Printing Money: Ink Jet Continues to Grow

By Tom Williams, Ink World Associate Editor | 09.06.05

While 2001 has been a rough road for much of the ink industry, ink jet has maintained outstanding growth through technology proliferation and expansion into new markets.

There are certain phrases that have, unfortunately, become synonymous with many aspects of the ink industry in the last year and a half. These include widespread consolidation, shrinking margins, slowing business and mature markets.

In the face of such concerns, however, one area of the ink market has continued to grow at a double-digit clip, and is showing no signs of slowing down. Thus, many large ink suppliers are increasing the amount of time, resources and energy allotted to their ink jet activities.

“I think the economic slowdown has perhaps accelerated the development and acceptance of ink jet,” said Steve Emery, vice president of sales and marketing at American Ink Jet Corporation. “Given the general acceptance of ink jet for prototypes and short runs along with the ‘mass customization’ trends, ink jet presents more opportunities.”

The ink jet market, which now consists of traditional ink giants along with smaller independent ink jet firms and large, multinational ink jet companies, has seen a rapid increase in consumables sales over the past decade, according to the Freedonia Group, a Cleveland, OH-based consultancy. A printing ink study released by Freedonia in January of this year showed margins for ink jet inks decreasing from $8.40/lb. in 1989 to $5.30/lb. in 1999. However, over this same period demand for digital inks rose from $42 million to $175 million, allowing companies to realize dramatically increased profits.

What has driven demand to such great heights? The rapid development and introduction of new technologies and products has created a windfall of new opportunities. These include applications that previously did not exist or were dominated by traditional printing methods, as well as applications that were heretofore considered outside the ink industry spectrum. All this is playing into the evolution of a market that is anything but mature.

The Desktop Market
Traditionally, the desktop market has been the driver for a significant portion of ink jet growth. After all, it was for this market that the technology was first developed in the 1970s and early 1980s. As a result, while the majority of the population remains in the dark about the complexities of most of the ink industry, ink jet has become a household word thrown from the lips of even grandmothers and toddlers.

In spite of, and perhaps as a result of, the widespread proliferation of ink jet devices in the home and SOHO (small office/home office) area, the desktop hardware market has experienced competitive price erosion unlike any other area of ink jet. However, this is not necessarily bad news for ink suppliers. The SOHO market still offers an extremely large installed hardware base in which to sell consumables.

“Due to price erosion and competition in the desktop market there is virtually no margin now on hardware,” said Mike Willis, managing director of Pivotal Resources Limited, a Cambridge, U.K.-based digital printing consultancy. “All the money is being made on supplies, particularly ink.”

Mr. Emery agreed, saying, “The most profitable areas of the ink jet markets are being realized by the desktop ink jet printer manufacturers. In spite of low margins on hardware, pricing per liter remains relatively high, allowing ink jet manufacturers to maintain reasonable margins.”

The problem for ink manufacturers who don’t make hardware is how to access this market. Instead of pulling their hair out, however, the majority of ink jet ink suppliers are focusing on still developing and traditional ink markets as the best routes to grow business.

Industrial Ink Jet
While the industrial ink jet sector was initially concerned primarily with coding and marking applications that required fairly basic ink formulations, the sector is evolving and its promise cannot be overstated. In fact, many industry analysts highlight industrial ink jet as possessing the greatest profitability potential for ink manufacturers. Whereas the access to the desktop market is limited, it appears that industrial ink jet ink suppliers will be able to sell directly to end-users. Additionally, despite the fact that the number of industrial ink jet machines is and will remain significantly lower than that of the desktop market, industrial ink jet printers consume ink at significantly higher volumes.

“It’s still the desktop market that is driving ink jet at the moment, but I certainly feel that will change and there will be significant volume increases of ink jet ink for industrial applications over the next five years,” said Mr. Willis. “That’s something that’s attractive to ink suppliers because the industrial applications will tend to use more ink. There won’t be as many machines, but they will be drinking the ink.”

American Ink Jet’s Mr. Emery concurred, “As the products mature and consumers push pricing downward in the consumer markets, the business model will change. In the industrial markets, there will be more vendors with more ink chasing new applications.”

Another market sector that is experiencing heavy developmental traffic at the moment is the area of textile printing. To this point, several factors have slowed the expansion of ink jet in this area. As a result, while its potential is unmistakable, this market is almost untapped in the U.S.

As ink jet is a direct to substrate technology, the majority of ink jet applications require substrates to be pre-coated to accept inks and maintain their stability. For their part, textile manufacturers have be resistant to specialty coated textiles or backed articles, seeking the elimination of pre- and post-treatments. While this problem has yet to be solved, it has been partially addressed by coating price reductions.

“I think the issue of having to precoat substrates in the textile market is still hurting the ink jet sector, but we are seeing better, less expensive precoating,” said Bill Hoagland, president and CEO of Spring Lake Park, MN-based Squid Ink.

