Trends in the Global Markets for Imaging Supplies pres at Remax 2006.pdfWorldwide color laser printer/cartridge market forecast and trends Aftermarket share of toner cartridge markets

Trends in the Global Markets for Imaging Supplies

Charlie BrewerManaging Editor

The Hard Copy Supplies Journal

April 6, 2006 Remax Barcelona 2006

2© Lyra Research, Inc. All rights reserved.

Lyra Research

35 employees, 20 of whom are analysts, researchers, and editorsOver 2,000 clients in 40 countries, representing all sectors of the imaging industry (printer hardware, marking materials, media, components, chemicals, software) plus many firms interested in the imaging industry (finance, advertising, PR)Headquarters in Newton, MassachusettsStaff, research partners, and sales agents around the world

Japan (JDS)Korea (Mindbranch Korea)China (ACMR)Switzerland (InfoSource S.A.)U.K. (Context, Recycler magazine)U.S. (Current Analysis/ARS, Recharger Magazine)


Lyra Research’s Expertise:Market Research, Sizing, and Analysis


How Lyra Builds a Forecast Model: Desktop Ink


Agenda

Ink jet printer market trends and aftermarket implicationsWorldwide ink jet printer/cartridge market forecastAftermarket share of ink jet cartridge marketsTrends in supply of empty cartridges

Laser printer market trends and aftermarket implicationsWorldwide monochrome laser printer/cartridge market forecast and trendsWorldwide color laser printer/cartridge market forecast and trendsAftermarket share of toner cartridge markets

Conclusions and wrap-up

The Ink Jet Cartridge Market


Trends in the Ink Jet Printer Market

Faster, better, cheaper hardwareCanon PIXMA MP800—$299, 1 pl drop size, 9,600 × 2,400 dpiEpson Stylus C88—$79, 22/12 ppmHP Officejet Pro K550—$199, 37/33 ppm (black/color)

MFPs (all-in-ones) remain popular; low-end units flourishCanon PIXMA MP150—$89.99, Lexmark X7350—$149

Separate ink tanksMarket requirement for photo printers and business printersMost Epson and Canon models and more HP models (Photosmart 8250,Officejet Pro K550, Business Inkjet series)

New focus on advanced inksOEMs stress brands

HP Vivera, Canon ChromaLife 100, Epson DuraBrite Ultra, Lexmark EvercolorMore focus on performance and archivability

OEMs begin using Wilhelm Imaging Research numbers for suppliesPromote lightfastness

Pigmented color inks (Epson UltraChrome, new Vivera SKUs from HP, Canon’s new Lucia brand)


Trends in the Ink Jet Printer Market (continued)

Other new consumables tactics and strategies Low-cost “standard” cartridges; higher-cost, high-yield cartridges

Average price of ink cartridges decreasing but price per ml increasingMore bundles

Multipacks—CMYK bundles, K twin-packsPhoto paper and ink SKUs

OEMs aggressive in courtsCanon v. PelikanEpson takes on manufacturers and North American distributors HP files complaints over infringing inks

Empties harder to find and more expensiveMore sophisticated reclamation schemesEnd users continue to resist recycling

Retail refill shops growing at a high rate


Implications for the Aftermarket:Good News and Bad News

Thanks to the hardware, demand for ink SKUs continues to growTrend toward MFPs will increase demand for ink (MFP users print more)Low-priced printers mean OEMs will fight hard for share of supplies marketIndividual tanks are easier to produce but there is a downside

OEM SKUs can be priced lowerNozzle clogs due to ink impurities can be disastrous on printers with permanent print heads

More advanced branded inksColor matching must be precise or photos come out off-colorConsumers will demand more from inksOEMs stress Wilhelm Imaging numbers

Low-cost cartridges and tanks mean lower margins for remanufacturersRetail refill shops will raise the visibility of aftermarket


Huge Ink Jet InstalledBase Drives Supplies Sales

Worldwide Installed Base of Ink Jet Printers,2004–2009

50

100

150

200

250

300

350

400

450

500

550

2004 2005 2006 2007 2008 2009

Inst

alle

d ba

se (i

n m

illion

s of

uni

ts) Ink jet MFPs (CAGR=24.9%)

