■ Printing Industry Records Negative Growth Rates for the Last 6 Consecutive Years

In 2003, the printing market was expected to recover from its slump as the Japanese economy showed GDP growth of about 3% in real terms. However, JAGAT estimated that the total value of shipments in the printing industry was 0.8% lower in 2003 than in the previous year. According to the 2002 Industrial Statistics, Version of Industry, the total value of shipments in the printing industry was 7,606.8 billion yen, 4.5% lower in 2002 than in the previous year. From these data, the total value of shipments in the printing industry is estimated at 7,550 billion yen in 2003. In reality, however, the true figure may be less than 7,500 billion yen, because the recent JAGAT projections were considered to be too optimistic.

Although GDP in Japan has shown positive growth for the past 2 consecutive years, people in the printing industry have not seen this reflected in their own business. This is because the growth in GDP has made only a minor contribution to raising printing demand and structural factors associated with decreasing value-added due to technological innovation in the printing industry still remain. For the coming years, therefore, positive growth in the value of shipments can hardly be expected.

■ Information Technology and Related Services Rooted in Daily Life

Looking around the world, Information technology (IT) and related services such as Internet, mobile telephone and EC (electronic commerce) have spread and been integrated into daily life at predicted or higher rates of adoption.

The EC (electronic commerce) market for B to C has grown year by year and reached 1.6 trillion yen in 2002, and B to B attained total EC sales of 60 trillion yen one year earlier than forecast. In 2003, the number of Internet users reached 69,42 million, and the percentage of households using the Internet was 81.4%, somewhat higher than predictions. The number of broadband contracts exceeded 13 million for a short period. The most popular media are now mobile telephones both in terms of media-related access time and household expenditure. Mobile telephones are being increasingly used for e-mails and games, and the more sophisticated and higher value-added models are now freely available in the marketplace. The sales of digital type consumer electronics have been steadily increasing and contributed to growing the GDP in 2003. Communications media have become more and more diversified and are changing rapidly all the time.

Naturally, these circumstances have influenced the print market and the main related industries, where the expected potential changes have become gradually visible to everybody.

■ Obvious Influence of Digital Media on Paper Media

A great change has been observed in the digital media (DM) sector of the advertising market. DM advertising expenditure that had grown till 2001 independent of economic fluctuations has decreased for the past 2 consecutive years, by 4.5% in 2002 and 3.0% in 2003. One of the reasons is that sealed letters have been rapidly replaced by postcards. The ratio of postcards to sealed letters that had formerly been 1:2 rose to 1:1 in 2003, and half of the decrease in advertising expenditure in the year was due to the replacement of sealed letters by postcards. Another reason was that e-mail had the effect of decreasing DM advertising expenditure. E-mail is an electronic medium that has both the merits of push media like DM and those of paper media.

In the mail-order sales sector, sales on the Internet are now higher than those obtained through leaflets delivered to homes, because the diffusion of broadband has made the electronic media more cost-effective with greater advantages than other forms of media.

In the forms market, the existing books & cards sub-market has been declining year by year due to the structural market changes caused by the spread of information technology. On the other hand, digital media involving DPS/information processing and variable printing have grown so rapidly that they now have about a 30% share of the printing market.

■ About 70% of All the Printing Companies Had Lower Turnover in 2003 than in the Previous Year.

The business trend survey targeting JAGAT member companies revealed that the average sales growth rate was 3.7% lower in 2003 than in the previous year with recurring profitability of 3.1% and per capita recurring profit of 617 thousand yen. Looking at the irregularities in sales growth and profitability, 70.5% of all member companies had lower turnover in 2003 than in the previous year, and the figure was higher than those for 2002 (65.8%) and 2001 (44.1%). Of the member companies that had higher turnover in 2003 than in the previous years, many had growth in the 0 to 5.5% range, and only 12.4% had growth of 5.5% or more.

In the hierarchical distribution of per capita recurring profits, the profit bracket of 250 thousand yen or less (including losses) was the largest and accounted for 39.0% of all member companies. Member companies that recorded losses accounted for about 10% of the membership, which was almost identical to the figure recorded in previous years. The average value of per capita recurring profit was 617 thousand yen in 2003. 16.7% of all member companies had a per capita recurring profit of not lower than 1,250 thousand yen in the same year, though the percentage of companies in the higher profit bracket was lower.

■ Rise and Decline of the Highest-Income Companies

At present, more than 20 companies in the printing industry are listed on the stock exchange. Of these companies, Dai Nippon Printing Co., Ltd. and Toppan Printing Co., Ltd. are much larger than the others. In addition, however, it is noticeable that the middle-ranking companies have made strenuous efforts in recent years. According to a time series analysis of declared-income data, the growth in turnover is 300% higher for the middle-ranking companies than for the 2 largest companies. The average ratio of income to turnover by company has been maintained at a constant level for the middle-ranking companies in recent years, while it fell for the 2 largest companies.