Printing speed is another factor that has hindered ink jet expansion in the textile market, according to John Law, general manager of SunJet, Sun Chemical’s dedicated ink jet division. “In my opinion, the biggest need the market has is that of productivity, and no one is effectively addressing the production area of textiles,” he said. “These machines have to run at a good speed, and that’s not necessarily the case with a lot of the systems on the market.”

Aware of the problem, a number of OEMs are well on their way to addressing this issue by developing textile ink jet systems capable of printing at high speeds while providing high resolution. For example, Leggett and Platt, DuPont, Inca and Xaar all have new textile ink jet systems on the market, and more should be expected in the near future. A closer look at the tremendous potential of the market reveals why.

The textile market is very segmented with many extremely sizeable non-apparel markets, including car interiors, couches, bedding and other furniture. As is the case with many technologies in the global marketplace, ink jet textile printing has been first introduced on a widespread basis in Europe so that the wrinkles can be ironed out. According to Martin Kerver, general manager of Lyson USA, the U.S. operation of ink jet specialist Lyson Ltd., the use of ink jet textile inks in Europe has been steadily increasing.

“The demand is increasing at an exponential rate and is going extremely well,” he said. “We expect that within the next 10-12 months, the textile industry here in the U.S. will begin to more rapidly explore what ink jet can offer them.”
As a result, Lyson and a number of other ink jet ink suppliers currently have plans in place to introduce textile inks to the U.S. market in the near future.

Wide Format/ Grand Format
While the industrial and textile markets remain relatively native in their development, wide format and grand format ink jet are areas that grew rapidly from the mid-1990s but have slowed of late. However, according to most industry analysts, ink companies are still extremely capable of turning significant profits in this sector as it grows along with industrial ink jet. In fact, ink jet is currently dominating the billboard market and is advancing rapidly in the signage market as well (see “A Sign of the Times” on p. 35). One reason for this is the rapid development of new ink formulations providing improved lightfastness and stability with reduced environmental risks. Additionally, like many other areas of ink jet, the wide format/grand format sector is also pushing into new markets.

“With this diversity, jet ink formulations must be optimized to meet changing needs,” said SunJet’s Mr. Law. “This is the case in markets such as billboards, vehicle graphics and glass decoration.”

UV Curables
A major boost to the grand format market has been provided by the further development of UV curable ink jet inks, which remain on the R&D pallet of numerous ink manufacturers. According to Mr. Emery, UV curable inks are desirable for applications such as outdoor signage where weatherability requirements and environmental concerns exist.

“Outdoor signage that needs fade resistance, abrasion resistance and waterfastness are prime examples,” said Mr. Emery. “Industrial applications requiring durability will be growing over the next few years and we are currently developing UV curable inks.”

While some end-users originally shied away from UV curable ink jet inks because of the inherent price premium, their advantages have begun to hit home. Combine this with the fact that ink manufacturers are developing UV curable ink jet inks with viscosities that are low enough to run smoothly through ink jet printheads, and the future looks even brighter.

“Clearly the thing that is nice about UV is that once it’s there, it’s there,” said Mr. Hoagland of Squid Ink. “There’s a lot more stability on the substrate and permanency once you cure it. This makes UV more suitable for outdoor signage and other applications that need lightfastness and permanence. We are formulating UV inks and think the growth in this market will be strong.”

Into Other Markets
While the development of new applications such as textile and certain industrial segments created their own market shares more so than they took from existing printing technologies, the latter will undoubtedly be the case with increasing frequency as ink jet technology continues to develop. The questions that then arise are what processes and markets will see the encroachment of ink jet first, and how far will it go?

“The global printing industry is a huge market and has developed a number of technically sophisticated technologies such as offset, gravure, screen printing and flexography,” noted Dr. Mike Nicholds, strategy and planning director for Avecia’s ink jet printing materials business. “We do not predict that ink jet technology will sweep several thousand man years of technology away. However, we do believe that in certain segments, where the short-run capabilities of ink jet coupled with its inherent lower potential cost and ease of use are required, ink jet will come to dominate. This would eventually mean that ink jet technology could take as much as 10 percent of the market.”

While the early days of ink jet were heralded by many claims of the coming of the future of the printing industry, most industry analysts and insiders agree with Mr. Nicholds’ predictions calling for ink jet to take no more than a 10 percent share of many traditional printing markets. However, this will occur only where the economics are suitable to ink jet’s variable data capabilities. Additionally, this market shift will not occur at the expense of printers who integrate ink jet into their existing business, but rather will facilitate the profitability of their operations.

“At the end of the day, printers are producing output, and they need to produce it in the most cost effective and appropriate means for the market concerned,” said Mr. Law. “For example, the larger screen printers have seen that and have introduced litho and also digital printing in many forms, be it proofing or production, to protect what really is their business, which is producing graphics.”

Looking ahead, Jan Fineman, CEO of Xaar, a leading ink jet OEM, sees ink at its infancy in terms of global printing market penetration. However, he too predicts ink jet’s impact upon printing markets will be more complimentary than conquering in nature. “We anticipate there will be enormous growth in the industrial printing sector where the ability to print variable data on different media will become an increasing daily requirement,” he said. “We expect that ink jet will complement traditional printing processes and may replace some, such as screen printing, altogether.”

