Shanghai sparkles
An upbeat industry converges at a busy ReChina Asia Expo
The 2009 ReChina Asia Expo hosted visitors in its new home, the Shanghai New International Expo Centre, which enabled the event to expand its exhibition space to more than 20,000 sqm. According to event organiser Shanghai GrandView Expo, this year's show attracted 420 exhibitors (up from 406 last year) and welcomed more than 10,000 visitors, setting an attendance record. Its President, Sean Liu, said that he was excited about the show's growth and thrilled with the new convention centre and the expansion of space that it provides.
Liu added that approximately 50 percent of the 2010 ReChina show floor has already been reserved, signalling exhibitors' positive view of the show. 2010 ReChina will be held in the same venue but earlier in the year, 27-29 September, to coincide with the 2010 Shanghai World Expo, which will run from 1 May to 31 October, 2010. Liu says that it was extremely difficult to secure space at the convention centre during this time because other industries want to take advantage of the World Expo event, which is expected to bring more than 70 million people to Shanghai.
According to the company representatives that Lyra spoke with, 2009, especially the second half of the year, was a good year for the Chinese aftermarket industry. Suzhou Goldengreen Technologies, a manufacturer of OPC drum products, featured a large booth at the tradeshow, and a nearby cartridge maker told Lyra analysts that Goldengreen drum products are in short supply because of strong demand.
Lyra met Aming Chen who runs a typical Zhuhai aftermarket cartridge company, Prinko Image, which makes remanufactured and compatible toner cartridges through in-house manufacturing and outsourcing. Chen remarked that his business was doing well, but he was worried that if the over manufacturing could lead to another slowdown in the aftermarket industry by May.
Marcela Gomez, Marketing Manager for UniNet Imaging, told Lyra that sales were slow in the first half of the year but had picked up in the second half, adding that the Asia had been one of its strongest markets. International Technology Products UK, a European empty cartridge collector, also experienced rapid growth in the region last year. Alhough a company representative complained that large buyers, or buyers who want consistent empties supplies, have to pay more per cartridge because it is difficult to collect a large number of empties, especially of specific SKUs.
Sun Ronghua, President of Jiaxing Tianma Printer Consumables revealed that his firm's sales volumes were flat but the value of sales had been higher, presumably because the company sells mainly high margin compatible cartridges rather than remanufactured cartridges. In addition, it also provides higher margin profits products such as CartridgeMate refill kits, detachable compatible ink cartridges, and easy refillable toner cartridges.
Higher margin/profitability is probably one of the reason for the many new compatible cartridges seen on the tradeshow floor.
"The general trend is that empties prices have gone up due to more demand," explained Andrew Lippman, a senior analyst at Lyra Research. "One part is more interest in lower-priced cartridges due to the economy. Also, some bigger Chinese companies are trying to be more responsible and do more remanufacturing instead of [producing] rip-off clones."
Vendor comings and goings
This year's 420 exhibitors included 77 overseas firms, and show organisers said that more than 200 exhibitors boosted their booth space from last year, with the total new exhibiting area increasing by 17.8 percent. In addition, more than 70 firms from the printing consumables industry exhibited for the first time. While two new players in the Chinese printer consumables industry, Shandong Forever and Forchen Green, both of which made it onto the Chinese government procurement list this year, stayed out of this industry event, show organisers said that other firms that did not exhibit this have already booked booths for ReChina 2010.
Shanghai Anerya Environmental Technology, a subsidiary of Anerya (China) Group featured the largest booth this year. Anerya's emergence marks a new trend in the Chinese aftermarket industry: a shift from 'mom-and-pop' shops to the large, well-funded firms that stress the importance of research and technology. Anerya's manufacturing centre is in the most expensive area of Shanghai, which presents a sharp contrast with the aftermarket supplies companies in Zhuhai, many of which are spin offs of market leaders, were founded by their former employees and remain small with very limited, if non-existent, research and development capabilities.
Anerya currently makes about 50,000 compatible and remanufactured laser cartridges each month. While its manufacturing scale is modest compared to giants Ninestar, Print-Rite, and others, Anerya is striving to become a market leader in China in the next five years. About 60 percent of the firm's toner cartridge output is new compatibles and 40 percent is remanufactured. Though Anerya is not one of the four firms on the government procurement list, the firm already sells to the local Shanghai municipal government.
Lyra noticed that Print-Rite, a firm that consistently has one of the largest booths at the entrance of the show, was represented by three of its subsidiaries in smaller booths. Fanling is responsible for selling to the Chinese domestic market, and Multi Union and Prime Success are in charge of selling ink jet and toner cartridges and doing private label business in markets outside of China Other major players in the Chinese market features similar sized booths at the show as in past years.
Pre-Show Forum
Recharger magazine and Lyra Research held a China Forum the day before the show, and this full-day event provided in-depth analysis on industry trends and worldwide forecast and featured presentations from Lyra analysts Lippman and Jiqiang Rong and six other business leaders and researchers. The forum attracted more than 60 attendees.
The morning session began with a presentation by Lyra's Lipmann, who shared his views on the trends of printer hardware and consumables, and ended with a presentation by Lyra's Rong who highlighted major trends in the Chinese printer hardware and supplies market. Rong also shared survey findings from Lyra's 2009 Chinese Business User Demand Study that is the first ever Kano study used in the printer and print supplies industry. Rong's presentation focused on the use of printer supplies, OEM versus the aftermarket, the impact of the current economic downturn on the end-user's choice of using OEM and aftermarket supplies, and the importance of low-cost supplies for new printers.
