Issue #0718/2 - Most of the manufacturers from Asia Pacific are recording healthy growth rates and healthy profits, higher than the US manufacturers. Black spots are Konica Minolta in particular but also Epson to a degree.
Opposite the three major US printer manufacturers are a number of Asia Pacific manufacturers that battle for the remaining four slots in the top five for each printer category once Hewlett-Packard takes its reserved top slot.
Taking a high level view of each of the Mono Laser, Colour Laser and Inkjet printer categories, there are only two of the US manufacturers represented in the top five (see "IDC market share research"), leaving three places for Asia Pacific manufacturers.
Financial data for printing activities is available from most of the top five players, giving us a view of how the East/West battle is shaping up. Although data is published by Samsung, no breakdown for printer activities was available in time for this publication.
All financials for Asia Pacific are for the full year ended March 2007 except for Canon (Q1 2007).
Stark reality is that, across the board, consumer inkjet technology is not providing the revenue for manufacturers to return revenue growth.
Epson is the one Asia Pacific manufacturer that relies heavily on consumer inkjet technology (62% of revenue). There is a correlation here with Lexmark in the US. More heavily reliant on inkjet than Lexmark, Epson has returned a revenue decline (Information Equipment division) largely because the company is finding that it is unable to make its inkjet business fly in the way that Canon and Hewlett-Packard can.
In fact, Lexmark has one advantage over Epson in that it owns its own laser technology whereas Epson has to buy in that technology (largely from Konica Minolta and Fuji Xerox).
Hence, while Lexmark’s decline was 1% for Q1, the return from Epson showed a decline of 6% on revenue of ¥916bn for the year. On the up-side for Epson though, costs have been brought strictly under control (fixed cost restructuring and staff reduction) such that operating profit rose by a staggering 87% to ¥84bn, representing 9.2% of revenue.
Despite this difficult situation, Epson’s Information Equipment division is the largest business segment in the group and has contributed 167% of the company’s gross operating income for the year!
However, this underlines the need for Epson to find a solid way through the situation – printers as a whole represent 85% of Information Equipment revenue and, as already stated, inkjet printers represent 62% of the division’s income. Not a good place to be for the future of printing.
For the coming year, Epson expects to be able to limit the revenue decline in the Information Equipment division to around 1.3% but with a 17% fall in operating income for the year. Printer revenue decline within this, though, is expected to be only 2.8%.
Strategies for combating the decline include a drive to increase printer hardware sales, in order to access future supplies sales, and to continue to pursue cost reductions. Within this, the company expects there to be a one percentage point shift from laser to inkjet.
Canon is Asia Pacific’s other mainstream inkjet manufacturer – a company with revenue in one quarter from its Business Machine division that far outstrips the competitors’ annual revenue.
Revenue for the whole division for Q1 of 2007 was ¥715bn, an increase of 13%, with an operating profit of ¥177bn, a growth of 16% and representing 24.7% of revenue.
Within this division, Office Imaging (the copier business) returned revenue for the quarter of ¥306bn, up 7% on a decline in unit sales of 8%. Revenue from colour copiers grew 24% on a 13% increase in unit sales while revenue from mono copiers fell 4% on a 12% decline in unit sales. Colour copying returns high value to the business (42%) but still represents a relatively low unit ratio (16%).
Alongside the Office Imaging business segment, Computer Peripherals (the printer business) returned revenue for the quarter of ¥383bn, a very healthy revenue growth of 21% on (again healthy) unit growth of 24%. Within this, inkjet revenue was up by 12% while laser revenue grew by 24%.
Splitting unit sales into segments shows that the only area suffering a decline in unit sales is single function inkjet printers (-21%) as customers move more and more to multifunction inkjet products (+26%). The ratio of multifunction to single function is now 46%.
On the laser side, again we see the continuing shift towards colour, with colour now accounting for 35% of revenue even though the ratio of unit sales is still running at only at 15%. However, Canon’s success in boosting sales of printers is phenomenal. Colour sales have increased by 83% and mono sales by 61%. This places Canon in an extremely strong position where future revenues are concerned as after-sales supplies revenue comes on stream.
As a result, Canon expects healthy revenue growth in all areas except mono laser for coming quarters with unit sales increasing in all areas except single function inkjet.
Battling to make its mark in the inkjet market is Brother. Very strong in the business laser sector, Brother has focused on multifunction inkjet devices with separate ink tanks. Although no specific figures are available, the new inkjet engine (launched in Q3 of last year) is understood to be proving popular and has helped to push Brother into the top five.
For Brother, the printer business is a key driver in growth for the Brother Industries group, contributing 71% of revenue and 73% of operating income, and the company is seeking to expand its printer business further. Operational results are already showing record highs and are outstripping expectations.
Brother is seeing strong growth in hardware sales, driving an impressive 19% revenue growth, to ¥397bn, and operating income growth of 50% to ¥37bn or 9.4% of revenue.
Investment is focused on both laser and inkjet segments. As already mentioned, Brother has developed a new inkjet engine and is now also in the process of launching its own colour laser engine – beginning with 21ppm single-pass – to replace engines purchased from other engine manufacturers. This will place all printer technology directly within Brother’s own stable, a very healthy place to be for the future.
These developments are designed to establish the Brother brand as being synonymous with colour. The company expects revenue growth in the coming year to be a modest 5%, following the great success of this past year, with operating income dropping by 8%.
Moving to the laser only sector, Konica Minolta and Oki have no part to play in the inkjet sector but are both strong players in the colour laser market.
Konica Minolta Business Technologies includes a strong MFP line-up with a long heritage in the copier business. Revenue for the financial year ended in March was ¥659bn, a growth of 9%, with an operating income of ¥80bn, a growth of 23%, which represents 12.1% of revenue.
Konica Minolta Performance
MFPs vs Printers
These strong results are totally thanks to the copier/MFP business, which grew 12% in revenue terms and 11% in unit sales. By contrast, the printer business slumped disastrously by 15% revenue on unit sales that fell by 37%!
Konica Minolta must be the only manufacturer to be recording reducing sales in the colour market. Colour unit sales fell by 18% (within which single-pass unit sales fell by 9%) while mono unit sales fell by 43%.
Oki Printing Systems, on the other hand, another manufacturer with a firm grip on its own technology, has been investing in new engines and printer products (reflected in low operating income that fell by 59% to ¥1.7bn or 1% of revenue) and has returned healthy revenue growth of 17%, to ¥187bn.
Colour, especially colour MFPs, is driving that growth, accounting for 55% of revenue as Oki pushes higher up the range with its hardware.
Colour, therefore, can be seen to be the dominant factor in the industry but, at company level in Asia Pacific, it is Konica Minolta that is in a dire position like Lexmark in the US. The company has decided to pull its printer business into the main Business Technologies stable. If this does not sort its financial difficulties, we could see Konica Minolta (once a dominant printer engine manufacturer) either pulling out of the printer side of the market or offloading its printer business as it offloaded its digital camera business to Sony a year ago.
At the other end of the scale, although no suitable financials have been available for Samsung, we see a company here that has aggressively targeted the laser printer market over the last few years and has pushed growth to the point where it now ranks as the number two engine manufacturer and the number two player in both colour and mono laser markets (see "IDC market share research").
~End~