Photo-specialty ink jets (CAGR=17%)Single-function ink jets (CAGR=–10.5%)

Source: Lyra Research, Inc., Hard Copy Industry Advisory Service, Second-Half 2005 Forecast


Growth in Cartridge MarketExceeds Growth in Installed Base

Worldwide Ink Jet Cartridge Shipments and Revenue, 2004–2009

0

500

1,000

1,500

2,000

2,500

2004 2005 2006 2007 2008 2009

Shi

pmen

ts (i

n m

illion

s of

uni

ts)

$0

$10

$20

$30

$40

$50

Rev

enue

(in

billio

ns o

f U.S

. dol

lars

)

Shipments (CAGR=13.4%)Revenue (right axis)

Source: Lyra Research, Inc., Hard Copy Supplies Advisory Service, Second-Half 2005 Forecast


Expensive Empties

Pricing Trend Lines for Select Empties Over €7Sept. 2005 and March 2006

€ 6.75

€ 7.25

€ 7.75

€ 8.25

€ 8.75

Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06

Source: The Recycler Magazine

Lex 10N00016

Lex 10N00026

Lex 18L0042

Lex 10N0227

Lex 10N0217

Lex12A1980/85HP C8728AN

HP C6657AN


End Users Are Not Helping the Empties Supply

How Respondents Dispose of Ink Jet Cartridges

57%48% 51%

7%

50%36%

47% 44%

47%

3%5%

0%

20%

40%

60%

80%

100%

UK, n=161 France, n=164 Germany, n=161 All, n=486

Per

cent

of r

espo

nden

ts

Return to empties broker or remanufacturerReturn to OEMThrow them away

Source: Lyra Research, Inc., 2006 Western European Consumer Survey


Aftermarket Continues to Gain Share

Aftermarket Share of Worldwide Ink Cartridge Market, 2002–2009

0%5%

10%15%20%25%30%35%40%45%50%

2002 2003 2004 2005 2006 2007 2008 2009

Mar

ket s

hare

Total aftermarket share of unit shipments (CAGR=5.1%)Reman and compatible share of unit shipments (CAGR=3.4%)

Refill shops and kits share of unit shipments (CAGR=12.8%)Total aftermarket share of revenue (CAGR=5.4%)

Note: CAGRs are for 2004–2009

Source: Lyra Research, Inc., Hard Copy Supplies Advisory Service,

Second-Half 2005 Forecast


Ink Cartridge Refill Shops Gaining Share in EMEA

Aftermarket Share of EMEA Ink Cartridge Market2002-2009

0%

5%

10%

15%

20%

25%

30%

35%

40%

2004 2005 2006 2007 2008 2009

Mar

ket s

hare

Remans and compatiblesRefill shops and kitsTotal EMEA aftermarket share




Conclusions: Ink Jet Printer Supplies Market

Worldwide ink cartridge market is bigger than the market for monochrome and color toner cartridges combinedDemand for ink cartridges is higher than growth in the installed base but SKUs face margin pressures Branded inks, separate tanks, and new pricing strategies all pose challenges for the aftermarketEnd users increasingly demand high-performance ink setsOEMs continue to aggressively defend their patentsThe availability of empties will remain a problemThe aftermarket will continue to gain market share, but the fastest-growing segment is refill shops

The Toner Cartridge Market


Trends in the Laser Printer Market

Shipments of single-function monochrome laser printers are flat or decliningIncreasing print speeds

Workgroup printers now range from 25 to 55 ppmPersonal printers range from 12 to 22 ppm

Low price points driving demand

Print quality is first-rateAll printers are 600 dpi minimum; most are betterPolymerized toners used in most color machines and many monochrome devices

The number of color devices is growing rapidlyMFPs are in demand

Shipments of monochrome MFPs are increasingCopier companies are entering the market for low-priced MFPs, placing products in retail channels


Effects on Remanufacturing Industry

Overall monochrome remains flatColor continues to gain ground

“Convenience color” unitsMore machines employ polymerized color toners

Technical challenges—color matching, toner formulae, etc.Proper toner is very important

User perceptions of colorTrend toward MFPs

MFPs use up to 60 percent more toner annually per deviceColor MFPs with low monochrome cost per page

