Because of the three reasons listed at the beginning of the report, an increased number of Japanese printing companies are opening factories and offices overseas.
The official statistics on overseas business expansion by Japanese printing firms appear in the government report called 'Results of the Basic Survey of Japanese Business Structure and Activities' (Fig. 7-1: Overseas operations of Japanese printing companies: number of overseas operation sites and their types of operation). The survey covered companies that were capitalized at more than \30 million and had a workforce of 50 or more. According to the survey results, of the 595 printing firms covered, 29 had overseas subsidiaries and/or affiliates engaged in the printing business. The combined number of these subsidiaries and affiliates amounted to 79. Asia was the most popular destination, accounting for 67.1% of the total overseas establishments, followed by North America (17.8%), Europe (12.7%), and other (2.5%).

Trends in the number of overseas operation sites of Japanese printing firms showed apparent growth in the first half of the 1990s, before the upward trend subsided in the latter half of the 1990s. Meanwhile, the ratio of 100% owned companies to all overseas establishments increased from less than 40% to close to 60%, suggesting overseas business expansion swinging into full gear. A survey by JAGAT, which is more detailed than the above government survey, indicates that there are almost 70 printing firms that are running printing factories or business offices overseas. Overseas operations on a small-scale basis are steadily growing, although they are not counted in statistics.

There is also a rise in the value of exports of products that Japanese printing companies manufacture in their domestic factories, topping \100 billion in 1998. The major export item is electronics products, including shadow masks manufactured by large companies, whereas printed matter as a whole comprises over 60% of exports. Items recently on the rise include cellular phone cases produced using a special printing technique.

Reasons why Japanese companies start overseas operations

There are three reasons why Japanese printing companies set up overseas operations and they are related to the globalization of the Japanese economy and the business climate in Japan.

(1) Overseas operations by major accounts

When the major account of a printing company moves production to an overseas country, a need arises for packaging (packages, labels, instruction manuals, and operation manuals) to be printed near the new factory so that it can ship products together with such packaging materials. Printing in a geographically close location is important because packaging materials need to be produced and delivered just-in-time in accordance with the customer's production schedule so as to be used in the packaging process.

According to the statistics obtained by JAGAT, existing overseas factories and offices set up by Japanese printing companies mainly handle two types of products: one is packaging such as paper containers, flexible packaging, labels and stickers, and the other is documents such as manuals that are supplied with customers' products. This suggests that, at least so far, a common pattern for Japanese printing companies to start overseas operations is 'building an overseas factory in response to a major account's overseas transfer of production, in order to avoid loss of orders from that account.' Figure 7-2 shows a breakdown of sales by overseas establishments of Japanese printing companies as published in the 'Results of the Basic Survey of Japanese Business Structure and Activities.' Local sales represented the largest part, followed by sales to third countries, while sales to Japan comprised only less than 10%. Although the figure indicates a significant increase in sales to Japan for the last three years, sales statistics for the subsequent years are, unfortunately, not contained in the government report.

For a printing company whose sales are heavily reliant on orders from a large account, there is no other choice but to set up operations overseas when the customer decides to move production sites overseas. This is partly because some customers even ask their print suppliers to go abroad along with them, and more importantly, printers themselves have to avoid losing a large part of their sales. Printing companies that can take such actions are actually limited to large-scale companies, and other smaller companies often end up losing all print jobs associated with the customer who moves production overseas.
The transfer of production facilities overseas by a large manufacturer can have a direct and indirect impact on the local printing market. For small- and medium-sized printers, the indirect impact, which causes a slowdown in local business and eventually results in a decline in overall demand for printing, is more serious than the direct impact as the loss of print orders from an important account. Some of the recent examples are Hitachi and Seiko Epson, both of which have moved production overseas. Indirect impacts of such events never show in trade statistics.

(2) Meeting price reduction requests from customers

Customer pressure to reduce prices is the reason why medium-sized printing firms are increasingly considering overseas production and alliance with overseas companies. Because of the economic slump in Japan and overcapacity in the printing industry, printing prices in Japan have reduced 20% in the last seven to eight years. During this period, Japanese printing companies have significantly streamlined their workflows by introducing state-of-the-art presses, eight-color sheetfed presses, or CTP systems. Physical productivity per operator in Japanese print shops (except for the prepress division) has improved 50% in the past 10 years.
With continued deflation, however, demands for price reduction from customers are unlikely to wane any time soon. The next phase of streamlining, which involves Computer　Integrated　Manufacturing (CIM) based on Job Definition Formats (JDF), will take more than five years to spread across the industry. One of the feasible options left for printing companies who are faced with demands for even lower prices is moving to areas where production costs are cheaper.
Since Japanese people are now seeing a growing number and variety of inexpensive imports available, print buyers are also beginning to assume that printed matter may be produced at lower cost overseas. Some of them are already placing orders to overseas printers either directly or through domestic printers. This is the primary reason why medium-sized printing firms have recently been showing interest in the idea of printing overseas.

(3) Aiming at business expansion in areas where the market has room for expansion

In most cases, the reason for Japanese printing companies to set up operations in Southeast Asia has been either (1) or (2), described above. Only a minimal number of companies have advanced there to pursue business expansion in a potential growth market. Regardless of the initial reason, however, it would be a natural course of action for a company, as long as it is a profit-making organization, to expand business if there is growth in local demand and meeting the demand can potentially bring profits to the company.
A number of printers have started operations overseas for the objective of leveraging cost-competitive local labor for labor-incentive print production. They are now changing the original strategy and more aggressively seeking business expansion in accordance with growth in the local markets. In the meantime, printing companies, which have advanced into foreign countries together with their major customers, are realizing that orders from these Japanese-affiliated companies alone are not sufficient for them to achieve profitability, and are facing a need to seek local demand. The result is a business development pattern in which Japanese printing firms overseas put the business on track through dealings with local Japanese subsidiaries before further penetrating into the local market. A similar approach is also taken by Japanese printers that have moved into foreign countries in pursuit of expanding business in untapped overseas markets. They usually depend on demand from local Japanese-affiliated establishments until a solid business base is built, and then launch efforts to capture the local demand.
For printing companies in Japan, a country where demand for printing has become saturated and the population is expected to decline, moving into overseas countries can open the door to new business opportunities, whatever the original intention is.