Past, Present and Future of the Printing Industry<BR>(Part 2)

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Past, Present and Future of the Printing Industry
(Part 2)

■ASIA FORUM
6th FAGAT/Singapore 2002
Information Exchange Meeting
March 20, 2003
Presented at the 6th Annual Meeting of the Forum of Asian Graphic Arts Technology (FAGAT) in Singapore
Ryoichi Yamauchi / Director of Japan Association of Graphic Arts Technology

【Please see data】
　　
(1)Printing:From high growth and maturity to shrinkage
(2)High growh driven by the move toward printing in color and large-item small-scale production(Fugure 13)
(3)A breakdown of the cost of sales for a midsize general printing company(Figure 14)
(4)Vanished added-value in prepress(Figure 15)
(5)Worldwide trends

How Economic Development and Technological Changes Affect the Printing Industry
The next part of the presentation analyzes the history of the printing industry from its rapid growth to maturity in the light of economic and technological development in Japan, and elucidates the growth basis of the printing industry.
【Looking back on the history of the printing industry】

(1) Printing: From high growth and maturity to shrinkage
Shipments in the Japanese printing industry continued to grow for 36 years from 1955, the year in which the statistics were first compiled, through 1991 without experiencing any decline. During this term, the value of shipments increased 99 times, while the number of businesses grew 3.9 times and employees 3.0 times (see Figure 11). For the two decades from 1970 to 1990, the elasticity coefficient of the printing industry's shipment value to GDP (the industry's shipment growth rate/GDP growth rate) was 1.2, indicating that the industry's growth surpassed the growth of the overall Japanese economy.
Figure 12 shows the balance between demand and supply in combination with the number of printing businesses for each five-year period during the 40 years from 1955 to 1995. Until 1985, the growth in demand constantly exceeded that in supply because enhancement of the production capacity at existing printing companies could not keep pace with the growing demand. Then, prepress and printing companies emerged to create a new business and filled the gap, boosting the total number of businesses involved in printing.
By the latter half of the 1980s (1985-1990), the increase in demand had almost balanced with the increase in supply, allowing existing prepress and printing companies to meet the demand with their enhanced production capacity. During these years, the number of businesses in the printing industry remained flat. The average annual growth rates both in demand and supply stood at a little over 7% in this period. This suggests that to make all the existing printing companies happy, when they total no less than 46,000 after a four-fold increase during the high growth period, an annual market growth over 7% is necessary. Although technological advances can enable an annual growth over 7% in supply capacity, a 7% level GDP growth in a matured economy such as Japan sounds unrealistic, regardless of the post-bubble economic slump. Accordingly, in the 1990s, as supply outstripped demand, the number of companies reduced by 6,000, or 13%.
The question here is what was behind the transition in the Japanese printing industry from high growth and maturity to decline as seen in Figure 12.

(2) High growth driven by the move toward printing in color and large-item small-scale production (Figure 13)
Figure 13 shows changes in the shipments of prepress film, letterpress/offset ink and printing paper. It indicates that since 1970, shipments of prepress film products had grown at double the pace of shipments of paper and ink for a while. During the two decades from 1970 to 1990, paper shipments increased 2.3 times and ink shipments 2.8 times, showing a moderate growth, while shipments of prepress film products soared as much as 7.5 times. This suggests that as color images became more common in society, the volume of prepress work increased twice as much as the increase in printing. For example, the number of color TV sets owned was only a few among 100 households in 1966, which then topped 20 in 1969 and 100 in 1974. In the 1970s, photographs taken by ordinary people also went color and the 4c/4c web offset press became available as a common printing machine for newspaper inserts.
Expanded demand for color printing made prepress more intensive. As color separations are needed for color printing, four times as many films and plates as monochrome printing are used. This explains why the increase in film consumption was much greater than that in ink and paper. In the 1980s, the concept of large-item small-scale production was emphasized. Making the idea reality, too, resulted in higher growth in film usage than in ink and paper usage. Performing two print jobs, 5,000 copies each totaling 10,000 requires twice the number of films and plates required for a single print job for 10,000 copies. Such additional costs were all included in the bills to customers, driving sales up sharply.