In between the two presentations, Binliang Gong, VP of the Special Printer Committee of the China Computer Industry Association, and Helen Duan, Senior Partner and General Manager of Innopat Intellectual Property, spoke to forum attendees. Gong's presentation touched upon vital issues facing the Chinese aftermarket industry, such as: smart chips; over production volume and capacity; the future of family-oriented aftermarket businesses; the establishment of industry standards, the quantification of government procurement of aftermarket supplies; patent violation and sharing; and the revitalisation of the Chinese aftermarket industry. Duan's presentation highlighted the importance of patents and avoiding patents. violation, and the need for companies in the industry to defend themselves jointly when facing patent infringement lawsuits.
The afternoon session was kicked off by Dr Influent Li of the Institute of Chemistry at the Chinese Academy of Sciences, who shared his institute's patented research results on Nano ink and its various applications. Li's presence at the forum highlights the increased efforts made by major aftermarketers on research and development and the enhanced awareness among industry leaders that the future of the aftermarket industry lies in acquiring its own proprietary technologies.
Li's presentation was followed by an industry panel moderated by Lyra's Lippmann and comprised of Luke Goldberg, Senior VP of Future Graphics; Benny Yue, VP of Ninestar Image and Xiping Zhang, President of Print-Rite. Unsurprsingly, the panellists agreed that the world financial crisis and economic downturn has created a good opportunity for the aftermarket industry.
On average, they said they expected a 10-30 percent growth rate this year. Future Graphics' Goldberg commented that he believes the aftermarket has greatly benefitted from macroeconomic conditions, with the third-party colour toner market size likely doubling in the last year or so. Goldberg also believes that predatory pricing is likely the greatest threat to the aftermarket and some of the smaller Chinese players price products far too low and threaten the stability of the industry.
Print-Rite's Zhang declared that one of the most important issues for the domestic market is a printer supplies procurement relationship with the Chinese government, and all the panellists agree that the proliferation of counterfeits is a problem for OEMs and legitimate third-party companies. Zhang provided additional comments on behalf of the aftermarket industry in his position of President of the Zhuhai Consumables Industry Association.
Though aftermarket supplies have been on the list of products for government procurement, the industry would like to see the government specify what percentage of government procurement of printer consumables should be aftermarket cartridges. Otherwise, the overwhelming percentage of consumable procurement will remain OEM cartridge. Consequently, the industry will continue its attempts to lobby the Chinese government to limit the use of smart chips.
Zhang revealed that aftermarket supplies account for only about 10 percent of the Chinese domestic market, and [unsurprisingly] counterfeit products have the majority of the market that the OEMs lost. He added that the adoption of a Chinese printer consumable industry standard has been too slow because aftermarket manufacturers were under-represented in the drafting committee that is mainly composed of OEM printer makers.
Show business
Lyra saw a number of trends at the 2009 ReChina show, but one of the most noteworthy announcements was the upcoming launch of a new printer from Ninestar that the firm says will be available in 2010. Lippman describes the firm's advertisement for the new printer at the show as "significant".
"This is a huge first; we have never seen an aftermarket company produce a device and become an OEM," he adds.
While details about the product are unknown, according to unconfirmed rumours, the new device will be a desktop monochrome laser printer that is likely to have a very competitive cost per page. The launch is related to the ongoing "printer consortium" that Lyra reported between Lenovo, Ninestar, the Zhuhai government, and large holding company Legend Capital in 2007.
An abundance of colour toners was a noticeable trend at the event. Mostly international toner manufacturers from Europe, Japan, South Korea and the US showed their latest products for the rapidly expanding colour toner aftermarket, with many firms showing solutions for chemical-based cartridges. In terms of finished colour toner cartridges, many firms promoted products for popular models from Brother, Dell, HP, and Xerox. DPI Solutions was one of the few third-party companies to have a patented chemically-produced toner, and the company announced new colour toner releases for the HP Color LaserJet CP1215 and CP1515, Dell 5100cn, and Xerox Phaser 6300. Representatives from the company said that they were eagerly anticipating the introduction of new colour toner for the Brother HL-4040 next year.
In general, laser components and finished laser cartridges dominated the show, accounting for roughly 60-70 percent of products. On the ink side, while Canon and HP ink tanks were a focus, it is worth mentioning that APEX Microelectronics has developed a compatible chip for the Canon CLI-221/CLI-521 models. Furthermore, Static Control Components says it will have a chip ready soon and Skyhorse (Jiaxing Tianma Printer Consumables) claims it has even patented several other elements of this ink tank model so as not to infringe Canon's patents. To this point, the smart chip has been the only thing standing between Chinese manufacturers and the mass market.
Bucking the trend
The rising exhibitor and visitor numbers at 2009 ReChina are positive signs at a time when attendance has fallen at virtually every other show this year. Lyra has already discussed the increased activity during the second half of the year that likely contributed to the encouraging news, and ironically, the success of ReChina is likely somewhat related to the slowdown in World Expo in Las Vegas. The cost for international companies to travel and exhibit in Las Vegas is great, and many of the major buyers and distributors are present in Shanghai, as a lot of the small buyers and distributors have disappeared in North America.
It is interesting to note that the ReChina show and its Zhuhai counterpart, Remax Asia Pacific, held in October last year both saw an increase in exhibitors and visitors in 2009, despite the two events being held close together. This year, the two events will trade places in the calendar as Remax AP will again take place on 14-16 October, but this time that event will be a few weeks after the 2010 ReChina show.