Digital Photography
Ink jet’s adaptability to various applications has also been essential to its integration into the digital photography business model – a market that is currently exploding and has astronomical limits.

“Digital photography is poised to have a significant impact on the ink jet market,” Dr. Nicholds said. “Clearly, an increasing number of photographs will be taken using digital cameras; how many will actually be printed and through which channel is still not clear. The current forecasts for the photo specific technology is for a total market at retail for inks and printers in excess of $4 billion in the next four to five years. If you expand the definition to the segment for photo capable printers, i.e. not purchased specifically to print photos, then this figure will increase significantly.”

Obviously, that news is music to the ears of a number of ink manufacturers, especially those with desktop OEM supply agreements or bundled consumables packages. And it has ink companies outside the loop asking themselves how they can get in on a piece of the pie.

“The question for a lot of the specialized areas like photo processing is: how does somebody like us get to that market?” said Mr. Hoagland. “You can’t go out and sell $50 worth of ink to somebody. So if you are not in bed with the OEM, how are you going to sell it?”
Another area that has ink manufacturers keeping an ear to the ground is the expectation that a lot of digital photographs are going to be processed through the photo-finishing trade.

“There are digital systems out now for minilabs, but the big interest is with Gretag, who has a joint venture with Epson, and Phogenix, which is a joint venture between HP and Kodak,” remarked Mr. Willis. “They are both working on minilabs for one-hour photo labs based on ink jet technology. Both of these will be beta testing later this year. The expectation is for a fair number of these photolabs to be sold.

“I think it is going to have a tremendous impact, because the potential volume there is just huge,” Mr. Willis continued. “Although the cost of the materials, the ink and the paper, is going to be higher than silver halide in the short term, you don’t have nasty chemicals to dispose of, you can do a range of print sizes on quite a large format machine, which means it can be more versatile.”

Technology Development
Were it not for people pushing the limits of technology, ink jet would certainly not be where it is today (see Who Would Want to Print in Color? on p. 32). And as ink companies look to the future, they know that continuing this tradition is essential to their success in the ink jet market. As printhead and equipment technology continue to expand, and as applications become more diverse and demanding, new, more complex ink formulations will be required.

“New printheads offer the promise of higher frequency, allied to greater resolution, and these advancements will undoubtedly require new ink formulations,” noted Dr. Nicholds. “This, coupled with the increasing performance requirements on a wide range of substrates, is increasing the complexity of chemical solutions required.”

It is not equipment and printhead development that will drive formulation advancements, however, but rather markets and applications. “The need for more formulations is more market driven in terms of end-user versus the printheads and equipment,” said Mr. Hoagland.

Success Abounds
One factor that distinguishes the ink jet ink market from most segments of the ink industry is the fact that both large, multinational corporations and smaller, independent ink companies are enjoying success in this area. In fact, in many cases the smaller companies, with their ability to adjust quickly to the changing market structure and the lower initial start-up and development costs, are further along than the larger companies.

Mike Green, vice president of Flint Ink’s digital division, noted that small manufacturers of ink jet ink have been able to establish a position by focusing on specific ink jet technology types that require lower capital investments.

However, Squid Ink’s Mr. Hoagland maintains that his company has been able to thrive on its reputation as a quality provider and partnerships with OEM and printhead manufacturers.

“OEM partnership agreements are a two-fold positive move for us,” he said. “One, the OEMs are out selling, so it gives us access to markets in terms of revenue dollars. It also helps our understanding in a joint development relationship – ink to their engines – because it really helps us with our knowledge base.”

Future Developments
With all that’s happening in the ink jet market right now, the future is extremely bright. For although analysts expect ink jet ink margins to continue to shrink as more and more players develop complete product lines and competition becomes heated, demand for ink jet ink is expected to rise accordingly. The Freedonia Group’s 2001 report predicts ink jet demand will reach 62 million pounds ($290 million) by 2004 and 105 million pounds ($450 million) by 2009.

Aware of the profits inherent to ink jet success, companies are turning up the RPMs on the engines of their ink jet development teams. As R&D work continues to advance at a rapid pace, more and more products will enter the market and competition will become even more heated. Expect ink manufacturers to work under joint development and partnering agreements with OEMs and printhead manufacturers to provide integrated technology solutions.

Additionally, companies will also increasingly seek to differentiate themselves from competitors by tailoring products to specific applications and focus on service.

SunJet, for one, thinks its experience in the traditional ink market will provide a competitive advantage of sorts as the ink jet market evolves.

“We recognize strategically that ink jet is a technology that will offer great potential to the world of print,” Mr. Law said. “As a leading player in the world of print, we aim to bring that to our customers. We recognize that the dynamics of the ink jet business are very different from those of the commercial ink business currently. It is a model based on partnerships where we have to work closely with printhead manufacturers and integrators to facilitate solutions.”

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