The Competitiveness of the European Printing Industry and the Influence of China

1. The Competitiveness of the European Printing Industry and the Influence of China INTERGRAF

2. INTERGRAF Confederation for Printing and Allied Industries Place E. Flagey 7 BE – 1050 Brussels 25 Member Federations in 22 Countries INTERGRAF

3. Content of presentation • European Graphic Industry • Chinese Printing Industry and imports affecting the European market • Analysis and initiatives INTERGRAF

4. Profile of the European Graphic Industry • 130,000 companies; 870,000 employees; 100 billion EUR turnover • Sector which is dominated by small and micro companies • Largely focussed on domestic market • Dependant on trends in advertising • Investments focus on equipment acquisition. R&D and other immaterial investments are more marginal • Characterized by structural overcapacity • Enormous pressure on prices • Dependence on very large customers and suppliers • Emergence of new actors: print management companies • Varying importance of foreign trade; deterioration of trade balance in most countries INTERGRAF

5. Chinese Printing Industry 19852002 2006 11,000 companies 90,000 companies 97,000 companies 850,000 employees 3 Mio employees 3.4 Mio employees 0.6% of GNP 2% of GNP • Growth Rate of 15% per year • Total turnover of 30 billion EUR in 2005 • Market Segments: Commercial Printing 41%, Packaging Print 40%, Pre-press 19% • 40% companies privately owned, 26% collective companies, 18% joint stock companies 2003 EU 27: 126,000 companies 900,000 employees 91 billion EUR INTERGRAF

6. A long way to go for fair trade Intellectual Property Rights Turbulent, high-risk IP environment: • Counterfeited goods; • Entire fake companies; • Rampant piracy from DVDs, watches and luxury goods to software and pharmaceuticals; • Reverse engineering; • Limited legal enforcement. Production Conditions Very low production costs due to various factors INTERGRAF

7. How far is China? Boat 30 days, Shanghai is the third largest port in the world Road 20 days, increasing efforts by the International Road Transport Union to simplify customs procedures Airplane Overnight; Transport by air seems to be an option for European buyers INTERGRAF

8. Chinese Printing Industry Bohai Rim Beijing Yangtze River Delta Shanghai Pearl River Delta Hong Kong / Macao / Guangzhou INTERGRAF

9. Chinese Printing Industry Developments • Today, newspapers, books, packaging, magazines are dominant sectors by value; • Sectors that will gain importance: Packaging, advertising and promotional-related print sectors are expected to increase • Less imported equipment expected • Industry concentration in delta regions INTERGRAF

10. Key points for CHINESE Printing industry Supply chain • Environmental legislation seems to exist only in the field of energy production • No information on H&S • Larger companies are ISO certified • Some 6 000 publication printing companies • 37 000 packaging printers • 54 000 other printing • 3 Mio employees • Since 2006 China has managed to satisfy local consumption needs for paper, ink and machinery • Chinese machinery not far from European one regarding quality Industrial structure and economics Regulations Clients & Products Technology • Local market is skyrocketing • Customers’ portfolio is international • Customers are target of worldwide promotional campaigns • Officially they can order all products Challenges • Technology gap with Europe is not deep • European machinery manufacturers are in the process of opening subsidia-ries. Complaints about infringement of IPR Economic Background INTERGRAF

11. The Globalisation of Print – Chinese Import penetration grows 650 Mio EUR in 2006 75 Mio EUR in 1995 INTERGRAF

12. Imports of printed matter into selected European countries 1995-2006 (in EUR) INTERGRAF

13. Imports of printed matter into selected European countries 1995-2006 (in Million EUR)without UK and Germany INTERGRAF

14. Categories of products affected by relocation The relocation drivers are based on product and market characteristics: • Volume to be produced • Time for delivery (including conception, order, manufacturing and transportation schedule) • Importance of labor cost and manual operations in products INTERGRAF

15. Categories of products affected by relocations Volume Ordered Manuals of delocalized products Printed trade materials Newspapers Children books Diaries High Catalogues Books Magazines Best Sellers books Low Long time limits Short time limits Manufacturing time limits INTERGRAF Affected by relocations Potentially affected by relocations

16. Chinese Influence on European Print Market • Increasing pressure on European markets • Countries most affected: UK, Germany, France, Netherlands, Belgium, Spain • Other Asian countries with some influence: Hong Kong, Singapore, Malaysia • Even though the total amount of imports is not yet threatening the increase witnessed over the past years is dangerous • Most affected categories of products: other books, children books, calendars/ greeting cards and other printing INTERGRAF

17. Analysis of the EU Printing Industry Strengths Modern & efficient production tools High quality and flexible product offer respecting the environment Weaknesses Average size too small Overcapacity Moderate intern. Experience Weak negotiation position Opportunities Differentiation possible Service orientation grows Multi-media comm. solution Threats Growing presence of third countries Relocation of activities Intense price war Disconnected from R&D INTERGRAF

18. Analysis of the EU Printing Industry • Lack of common and shared vision • Low level of consolidation • Weak negotiation position • Overcapacity • Standard product positioning without sufficient differentiation or added value INTERGRAF

19. Scope for Action Actions need to happen at company, national and European level • Managing production costs • Find new growth basis • Support European printers and develop the European Printing Industry • Invest in human resources for the future • Make printing industry a reference in terms of Health & Safety & Environment • Improve the image of the printing industry with its best practices INTERGRAF

20. Intergraf Initiatives • Publication of the Intergraf Report on China in March 2006 • Intergraf Workshops and Conferences in different countries in 2006 and 2007 • EU Commission Study published in autumn 2007 • Publication of “Why print in the European Union” • Joint European Campaign to promote Print: Print Sells • Set up of a project data-base • Draft of a Common European Action Plan along the 6 Action Points INTERGRAF

21. Intergraf Member Projects Internationalization Competitiveness Innovation / Research & Development Environment / H&S / Waste EU Standardization Market Trends Machine Guidelines Image national Procurement Guidelines Human Resource Process Optimization / Cost calculation Value of Membership Lean Management local level / company Short term Long term INTERGRAF

22. Some key issues for the future • Research on imports from China (H&S issues) • Provide market trends • European Project for value added services • Reinforced co-operation of companies • Sharing of best practices at association level • Involving more stakeholders • Developing a European Research & Innovation network • Lean management and improved processes • Printing standards network • Develop Print Sells as continuous network INTERGRAF

23. Human Resources • Courses and workshops throughout Europe / trainee programmes • Cross-media: education on the developing and marketing of cross-media concepts • Network of companies with focus on process optimization, new working methods and competence development • E-learning based training courses developed with universities • Up-date of job profiles to respect the changing customer demands • More modular approach in education and training INTERGRAF

24. More Information …. INTERGRAF Place Eugène Flagey 7 BE - 1050 Bruxelles Tel: +32 2 230 86 46 Fax:+32 2 231 14 64 www.intergraf.eu Thank you for your attention! INTERGRAF Beatrice Klose - bklose@intergraf.eu