(3) A breakdown of the cost of sales for a midsize general printing company (Figure 14)
Figure 14 shows a breakdown of the cost of sales by processes for a typical general printing firm with some 100 employees located in a provincial city in 1994. At the time, the company had a color scanner and a computerized typesetting system, and its printing shop had four-color, two-color and single-color sheet-fed presses as well as business form printing press and unbound machine. In a separate building, there were production lines with type writer and duplicator. This makes the company a typical example of a general printing company located in the provinces.
As shown in Figure 14, of the company's cost of sales, 10.7% was spent on block copy making and 25.4% for film work, plate making, adding up to 36% for prepress. Meanwhile, printing costs made up only 12.4% of the sales cost, equivalent to no more than one-third of the prepress cost.
Figure 13 on supplies for prepress and printing and Figure 14, a breakdown of the cost of sales for a printing company, respectively provide macroscopic and microscopic explanations of how the growth of the printing industry in the 1970s was induced by the increased demand for color printing and large-item small-scale production, which expanded the volume of work and processing operations in prepress. The printing industry's growth in the two decades from 1970 to 1990 is 70% attributable to the enhancements in the prepress process. Without such an increase in prepress work and operations, the elasticity coefficient of the printing industry's shipment value to GDP for these 20 years would not have been over 1.0.

(4) Vanished added-value in prepress (Figure 15)
Since 1991, the Japanese printing industry has experienced two cycles of economic troughs and peaks, through which the market shrank by 900 billion yen or about 10%.
Figure 15 shows how three types of shipments in the Japanese printing industry changed. 'Nominal shipments' indicate the total value of shipments in the printing industry consisting of printing, prepress, bookbinding and other relevant service industries reported in the 'Industrial Statistics' itemized by industry. Note, however, that the values for 2001 were estimated by JAGAT. 'Real shipments' are the shipment values after eliminating factors of price fluctuations and estimated by JAGAT based on the volume of shipments for film and ink products for printing. Thus, the difference between nominal shipment values and real shipment values represents a fluctuation in prices.
Looking at how both values changed indicates that they had been on almost the same track since 1975 through 1992 before they separated in 1993, since when the difference between them kept expanding until 1997. The nominal values standing below the real values mean that prepress and printing prices had declined. Constant oversupply has resulted from a slowdown in printing demand under the country's matured economy as well as from a faster increase in supply capacity enabled by accelerating the development of technology. For example, assume that a printing office, which had four web offset presses two years ago, has replaced one of them with a new one, which provides a 60% higher productivity than the old press. Consequently, the replacement has improved the overall productivity of the printing office by as much as 15%. On the other hand, growth in demand remains below 3% even in a robust economy and, in the medium and long terms, it is expected to level off, followed by a downturn. What is likely to happen when the above company tries to make full use of its expanded productivity is obvious.
The difference between the nominal and real shipment values for 2001 was 1.6 trillion yen. In other words, since 1993, prices for prepress and printing have declined a little less than 20%, causing a loss of 1.6 trillion yen for the industry. What is noteworthy is that the values of shipments in real terms, after having remained flat for a few years, took a small downturn in 2001. Full digitization of prepress and rapid dissemination of CTP have contributed to this.
The digitization of prepress in the Japanese printing industry began in the middle of 1993, as is evident by the statistics. Through 1996, DTP systems gradually penetrated the industry. During the same period, the consumption of photographic printing paper reduced while that of prepress film products saw some increase. This was the first diffusion phase of DTP, where the processes up to block copy making were supported by DTP systems.
In 1997, however, shipment volumes of printing paper and film turned into a sharp decline. The year 1997, for example, is known as the year when the installation ratio of Macintosh among the member companies of Tokyo Printing Industry Association first reached 50%. From then, companies who had been hesitant actively began implementing DTP systems. It was also around 1997 that the move toward full digitization started among more advanced businesses, leading them ahead to CTP.
The number of CTP recorders installed in Japanese printing businesses was 200 to 300 as of the end of 1999, before it topped 500 by the end of 2000 and 900 by the end of 2001. CTP implementation in 2002 has already overwhelmed vendors' predictions.
In the midst of the printing industry's transition from full digitization to CTP, prepress film reduced its volume of shipments by 32.9% during the four-year period to 2001, as seen in Figure 13. The drop was a result of the shortened prepress process. As there are no longer expenses for processes such as block copy making, color separations and stripping, which could have been added to customer bills in analog prepress, a significant part of the prepress sales value has been lost. The largest driving force of the printing industry's growth during the 1970s and 1980s is now about to disappear due to technological advances.
Even while prepress operations were undergoing a great deal of transformation as described above, shipments of offset ink increased more than 40%. This is calculated into a high average annual growth rate of 5.0%. Printing /writing paper also increased shipments by 1.17 times at a 2.0% average annual growth in eight years. In other words, the total volume of printed products and printing work was rising.
Included in the three types of shipments plotted in Figure 15 is 'Prepress adjustment.' Values for this item are hypothetical shipments in the printing industry without full digitization and CTP, where costs for block copy making, color separations and stripping could have been added to sales. They were calculated from the volume of shipments for offset ink and prepress film since 1996. Based on this method, shipments in the printing industry for 2001 were assumed to reach 12.4 trillion yen. There is a gap of 2.7 trillion yen between the hypothetical and actual values. This is translated as a 2.7 trillion yen loss in added value for five years as a result of the digitization of prepress.
Such devaluation can occur in any country where prepress is becoming digitized because it has nothing to do with Japan's economic conditions and excessive competition in the country's printing industry.

