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Desktop Printing Supplies: The Global Market & South Africa. Steve Bambridge Lyra Research October 10 , 2003. Agenda. Desktop Printer and Printing Markets What is driving the OEMs? What does this mean for supplies? Inkjet Cartridge Market Laser Cartridge Market South Africa.
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Desktop Printing Supplies:The Global Market & South Africa Steve Bambridge Lyra Research October 10, 2003
Agenda • Desktop Printer and Printing Markets • What is driving the OEMs? • What does this mean for supplies? • Inkjet Cartridge Market • Laser Cartridge Market • South Africa
What‘s So Important about Supplies? • Printer market is mature and supplies are now the main source of revenue growth and margin • Critical to OEMs • The ‘razors & blades’ business model is coming under threat • Revenue growth is slowing and may cease for some • Growth area for the channel • Fuelling third party industry
Ink Jet Cartridge Market 1 billion cartridges ÷ 365 days/year = 2.7 million cartridges/day!
OEM Strategies • Frequent launch of new cartridges (especially Epson) • Use of inhibiting technology • Patent protection on integrated cartridges • Canon ThinkTankTM, Epson smart chips • Litigate where possible (e.g. HP vs MultiUnion, Canon vs Pelikan) • Lower cartridge pricing • Single color ink tanks (especially Canon) • Reduced ink volume (HP 56/57/58) • Performance guarantees • Matched ink/media for long photo print life • Leverage Brand and Channel Strengths • Cartridge reclaim schemes (HP)
Mono Cartridge Market Shipments will decline as mix shifts towards larger capacity cartridges
OEM Strategies • Frequent launch of new cartridges • Higher yield cartridges • Use of inhibiting technology • Smart Chips (& related firmware) • Cartridge design and construction (e.g. LJ 9000) • Litigate where possible (e.g. Lexmark vs SCC) • Move to sophisticated new toners • Chemical Toners, e.g. Polyester toner used in LJ 4200/4300 • Cartridge reclaim schemes • Lexmark prebate, HP • Cartridge Remanufacturing • Lexmark claim to remanufacture >1m cartridges a year • Leverage brand and channel strengths
Some Key Messages • The ink jet and laser cartridge markets remain critically important to OEMs as a source of revenue growth and margin • Growth for some is threatened in part by success of third party industry • OEMs will continue to seek ways of slowing down third parties • The OEMs will increasingly focus on the colour laser market • Be ready for rapid growth of the cartridge market • Potential opportunity for third parties to take ownership of the mono cartridge market • Be ready for rapid growth in the Lexmark ink jet cartridge market • The South African third party market growth should exceed worldwide growth rates over the next few years
Desktop Printing Market South Africa What little information is available suggests…… • Laser printing market is relatively well developed • Driven by business activity • PC use normal in business environments • OEM growth has fallen below 10% per annum • Inkjet printing market is under developed • Low level of household PC ownership • Low level of spending on consumer electronics (e.g. digital cameras) • OEM growth remains between 15 and 20% per annum
The South African Remanufacturing Industry • 100+ players • Average monthly output of 400-500 (for each of laser and inkjet) • Empties recovered exceed the number remanufactured: • By 35% for Laser • By 31% for Inkjet • Enabler for further growth?
Which Means…. The available data suggests…….. • Third party ink jet cartridges have much higher market share in South Africa than in Europe and the USA • Compatibles account for well over 50% of ink tanks shipped, vs <30% in USA and Europe • Remansaccount for over 20% of integrated cartridges shipped, vs <15% in USA and Europe • Third party laser cartridges also have significantly higher market share in South Africa than in Europe and the USA • Is this correct? • How do the OEMs feel about this, and what are they doing?