By Mark Hanley
2021 saw a robust increase in wide format graphics systems’ sales over 2020, with the exception of weakness in the strategic eco-solvent and dye-sublimation (dye-sub) soft signage sub-sectors. Total wide format graphics unit systems’ sales—excluding China—rose by 17 percent, vendor revenues by ten percent, and square meters printed by one percent.
I.T. Strategies believes that a lag effect in reduced installations driven by the last two pandemic years as well as persisting infrastructural contraction in major wide format graphics usage markets like events and travel, as well as among print service providers (PSPs) are at work in the print consumption numbers.
Units of Sale by Sectors Worldwide
Unit sales of new wide format graphics systems are the prime indicator of longer term recovery after the pandemic, generating an overall growth rate 2021 over 2022 of 17 percent. This reflects a surge of buying more productive equipment after a period in which many systems were mothballed, abandoned, and at the least, became less matched to the new patterns of demand that evolved during the last two years. There is some real renewal here. Of course, to an extent, over one year the growth rate is inflated just as a function of the unusually weak year that preceded it.
There were, however, two sectors where unit sales performance was well under the average, and those were eco-solvent and soft signage. This is important since those were leading sectors in terms of output volume, innovation of applications, and in breadth of channel coverage. These sub-sectors were technologies most converters have a foothold in and even leveraged as prime drivers of growth.
This weakness can be indicative of damage done to changed demand patterns but may also indicate longer term market maturity. In particular in the case of dye-sub used for soft signage, the demand for the use of lower end dye-sub machines for apparel print may also have diverted productive effort to that sector away from signage.
Vendor Revenues by Sectors
Vendor revenue as a measure of 2021 market performance shows healthy growth at ten percent 2021 over 2020. But in reality ten percent is the minimum you would expect after the depths of 2020, so it is more like reversion to the mean than real growth over the longer term.
Actual revenues in 2021 are around $3B against $4.2B in 2019, so still 30 percent down, and by our conservative estimates not returning to 2019 levels until around 2026. So the message is that the pain is still with anyone who remembers the market of only two to three years ago.
Square Meters by Sectors
Printed square meters is the measure of demand for wide format graphics among users. Here we see only one percent growth over last year. It is a secondary function of the installed base which, following presumably the patterns of demand, and lagging reduced sales of new equipment over the last couple of years, we think it was reduced a lot.
It was diminished because businesses went out of business or consolidated ownership, and because whole demand sub-sectors as good as flew off the charts. Once that happens you do not simply put the pieces back. In reality, the market is a different construct and needs to be remade, and that takes time.
Relative to the fate of PSPs in the wide format graphics market and the effects of that on working installed print systems, always remember that the glory of the wide format graphics channels is their fragmentation among thousands of small sites. That fragmentation is good because it allows demand to be addressed in a highly flexible way, but bad because it is relatively financially weak when a large crisis occurs. The industry has very good financial defenses in its ability to absorb these changes through restructuring, but that takes some time to effect.
Wide Format Applications
We saw a major shift in application during the pandemic. In our analysis this year we see some reduction in informational signage directly driven by pandemic needs and some shift towards purely commercial uses like point of purchase, though continuing weakness in trade shows, and even some sports and events-related applications.
Commentary Major Segment
This forecast is from 2021 to 2027. Starting this year we have completely re-organized our 27 year old statistical model for the wide format graphics market. We are producing identical data to the past, and in fact more data, but it is in a simplified and standardized format better suited to today’s market needs.
As part of this standardization we made some adjustments to some 2019 numbers including installed base counts to bring models into line and to reflect continuously improving research. We folded aqueous (AQ) corporate into AQ less than 36 inches, and have introduced low-end (LE) and high-end (HE) dye-sub soft signage as new categories.
The following are summary forecasts for each sector and summary of sectors.
AQ printing in wide format graphics remains relatively small, but quite robust within a market slowly declining in size. Unit sales did well in 2021, but that can reflect spurts of success with single vendor models sold at low prices, so is not necessarily reflective of longer term demand changes. Very high quality from very low-cost systems utilizing high-cost inks is the business model and it serves a range of applications still from high-end portraiture to quick-and-dirty in-house indoor retail or informational signage.
What we call for legacy reasons the LE solvent market actually also includes latex print, which is a market at the LE where HP Inc. is not the sole supplier any more even as the company remains the dominant supplier.
Under the heading of latex we also include for the first time HE HP systems. We calculated these as a separate sector at their appropriate higher consumption rates, though we combined the LE and HE numbers into a single summary in order not to reveal the share of HP at the HE. Normally you would say don’t the HE systems belong competitively with UV?
Yes and no. We cannot separate them out first, for the reason given above, but second, we see HE latex systems as having substantially a unique and separate competitive profile often not directly competitive to UV, in fact more oriented to décor markets, which are arguably not so much wide format graphics.
The LE solvent market combining eco-solvent and latex is the largest single sector with a more or less unitary channel and demand profile in the wide format graphics market and so its relatively weak overall performance is another confirmation of maturity even after you have taken into account all the pandemic effects. These types of systems are the closest we have to universal printers for most applications and they are quite low cost to obtain and are relatively unencumbered by high ink costs within a very fragmented demand market.