(5) Worldwide trends
The same phenomenon ― the printing industry is adversely affected by oversupply arising from a matured economy and technological development and by reduced or vanished added-value in digitized prepress ― was observed in the U.S. printing industry in the middle of last decade, amid the booming economy.
Figure 16 shows the value of shipments in the U.S. printing industry from 1992 to 1998 reported in 'U.S. Industrial and Trade Outlook 1998.' The industry had seen a high growth of over 5% since 1995, with a slightly smaller figure, 4.7%, in 1998. The average annual growth rate during the five-year period between 1992 and 1997 marked 4.9%. Given a 5.6% average annual growth of GDP in the same term, the elasticity coefficient of the printing industry to GDP is 0.85.
Meanwhile, a report on shipments in real terms (see Figure 17) shows that the 1992-1997 average annual growth rate was 1.3%, close to the population growth rate in the U.S.
As for the trend of the printing industry in United States, the advanced country in digital field, whether the demand for paper decreases or not is concerned.
Printing/writing paper shipments indicated steady growth with an average annual rate of 2.6% for the five years from 1992. Even after electronic commerce and networking became commonplace, paper consumption did not decline. Furthermore, growth in printing/writing paper surpassed growth in the real value of shipments in the printing industry.
To discuss the relation between paper demand and printing demand, let's look at the added value of printing per copy of printing/writing paper (the shipment value in the printing industry divided by the production volume of printing/writing paper). The figure for 1997 is 3.0 U.S. dollars per kilogram, while that for 1992 is 3.2 dollars, indicating a drop over these years by about 6%. When the printing industry's elasticity coefficient to GDP turned below 1.0, the value that printing companies could add to paper fell, just as was the case with Japan.
That is to say, in a maturing economy, when technological advances increase supply beyond demand and enable digital prepress, the printing industry is likely to be subjected to increasing demand for paper and diminishing added-value generated in the industry, turning the GDP elasticity coefficient of the industry's shipment value below 1.0.
A similar situation is causing dedicated prepress companies in Japan to lose their business bases and exerting a serious impact on prepress vendors.
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2003/03/18 00:00:00

公益社団法人日本印刷技術協会