Dealers using cost-per-page business modelService opportunity

Faster speedsMore precision required

Better print qualityMore precision required along with proper toners


Monochrome Laser Printer Shipments Slowing, but Installed Base Still Ramping Up

Worldwide Shipments and Growth in the Installed Base of Monochrome Laser Printers and MFPs,

2004–2009

0

20

40

60

80

100

120

2004 2005 2006 2007 2008 2009

Shi

pmen

ts (i

n m

illion

s of

uni

ts) Installed base Shipments

Source: Lyra Research Inc.,Hard Copy Industry Advisory Service, Second-Half 2005 Forecast


Worldwide Laser Printer Installed Base:Color versus Monochrome

Worldwide Laser Printer Installed Base: Color versus Monochrome, 2004–2009

0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008 2009

Inst

alle

d ba

se (i

n m

illio

ns o

f uni

ts)

Color

Monochrome

Source: Lyra Research Inc.,Hard Copy Industry Advisory Service, Second-Half 2005 Forecast


Major Factors Influencing theMonochrome Installed Base

Product reliabilityOlder printers are very reliablePersonal units have low volumes

New printers have few differentiating featuresLow-cost color MFPsInk jet printers

Increasingly targeting office users

Color laser substitution“Monochrome printers with color capability,” e.g., HP Color LaserJet 3000, Dell 3100cn, etc.


Trends in the Toner Cartridge Market

Market predominately monochrome, but shift to color is speeding upUsers are printing more, and page coverage is higher

More MFPs fuel more outputDemand for toner cartridges exceeds demand for printers

Demand for aftermarket cartridges will continue to increase as long as quality is maintained and OEM prices stay high

Remanufacturers will continue to gain market shareKey issues for remanufacturers are pricing, quality, brand strength, and channels of distribution


Installed Base Drives Sale of Supplies

Worldwide Monochrome Toner Cartridge Shipments and Revenue, 2004–2009

160

165

170

175

180

185

190

2004 2005 2006 2007 2008 2009

Shi

pmen

ts (i

n m

illio

ns o

f uni

ts)

$16

$17

$18

$19

$20

$21

$22

Rev

enue

(in

billi

ons

of U

.S. d

olla

rs)Shipments

Revenue (right axis)

Source: Lyra Research, Inc.,Hard Copy Supplies Advisory Service, Second-Half 2005 Forecast


The Aftermarket Continues to Grow

Worldwide Monochrome Toner Cartridge Shipments: Aftermarket Shipments and Share,

2002–2009

0

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006 2007 2008 2009

Shi

pmen

ts (i

n m

illio

ns o

f uni

ts)

0%

5%

10%

15%

20%

25%

30%

35%

40%

Afte

rmar

ket’s

sha

re o

f to

tal c

artri

dge

ship

men

ts

Aftermarket shipments

Aftermarket share (right axis)



MFPs Offer Aftermarket Opportunities

MFPs use between 20 and 60 percent more toner annually than single-function printers

According to new report from The Recycler and Lyra Research

MFPs offer service opportunitiesOperate at higher duty cycles and have more electromechanical parts

The installed base of monochrome MFPs is growing while the installed base of monochrome single-function printers is decliningAlthough only about 16 percent of all personal monochrome laser devices are MFPs, 25 percent of all cartridges consumed by personal monochrome lasers are used in MFPsThe installed base of convenience color MFPs is growing at an 82percent CAGR


Personal MFPs Use More Toner

Annual Cartridges Used By Type of Personal Monochrome Device

0.00

0.50

1.00

1.50

2.00

2.50

2005 2006 2007 2008 2009

Car

tridg

es U

sed

Ann

ually

Annual Cartridges Per Personal PrinterAnnual Cartridges Per Personal MFP



Healthy Growth in Color Laser Printer Market

Worldwide Color Laser Printer Shipments and Revenue, 2004–2009

0

1

2

3

4

5

6

7

8

2004 2005 2006 2007 2008 2009

Shi

pmen

ts (i

n m

illio

ns o

f uni

ts)

$0

$2

$4

$6

$8

$10

$12

$14

$16

Rev

enue

(in

billi

ons

of U

.S. d

olla

rs)

ShipmentsRevenue (right axis)

Source: Lyra Research, Inc.,Hard Copy Industry Advisory Service, Second-Half 2005 Forecast


