Peripherals Special: Printers

HP retains the printer crown

Rahul Neel Mani says the printer segment is headed towards decent growth and will see more innovations in the multi-function device and photo-printing segment

According to V Krishnan, thanks to its dominant position Hewlett-Packard can control a lot of parameters by which one can create new markets, thanks to its dominant position

The printer segment is a crucial product segment in the information technology sector. It is among the most voluminous, both in terms of revenues and units, and also among the most dynamic. The segment witnessed a good year in 2003 and there’s cautious optimism regarding 2004 too.

Overall market scenario

The picture becomes clear when you consider the numbers game. According to IDC reports and forecasts for FY 2002-2003, the market size for inkjet printers was 5.7 lakh units, while that for DMP (dot matrix printers) was 3.3 lakh units and for laser printers the number was 1.3 lakh units. During the same period, the growth for inkjet was 24 percent year-on-year (from 2001-02 to 2002-03), for DMP it was 6 percent and for laser growth was pegged at 44 percent.

In terms of growth for 2004-05, IDC projects the inkjet market will grow at 13 percent, DMPs will grow at 6 percent or even take a dip, and the laser market will grow by nearly 5-7 percent.

Another segment, intentionally kept separate from the general printer segment, is multi-function devices (MFDs). This is probably the most dominant segment in terms of future growth and revenues for all vendors. According to IDC estimates, the total market for MFDs in Q3 2003 was 40,188 units, valued at Rs 90.25 crore, thereby registering a sequential growth of 107.7 percent and year-on-year (YOY) growth of 213.5 percent in unit terms. The reason for this is simple. The market is a new one and unit sales have picked up from ground zero. If we go into the details, then the sales of inkjet-based MFDs during Q3 2003 were 34,720 units, valued at Rs 29.03 crore, thereby posting a sequential growth of 139.4 percent in unit terms. This market has outperformed all forecasts, something that happened mainly due to one vendor, HP.

Laser-based MFDs witnessed a dip in share at the cost of inkjet. That market grew at just 44.5 percent (YOY) and sequentially by 12.9 percent. Xerox was the leader here, followed by Canon. The forecast for this segment is thrilling. The inkjet MFD market will register a CAGR of 83.1 percent in unit terms and 43.3 percent in value terms. The growth for 2004 is expected to be 102.9 percent over 2003, whereas the laser MFD market is expected to grow annually by 55.4 percent in 2004 over 2003 with a CAGR of around 43 percent. Value growth might drop primarily due to further price cuts that are expected to materialise in the near future.

Segment analysis

MFDs is the most important segment in printers because of the growth in terms of volumes and the value in terms of customer satisfaction. Although it won’t be appropriate to rate players based on past performance, it is evident that there is one leader in all segments with the DMP segment witnessing a very tough fight.

According to IDC, these are the clear leaders in the following categories:

Inkjet—HP, Epson and Canon.

Laser—HP and Samsung (no third player), but players to watch are Xerox and Canon.

DMP—TVS-E, Epson and WeP.

Inkjet printers

HP led the race with nearly 60 percent market share, followed by Epson, which maintains a market share of 20 percent. IDC projects that the inkjet printer market will grow at 13 percent in 2004-05. The key driver for growth would be PC bundling by major vendors. Small and medium enterprises (SMEs) and homes will remain the biggest buyers of the bundled offerings. Says Sanjit Sinha, manager, hardware research, IDC, “The only apprehension is that though business inkjets are gaining ground, growth may stagnate since laser MFD and inkjet MFD substitutes are available at little extra cost and provide much more value to end users.”

Says V Krishnan, general manager, consumer sales, IPG, HP, “When we talk of market share of over 60 percent that means we govern the market. The company is able to control a lot of parameters by which one can create markets.” HP has retained its leadership by introducing new products with better specs, creating a market through the right price points (price to performance ratio), building an excellent channel network and creating new market segments by understanding the needs of end users.

Meanwhile, S Govindachari, business manager, consumer products, Epson India, has reason to smile too. He says his company is witnessing a 10 percent growth in the inkjet segment. Factors driving growth are the 3 Ps—PCs (excellent PC sales, estimated at 25 lakh units), Price (price erosion of entry-level and mid-end inkjet printers), and Photo (conversion of silver halide processing into digital processing).

Another significant player to watch in this space is Canon. Says Alok Bharadwaj, director, CIID & volume products, Canon India, “Canon closed 2003 with an 18 percent market share in inkjet printers. During 2004 we want to be a leading player in the inkjet market and increase our share from the current 18 percent to 25 percent.” Canon will also be focusing on photo printers. In a bid to increase its market share in the digital imaging portfolio, Canon will be investing close to Rs 10 crore in marketing and channel development.

