The burgeoning Chinese market offers great potential for converters and their suppliers. Robin Meade reports
Since the Bamboo curtain came down in the 1980s, China has been a source of opportunity for European, North American and Japanese printing and converting machine manufacturers, as well as for suppliers of inks, printing blankets and other consumables and components. Demand for advanced Western technology initially came from state owned ventures in the core industrial/administrative and special economic status regions. But, fuelled by economic growth in every sector and growing prosperity among many of its citizens, exporters soon witnessed interest in their equipment from Chinese companies operating in more remote regions.
China now has 82,000 printing companies, 400 printing/converting machinery manufacturers, 9,000 paper and other substrate production plants, and many other businesses creating demand. While the population is more than 1.3B, for converters the most important demographic is the burgeoning middle class. This segment is fueling demand for flexible packaging, labels, cartons and other packaging. The net effect is an expected 9 per cent annual increase in the overall Chinese packaging market until 2010. The value of production is expected to nearly double from US$41B in 2004 to US$75B.
Tom Kerchiss, managing director of RK Print Coat Instruments, which is active in the region, says: “The opportunities for selling our equipment are vast. In fact, we’ve barely scratched the surface. Although there was, and still is, a need to import best available technology, many Chinese printers, converters and supporting manufacturers are engaged in assimilating ideas and then innovating in their own right.”
The UK based company exports its sample preparation and coating technology systems to China. Tom Kerchiss says the converting industry there wants to stimulate the development of a national graphic arts industry that can compete in world markets, not just on price, but on quality as well.
China as an economic force clearly will not go away and at the current rate of expansion analysts predict the Chinese and US economies will be roughly equal in size in 35 years. In May, the country’s trade surplus grew by almost three-quarters, to £11.4B and for the five months up to that grew 84 per cent to £42B. Trade with Europe is expected to hit €170B by the end of the year.
Dennis Mason, president of Mason Consulting, which specializes in marketing and technology issues in the graphic arts industry, says in the near term China is considered an excellent market for equipment and software. In the longer term, the Chinese can be expected to develop equipment for their local market and for export.
Berren, a major Chinese manufacturer of printing presses and bindery equipment allied with Fuji, occupied most of one hall at the last All in Print China show, in 2006, in Shanghai. The company exhibited web and sheet-fed presses, as well as bindery equipment ready for distribution around the world.
Significantly this year’s ProPak China in July was the show’s biggest ever, with more than 500 companies from the UK, Germany, Italy, Japan, Korea, Taiwan, and the US. Vera Fritsche, of the German Packaging Machinery Manufacturers Association (VDMA), says: “The Chinese packaging market is increasingly difficult. More and more Chinese competitors are entering the market.”
China has become the world’s largest market for RFID, spending almost £1.9B. While this has peaked around delivery of 300M national identification smart cards prior to the 2008 Olympics, and other cards related to transport, cash replacement and secure access cards, research by IDTechEx in the UK shows Western companies are partnering Chinese producers or outsourcing inlay production there. Companies such as NXP, Texas Instruments, lnfineon, STMicroelectronics, EM Microelectronics, and Atmel are involved in the market.
However, for suppliers to China, the market represents both opportunity and threat. Chinese observance of intellectual property rights and adherence to international patent law is virtually nonexistent and exporters to the country risk having their products copied for use there and for sale elsewhere in the world.
There are other pitfalls too. China has recently been reducing protection from trade tariffs to the point that it was the only market that did not grow strongly for Heidelberg in its latest financial results. The company said the Asia Pacific region was hit by the Chinese Government’s decision to stop waiving import duties for printing presses other than A1 format machines. These taxes add 25 per cent to the cost of machines imported into the country.
Despite excellent sales in China last year and tremendous growth potential, rival MAN Roland is also likely to suffer. The Roland 900 XXL with full UV applications made its debut at Suzhou Dongyi Packaging, whose chairman, Cai Long Long, says it gave his company the ability to meet the demands of the domestic market and to break into the international market.
“This is a big investment, but the intangible advantages that come with it are exceedingly great,” he exclaims. “The Roland 900 XXL has become our motivation to stride forward.”
Packaging printer Yiwu Sanli has also built a 30,000m2 factory and bought five Roland sheet-fed presses, bringing the total of Roland 700 units to 29.
Fujifilm has opened a plate factory in China that will be a centre of production for its PS and CTP plates for offset printing. The 150,000m2 facility will enable Fujifilm to meet domestic demand and increase exports to Asia.
SCA also opened a new £10M packaging facility in Suzhou, a one hour drive from Shanghai, this year as a platform for expansion of its packaging business in China. The 70,000m2 site serves as a one stop centre for corrugated board production, litho printing, protective foam packaging and fulfillment. SCA Packaging Asia has annual sales of SEK1.5B (£111M) and expects to at least double business within five years through organic growth. The company has 16 production units in China, and six in Singapore, Malaysia and Indonesia.