Trend toward Color MFPs

Worldwide Shipments of Color Laser Devices by Product Segment, 2004 versus 2009

0%

20%

40%

60%

80%

100%

2004 (1.4 million units)

2009 (6.9 million units)

Sha

re o

f shi

pmen

ts

Production colorcopiers/MFPs*Full-time office colorcopiers/MFPsConvenience colorcopiers/MFPs Color laser printers

Source: Lyra Research, Inc.,Hard Copy Industry Advisory Service,

Second-Half 2005 Forecast*Share of shipments too small to be shown in figure


Installed Base of Color Devices Growing at Double-Digit Rates

Growth in Worldwide Installed Base of Color Devices, 2004–2009

0

5

10

15

20

25

30

2004 2005 2006 2007 2008 2009

Inst

alle

d ba

se (i

n m

illio

ns o

f uni

ts)

Color copier/MFP installed base

Color workgroup installed base

Source: Lyra Research, Inc.,Hard Copy Industry Advisory Service, Second-Half 2005 Forecast


Color Is a Small Portion of Total Pages Printed

Worldwide Plain-Paper Output: Color-Capable versus Monochrome-Only Devices, 2002–2009

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2002 2003 2004 2005 2006 2007 2008 2009

Num

ber o

f pag

es o

utpu

t (in

trill

ions

)

Pages via color-capable devicePages via monochrome-only device



Big Iron Prints the Big Volumes


Color Is Growing as Part of Supplies Revenue

Worldwide Revenue from Sales of Color and Monochrome Toner Cartridges, 2004–2009

$0

$5

$10

$15

$20

$25

$30

$35

$40

2004 2005 2006 2007 2008 2009

Rev

enue

(in

billi

ons

of U

.S. d

olla

rs) Monochrome cartridge revenue

Color cartridge revenue



Very Healthy Growth inColor Toner Cartridge Market

Worldwide Color Laser Cartridge Shipments and Revenue, 2004–2009

0

20

40

60

80

100

120

140

160

2004 2005 2006 2007 2008 2009

Shi

pmen

ts (i

n m

illio

ns o

f uni

ts)

$0

$2

$4

$6

$8

$10

$12

$14

$16

Rev

enue

(in

billi

ons

of U

.S. d

olla

rs)Shipments

Revenue



Aftermarket Beginning to Gain Share in Color

Worldwide Aftermarket and OEM Color Laser Cartridge Shipments and Aftermarket Share,

2002–2009

0

1020

3040

50

6070

8090

100

2002 2003 2004 2005 2006 2007 2008 2009

S

Shi

pmen

ts (i

n m

illio

ns o

f uni

ts)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Afte

rmar

ket s

hare

of s

hipm

ents

OEM shipmentsAftermarket shipmentsAftermarket share (right axis)



Factors Influencing Aftermarket Share

Availability of compatible tonerNew suppliers are coming online

Xerox and LG Chem

Color matching is an issue especially in the graphic-arts market More office users have color units and they tend to be less demanding

Technical issuesChips, complex cartridges, etc.

User reluctanceUsers remain more critical of color print quality than they are of monochrome print quality

Availability of empties


Aftermarket Share in EMEA Reflects Worldwide Trend

Aftermarket Share of EMEA Toner Cartridge Market2004–2009

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2004 2005 2006 2007 2008 2009

Mar

ket s

hare

Mono Toner Cartridges Color Toner Cartridges




Conclusions: Laser Printer Supplies Market

Monochrome laser printers shipments are declining, but the installed base is huge

Installed base growing as shipments declineColor and MFPs on the rise

Copier business model growing“Monochrome” MFPs with color capability

Monochrome cartridge demand will grow through 2008Aftermarket will continue to grow share in monochrome and colorColor growing at double-digit rates

Aftermarket must overcome technical challenges in order to seize share of color marketNumber of color pages will continue to grow

Lyra ResearchTHE PREMIER SOURCE FOR IMAGING

INDUSTRY ADVICE AND INSIGHT

Documents

Trends in the Global Markets for Imaging Supplies pres at Remax 2006.pdfWorldwide color laser printer/cartridge market forecast and trends Aftermarket share of toner cartridge markets