Says Sinha, “The home segment is now getting inkjet MFDs at Rs 6,000. These users will stay with to inkjet MFDs. But corporates and government, who are buying an inkjet at Rs 15,000, will graduate to Laser MFDs or high-end inkjet MFDs. This is the trend to watch. This market draws maximum volumes from the SOHO and home segments.”

N V Mahadevan is of the opinion that dot matrix printers will see robust market growth as they still retain an overwhelming cost-benefit advantage

Laser printers

HP is the market leader with an overall share of 75 percent, followed by Samsung with 20 percent. In the colour laser segment, Xerox has a minuscule market share of 4 percent while HP enjoys a huge share of over 90 percent.

According to IDC estimates, laser market growth will be nearly 5-7 percent. Sinha says that growth is still primarily driven by the mono-laser segment. The main reason colour lasers are not flying off the shelves is price—although in the long run colour will rule. Besides the price difference between a colour and a mono-laser printer, another factor is the cost-per-page [for printing] difference between the two. One important reason why colour is definitely going to grow is the fact that there is a tendency for ASV (Average Selling Value) to come down over time. To maintain revenues vendors will have to discontinue low technology products and continue with high technology products.

IDC believes the laser segment grew by a whopping 44 percent because of a sharp decline in prices. Laser printers were available even at Rs 10,000. IDC expects the prices of entry-level lasers to come down very sharply this year.

Says Farrukh Kazi, product head, office automation and laser, Samsung India, “Samsung is focused on the laser segment since it is the owner of this technology and does not buy from other vendors. We will continue to focus on the segment both in the single and multi-function category.” The company believes that 40 percent of the personal laser market will move to laser MFPs. Currently, Samsung has three laser MFP products, which are targeted at the SOHO/SME space, and the Korean giant does not plan to launch any new models in the near future.

Rajesh Kumar, marketing manager, OPB Laser, Xerox India says that one of the key factors driving growth in this segment has been the drop in the price points of entry-level laser printers. “Another driver has been the adoption of the network/centralised printing option vis-a-vis standalone printing by medium and large corporates due to which the 31-44 PPM laser printers (mainly network printers) have seen more then 300 percent growth in JAS 2003 as compared JAS 2002. In 2004, we expect the price barrier between entry-level laser printers and inkjet printers to go down further. The mono network/colour printer segment will see more technological advances such as remote printing, wireless printing, etc.”

Dot matrix printers

The DMP segment is basically a stagnant market. IDC is not projecting much growth here. Basically, it will remain static at 6 percent or may even take a dip. “The point is that Indian DMP vendors like TVS-E and WeP are very focused and are fine-tuning usage and customisation. There are a lot of offerings like passbook printers, customised small bill printers, etc,” says Sinha.

The government will remain the main driver for the dot matrix printer segment. Around 30-35 percent of DMPs are sold through tenders. However, Sinha says that none of the Indian vendors have made a significant dent in the retail vertical, which could use DMPs for counter printing, etc.

Vendors are bullish on this segment. N V Mahadevan, product manager, TVS-E, says that 2003 was a happening year for the DMP market. The value growth has been highest in this segment: 18 percent against 14 percent in inkjets and around 8 percent in lasers for the period April-September 2003.

Says Ramdin Saiawi, product manager, DMP, Wipro ePeripherals, “In 2003 the total market size in terms of units was 3.5 lakh units and in terms of revenues it was around Rs 350 crore. In 2004 if we witness a 4-5 percent growth that will be considered good. Growth in 2004 will largely depend on how different verticals are behaving and how much they are going to invest on hardware.” He feels that a major trend in the DMP segment is customised solutions. More and more customers are looking at having solutions tailored to their needs. “The major advantage of this is that the vendor can meet the exact needs of the customer.”

Epson’s market share in the DMP category has grown fast during the last quarter. IDC market share figures released recently for July-September 2003 show the company’s market share at 35.2 percent. With this, the company is a whisker away from claiming the top spot. It closed FY 2002-03 with a market share of 27.7 percent and was in third spot after WeP and TVS-E. Says Samba Moorthy, deputy general manager, business products, Epson India, “Our growth during the first six months of this year has been due to our enhanced focus on the government and corporate sector, and penetration into upcountry markets.”

Adds Mahadevan, “As the cost-benefit is overwhelmingly towards DMPs, even today there are the applications driving growth, and hence my conclusion about robust DMP market growth.”

Multi-function devices

Lux Rao, assistant director, OSS value, Canon India, says that MFDs registered a growth of 55.5 percent. “This was supposed to happen and it did. Overall, the CAGR till 2007 is expected to be about 46 percent. MFDs are now fairly well accepted in the market.” Rao feels the challenge is now in converting these devices into an integral part of office communication hubs. “Increasingly, people are looking for devices that can take care of all aspects of office documentation. One of the most important drivers for the growth of MFDs will be e-governance, which has taken off in a big way.”