Two factors suggest and perhaps encourage the trend of this sector to maturity. First, all the major vendors are moving in their wide format derived product portfolio strongly in the direction of industrial markets, and second, we think the LE UV roll-to-roll (R2R) competition talked about in past years as being in a position to challenge LE solvent systems is now having that effect through price competitively.
We also say that without being able to describe it in real detail, indications are that latex products are establishing themselves better every year with a positioning profile significantly distinct from eco-solvent. This is mostly related to applications specificity, but also to vendor image positioning.
The UV sector is substantially separate historically from other wide format graphics sectors and the most important distinguishing factor is speed, which translates into seasonal volume capability and low print costs. UV uses a substantially separate channel corresponding to this differentiation. The sector retains this identity today despite some trends suggesting merging with non-wide format graphics channels or even applications.
In terms of response to pandemic conditions this market has been hit hard like all others and only gets back to 2019 revenue levels by our conservative estimate around 2025. Against that UV channels had some better resilience compared to LE R2R channels and the existing focus on lower costs of print was also a kind of defense.
Trends that stand out from 2021 are threefold. First, as mentioned under the solvent analysis, we believe that LE UV R2R systems have begun to eat into solvent channels and sales partly by adopting the identity of allowing the new adopters to get into higher volumes, and partly by allowing some PSPs to have a sense of the wider functionality UV from familiar vendors.
Second, we have seen a big shift in 2021 to HE R2R systems away apparently so much from HE flatbed systems. The change may be more apparent than real since most systems can print these days in R2R or flatbed format. But the capability of going R2R is clearly seen as more important presumably as a function of competitive print costs.
Third, an issue we have raised before, there is some kind of overlap in UV now between HE flatbed systems, sheetfed corrugated systems, and super high end (SHE) flatbed systems sometimes leveraging the kind of single-pass architectures driven forward by the development specifically of the corrugated packaging market. This is even more evident when you look at the new product portfolios of some vendors, which are not reflected so much in historical statistics.
The way we see it the packaging and corrugated sectors are quite separate requiring unrelated systems to address exponentially higher—by site—demand, but it is this sector that has driven technology development in the true flatbed graphics sector where price pressure—partly also from HE R2R—pushes greater productivity. It is more like a kind of reaction of flatbed to R2R competitive system pressure. But just to complicate it, some of the same people who buy corrugated systems or who come away from the corrugated packaging industry, are people who want to expand their footprint in pure graphics, which in their eyes is a more profitable sector to develop. That could be a kind of internal channel competition to existing pure graphics players.
Finally, UV in a large sheet format—which should be a natural technology development following on wide format graphics success—still does not have a serious footprint in graphic arts sectors. Should the wide format graphics sector see its future there? At least it should see it as a potential area of development.
Dye-Sub Soft Signage
Dye-sub for soft signage is presented here as an integral part of our wide format graphics forecast and analysis. We took for the LE of soft signage the hardware numbers from out of the textile dye-sub forecast in full and then devoted about 30 percent of the output to soft signage as represented and included in this analysis. The rest goes to apparel and sportswear print. We represent the same hardware for the other 70 percent of its output separately in our textile analysis.
We thought last year dye-sub soft signage would rebound as fast if not faster than other sectors after the pandemic. In fact 2021 numbers do not support that with a continuing if lesser decline. There was a shift to some extent among vendors to smaller dye-sub systems to industrial as well as signage applications. That may have had some dilution effect on the signage part.
The same issues apply to the SHE wide format graphics market in 2021 as before, namely some overlap in use and channel path of these systems between corrugated packaging and display, but it is only an early perception. In reality, the scale of the display and corrugated packaging industry are so greatly different that the use of systems in each industry will become easily distinguishable after these early years in developing the corrugated market. Each market complements the other whether within the same channel or in diverse channels.
For comparison purposes we break this sector of the market into three parts—post-print sheetfed single-pass systems primarily targeting corrugated packaging, post-print sheetfed serial print systems similarly targeted, and SHE primarily targeting display markets but usable for smaller scale corrugated markets and deploying a range of printhead architectures some using single-pass formats.
All three of these markets did not do as well in 2021 as we had foreseen and we have rowed back our
projections for each in our forecast as a consequence.
The SHE systems may be targeted at a display market that is smaller than corrugated packaging, but they offer an opportunity for competitive differentiation through greater efficiency of operation, and they also offer the opportunity for higher print volumes and ink sales. We project display systems at a three percent compound annual growth rate and true corrugated single-pass systems at 12 percent partly driven by fast rising volumes of print from a low base.
In Summary – Editor’s Note
The growth—and reasons why—over the last 12 months surprised even I.T. Strategies. While we all expected dye-sub to skyrocket as events returned, it’s interesting how latex and even AQ systems are taking a greater leap in usage. Stay with Digital Output as we continue to watch the market.
I.T. Strategies is a Boston, MA-based customs consultancy house serving the digital print vendor community. Mark Hanley, president, I.T. Strategies founded the company in 1992. Visit it-strategies.com for more information.
Aug2022, Digital Output