The list of the 50 highest-income companies for the past 5 years reveals how these rankings can change over time and reflect the ups and downs experienced by companies. The companies that were previously strong in the area of printing prepaid cards and in special printing for AV devices and OA equipment as well as automobile industries have been absent from the list for the past 3 or 4 years. On the other hand, Nissha Printing Co., Ltd. has invested its resources in the field of printing industrial materials and electronics, and increased its turnover and profit both domestically and overseas. We'll Corporation has significantly increased the sales of its original products by switching its diversification strategy to prioritizing printing and introducing inline production equipment for web offset printing and special processing. Toppan Forms Co., Ltd. has maintained its position of No.3 in the industry and its high profitability since 1997 by increasing annual average sales of DPS (data printing services) by 13.6%, and decreasing annual average sales of conventional BF by 1.6%.

■ Printing-Related Activities Have Not Resulted in Growth

The 'Printing Frontier 21' published in 2001 described the future vision of the printing industry as well as predicted annual demand from 2002 to 2010. In 2003, the total value of shipments in the printing industry was lower than the predicted value, even for the worst scenario portrayed in the document.

In a comparison between the predicted values and the corresponding results by market sector in 2001, the existing printing market for publications, commercial print and printed packing declined at a rate that was lower than predicted. However, sales growth was significantly lower than predicted in the market sectors that are expected to be future leaders in the printing industry, including construction, decoration and other materials, precision electronics and printing-related activities (such as printing-related services and information processing). This is considered to be one of the causes for the observed growth of the printing industry being lower in 2001 than predicted.　In particular, printing-related activities have grown by very little in medium- and small-sized printing companies. However, this was not because any failure to form or expand new market sectors, but because the printing industry could not incorporate new market sectors into its existing market.

■ Relentless Pursuit of Automatization

In various senses, desktop publishing (DTP) technology has not become a dominant influence in the printing industry, where anyone can now work without minding about it. This means that DTP is losing its significance as the driving force in developing printing technologies. However, another technology has been making steady advances to the extent that 'publishing' using this technology has now become an everyday event. This technology is called WEB. Although the principle of WEB is difficult to understand, the WEB mechanism is so highly automated as a result of advances in Information Technology (IT) that unmanned publishing systems that do not require operators to do layout and other work are becoming increasingly common. This wave of automatization will soon reach the DTP world, too.

In the production of prints, the long-term target will be 'overall optimization' by using information technology. From the macroscopic point of view, the prices for prints have dropped by about 20% over the past 6 or 7 years. Lead-time from the ordering to delivery of prints has been shortened by nearly 50%, as society has become more and more information-oriented. In the meantime, the shortened prepress process as well as the time and labor savings in printing preparation and post-processing have made a great contribution to higher productivity, lower prices and more rapid delivery of printing products to customers.

What will the situation be like in 5 or 10 years? It is expected that price competition will most likely continue because there is no sign that the current excess supply situation will end. One piece of research predicts that about 40% of all orders will be delivered within one day in 2010. What measures can be taken on the assumption that printing prices will be about 20% lower over the next 5 years, while lead-time will be about 50% shorter? Now that the application of digital printing technology and the automatization of presses have been completed as expected, there are diminishing returns to be made by replacing the old types of equipment with the new models and improving the productivity of each process. From the viewpoints of cost reduction and shortened production time, what may be significantly improved will be the automation technologies to eliminate the bottlenecks affecting logistic and information systems between processes.

■ Now is the time to aim at the realization of a vision.

In all aspects, the printing industry is shrinking and becoming stagnant. The printing industry experienced considerable decreases in the total value of shipments (-15.5%), the number of business facilities (-8.2%), the number of employees (-11.0%) and the total depreciation cost (-16.9%) for the 5 years from 1997 to 2002. However, these data were not at all unexpected. At the turn of the century, the printing industry presented a number of visions for the future. In fact, however, the prediction that the existing printing market will shrink is proving to be correct. Not only was the decline of the printing industry predicted, but an activation strategy to counter this decline was also proposed. However, the most serious problem is that the printing industry has not committed to this strategy or managed to obtain any positive result.

As one of the new frontiers related to the printing industry, the digital networking project is being implemented as expected. Under this project, the areas in which the printing industry could potentially participate have expanded in the last 3 years to reach a scale equivalent to at least 3 trillion yen. While the appropriate long-term strategy to re-activate the printing industry was formulated some time ago, most of the printing companies in Japan have not yet incorporated this strategy into their own plans. It seems as though these companies were not mentally prepared or determined to adapt the vision formulated for the printing industry in the 21st century into one suited to their own companies. Therefore, it is uncertain whether the printing industry will develop to achieve the goals set out in its future vision or continue to decline.

Now that the relationships between the printing industry and the digital networking and information technologies are well understood, the printing industry should start to move toward the 'realization' of its future vision.

2004/11/19 00:00:00