HP was the clear leader in inkjet MFDs with a total of 34,720 units, valued at Rs 26.16 crore, shipped in JAS 2003. A major driver was the small office segment that wants to get rid of inkjet printers. The company also launched three new products in this segment in the same quarter. Says Krishnan, “There is a lot of erosion happening in the printer market. In most mature markets the ratio between lasers to MFDs is 1:2. The largest growing segment is also MFD. The reason is simple: there is little competition in this segment and it has a higher Average Selling Price (ASP).”

Epson, though nowhere near HP, stood second in this race. It was the first in the world to introduce a six-colour separate cartridge SPC in January 2004. The company also dropped the prices of its MFDs and will focus on retail visibility for MFDs. Canon was placed third with a value of Rs 1.18 crore, thereby witnessing a sequential growth of 19.9 percent.

Laser MFDs were in the news. Xerox remained market leader with a unit share of 23.5 percent and a value share of 32 percent. “The main market for laser MFDs is mid-to-large corporates and the government. Last year witnessed a seasonal increase in corporate demand for MFDs, which most vendors tried to cash in on through aggressive promotions,” says Kumar. Canon is the second biggest brand here with a unit share of 18.2 percent and value share of 26.8 percent. Says Rao, “Canon’s market share for laser MFDs was 10 percent in Q1 2002, which has grown to 27 percent in Q3 2003. We were expected to achieve 30 percent share by Q4 2003. The objective for 2004 is to consolidate this and close at a market share of 40 percent.” He feels that the biggest obstacle to MFD growth is legacy equipment in the office.

This is a young market in India and is expected to grow at a very fast pace with aggressive pricing strategies by all vendors. IDC says that the inkjet MFD market will cannibalise the fax and printer market.

Conclusion

A large part of revenues in the printer market comes from consumables. In 2004-05, the ASV will certainly fall further. This can be because of two reasons. One, prices come down, and second, the proportionate share of buyers buying high-end printers will grow. But the printer market has already reached a level of maturity. Although MFDs pose a powerful threat, vendors will gain anyway. And because of this, growth may not be as spectacular too. “The absolute numbers will remain, and the maximum amount of activity will happen in the inkjet printer market,” predicts Sinha of IDC.

Canon: Playing the challenger

The company has beaten all assumptions to jump to the third slot in the inkjet category and has acquired the second place in laser MFDs. Canon is betting very heavily on MFDs as well as on digitisation of offices. The company feels that e-governance will be the largest segment to consume its products. The company has launched 20 new products in the Indian market, including digital cameras and photo printers with PictBridge technology. This technology enables digital cameras to provide printouts of pictures via the printer but without a computer. In fact the company expects the technology to result in the creation of a new segment in the coming years: direct photo printers.

HP: Leading from the front

What Cisco is to the enterprise LAN market, what Microsoft is to the operating systems market, and what Oracle is to the database market, HP is to printers. The company maintained its lead in the overall printer segment and promised its users even better technology at an affordable price. It launched as many as 25 new models and variants of printers across different categories last year. It also made a sizeable dent in the inkjet MFD market in India and left little scope for other players. In all categories except laser MFDs, HP did the expected—holding the number one slot. The main focus of HP in 2004 will be photo printers and MFDs.

Samsung: Redefining market aggression

Samsung has the ability to prove any prediction, arithmetic or forecast wrong—as it has done many times in the past. The Korean major moved from almost nowhere to 21 percent market share in the laser category. Having started a price war, Samsung will further cut into the laser business and is now eyeing the MFD market. The main drivers for the company’s sales are SOHO and SMEs. The USP of the company is a large sales and distribution network with the ability to support customers well.

Inkjet printers Current market performance & forecast
	2002	2003	2004	2007
Revenue (in $ mn)	54.7	65.4	73.2	124.6
Total units sold	5,79,961	6,20,318	7,95,800	14,94,680
				Source: IDC

Laser printers Current market performance & forecast
	2002	2003	2004	2007
Revenue (in $ mn)	64.3	67.6	76.2	102.6
Total units sold	1,18,066	1,39,649	1,54,617	1,89,802
				Source: IDC

Dot matrix printers Current market performance
	July-September 2003		October 2003		November 2003
	Volume	Marketshare (%)	Volume	Marketshare (%)	Volume	Marketshare (%)
Epson	35,095	35.20	9,325	34.99	12,266	37.40
TVS-	35,357	35.50	10,889	40.86	12,078	36.83
E WeP	27,329	27.40	5,982	22.45	7,821	23.84
						Source: IDC

rahul@expresscomputeronline.com