Ashe Converting Equipment’s slitting and rewinding equipment and systems are installed throughout China. Chief engineer Keith Fordham says: “With the international advancement of both printing and converting technology, the printing and packaging converting industries of China have made great progress. However, Chinese companies still have to catch up in many respects, and although there are now more than 400 manufacturers of equipment and consumables, the need to import technologically advanced equipment and systems remains.”
He says if repeat business is to be made, machines must be reliable, easy and safe to operate, provide high levels of management information, offer fast set-up times, and, most importantly, must slit and rewind with a high degree of accuracy.
Ashe supplied a bespoke Sapphire DB to the Nine Colour Printing Co, in Kumming – a system with a maximum web width of 1,650mm and engineered for slitting of hot stamping foils, cigarette papers and 10 micron BOPP high slip films.
Nilpeter launched its operation in 2004 and has now formed a partnership with inspection specialist AVT, targeting the label and narrow web sectors. China has been a fast growing market for AVT for several years, with leading customers in the flexible packaging, cigarette packaging and label printing markets, for both wide and narrow web applications.
“Eager to improve print quality and reduce waste, our customers were seeking advanced technologies to meet these challenges,” says AVT general manager Ramon Lee.
Gal Shamri, AVT’s vice president of marketing, adds: “The agreement follows the market co-operation between our companies in recent months. It is an additional step to the appointment of William Bai to the position of general manager of the AVT Representative Office in China two years ago, and supports our strategy to be a leading supplier of automatic inspection systems to printers all over China.”
Other suppliers that have invested heavily include Metso Paper, which is building a second Advantage DCT 200 tissue production line for Fujian HengAn Paper Co. A similar line at the mill started up a year ago. Metso Automation is supplying an extensive automation package including process and quality controls, as well as a basis weight profiling system.
Brückner Formtec has sold four complete PET film extrusion lines and two upgradings to Far Eastern New Material, one of China’s leading packaging players. These comprise three horizontal roll stack lines for polished APET film in a thickness range from 200-1,200 micron, as well as an inclined roll stack for thick polished APET film in a range from 500-1,800 micron.
API is looking increasingly toward China after disappointing results earlier this year revealed business slumping across Europe in the face of stiffer competition and higher raw material costs. The company is due to complete a 30,000m2 factory in China producing foils and laminates for luxury packaging for export back to the West.
Wit-Color, of Shanghai, has achieved Xaar ‘Approved’ status for its range of solvent inks for use with Xaar 128 printheads.
A Xaar spokesperson says: “At a time when the industry is suffering from poor quality inks coming onto the market, the Xaar seal of approval strengthens Wit-Color’s position internationally.”
Tom Kerchiss says that with the increasing focus on quality and providing the domestic market with a product that can stand comparison with those produced in the West, the demand for RK Print Coat’s colour communication systems and product development print/coating systems has risen exponentially over recent years.
Bench top sample preparation and colour matching systems such as the K-Printing Proofer are exported to China in large numbers, primarily for the gravure printing sector. Although gravure still dominates the package printing market in China, the flexo process is being adopted very quickly in some sectors, most notably in label printing, where the printing of body and neck labels for beer is largely being undertaken with flexo.
RK Print Coat is providing the embryonic flexo sector with its FlexiProof systems. FlexiProof 100 has been supplied to a Chinese research establishment as well as to a number of ink producers, primarily satellite production plants belonging to international companies such as SICPA and Coates. However, there are already 400 ink makers in China, employing more than 25,000 workers.
Showing the way
An entrée to the Chinese market is being offered by the organizer of ICE, Europe’s International Converting Exhibition, which has launched a dedicated biennial event, to be held in Shanghai on January 16-18, 2008.
Following in the footsteps of ICE in Munich, ICE China will aim to fill the gap in the market for a dedicated converting event In China. It will be jointly organized by ICE owner nimble shows & media and IMAG, a subsidiary of Messe München, which stages the Munich event.
ICE director Michael Boyle says: “China is the market with the biggest potential for growth in the converting industry worldwide. IMAG and Messe München provide both the necessary expertise and infrastructure in carrying out trade fairs in Asia and this combined with our knowledge of the market creates an ideal synergy.”
Expectataions from ICE China are high but the organisers are confident of a sucessful show. Kurt Schraudy, managing director of Messe München, adds: ”With ICE China we are adapting a proven European model to the Chinese market. Our international experience and the skills of our daughter company in Shanghai provide the assurance that we can organize a fair which can meet the high expectations of European exhibitors, as well as participating Chinese exhibitors and attendees.”
Move to manufacture
Canadian manufacturer of label making machinery ETI Converting Equipment has opened a plant in Songjiang, China, to build its Metronome presses.
Founder and president of ETI Francois Bayzelon explains: “The decision to set up a plant in China comes from the imposition of a 37 per cent import tax on all printing equipment by the Chinese Government, making delivery of top of the range products from our Canadian plant impossible”.
ETI China will have some 60 employees by the end of 2007. Its first Metronome press is being manufactured and the company says it is currently negotiating several important contracts to supply the clear/clear label market.
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