like adoption rate of the true corrugated packaging market driving sales professionals to get what they can where they can. This was not the original intent of the corrugated systems vendors, but it acted as some kind of competition to other originally display-designated flatbed UV systems and was not all about incremental display demand. At the same time some display flatbed vendors started designating their systems as suitable for corrugated packaging and they probably printed a mix of very low-scale micro-packaging runs as well as display.
Now the display market is 150 times minimum smaller than the corrugated packaging market so that these two markets—corrugated packaging and corrugated POP display—are going to have to diverge on an economic basis even at a very conservative market penetration rate into the true packaging market.
There is no problem here as long as the observer is aware of the distinction and identifies where the systems went. That is a little hard right now because the markets are intertwined somewhat for the moment. But unless the true corrugated packaging initiative stalls then the two markets will part ways soon. That will leave a reduced display graphics super high-end flatbed market at flattish rates of sale.
I.T. Strategies differentiated future growth assumptions taking into account three points—how steep the 2020 decline was, the state of maturity the sector was in pre-COVID-19, and the speed at which drivers for each sector seem likely to return to normality. For consumables, which starts from lesser decline in 2020 then hardware, we have a baseline of ten percent for 2020, six percent for the year after, settling thereafter to three percent annually.
Higher growth rates for dye-sub are evident. The growth rates do not necessarily return to the rates seen pre-COVID-19 by the end of the forecast period as there is an assumption throughput the period that markets are still in reconstruction.
In summary about projections, the recovery is not going to be like 2009 because this crisis is longer and is still uncertain in its outcome. Furthermore, real structural change has been enforced in the way of restructured types of demand and what is suspected is quite deep channel damage. It is not this time a case of picking up where you left off in 2019. The projection is taking place within an uncertain environment and should be seen as a kind of minimum position.
Editors Note: Visit the digital edition here to view charts illustrating Hanley’s points from this article.
Aug2021, Digital Output