1 EGIN April 2008 INTERGRAF The Competitiveness of the European Printing Industry and the Influence of China

2 EGIN April 2008 INTERGRAF Confederation for Printing and Allied Industries Place E. Flagey 7 BE – 1050 Brussels 25 Member Federations in 22 Countries INTERGRAF

3 EGIN April 2008 INTERGRAF European Graphic Industry Chinese Printing Industry and imports affecting the European market Analysis and initiatives Content of presentation

4 EGIN April 2008 INTERGRAF 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 Profile of the European Graphic Industry

5 EGIN April 2008 INTERGRAF Chinese Printing Industry ,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 2003 EU 27: 126,000 companies 900,000 employees 91 billion EUR 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

6 EGIN April 2008 INTERGRAF 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

7 EGIN April 2008 INTERGRAF 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

8 EGIN April 2008 INTERGRAF Chinese Printing Industry Bohai Rim Beijing Yangtze River Delta Shanghai Pearl River Delta Hong Kong / Macao / Guangzhou

9 EGIN April 2008 INTERGRAF 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

10 EGIN April 2008 INTERGRAF Key points for CHINESE Printing industry Industrial structure and economics Supply chain Clients & Products Technology Regulations Challenges Since 2006 China has managed to satisfy local consumption needs for paper, ink and machinery Chinese machinery not far from European one regarding quality Technology gap with Europe is not deep European machinery manufacturers are in the process of opening subsidia- ries. Complaints about infringement of IPR  Environmental legislation seems to exist only in the field of energy production  No information on H&S  Larger companies are ISO certified Local market is skyrocketing Customers’ portfolio is international Customers are target of worldwide promotional campaigns Officially they can order all products Some publication printing companies packaging printers other printing 3 Mio employees Economic Background

11 EGIN April 2008 INTERGRAF The Globalisation of Print – Chinese Import penetration grows 75 Mio EUR in Mio EUR in 2006

12 EGIN April 2008 INTERGRAF Imports of printed matter into selected European countries (in EUR)

13 EGIN April 2008 INTERGRAF Imports of printed matter into selected European countries (in Million EUR) without UK and Germany

14 EGIN April 2008 INTERGRAF 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 Categories of products affected by relocation

15 EGIN April 2008 INTERGRAF Categories of products affected by relocations Manufacturing time limits Volume Ordered Low High Short time limits Long time limits Books Printed trade materials Newspapers Magazines Affected by relocations Potentially affected by relocations Catalogues Best Sellers books Manuals of delocalized products Children books Diaries

16 EGIN April 2008 INTERGRAF 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

17 EGIN April 2008 INTERGRAF Analysis of the EU Printing Industry Strengths Modern & efficient production tools High quality and flexible product offer respecting the environment Opportunities Differentiation possible Service orientation grows Multi-media comm. solution Weaknesses Average size too small Overcapacity Moderate intern. Experience Weak negotiation position Threats Growing presence of third countries Relocation of activities Intense price war Disconnected from R&D

18 EGIN April 2008 INTERGRAF 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

19 EGIN April 2008 INTERGRAF Scope for Action 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 Actions need to happen at company, national and European level

20 EGIN April 2008 INTERGRAF 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 Initiatives

21 EGIN April 2008 INTERGRAF Intergraf Member Projects Environment / H&S / Waste Short termLong term Standardization Market Trends Process Optimization / Cost calculation Lean Management local level / company national EU Innovation / Research & Development Procurement Guidelines Machine Guidelines Internationalization Competitiveness Value of Membership Human Resource Image

22 EGIN April 2008 INTERGRAF 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

23 EGIN April 2008 INTERGRAF 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

24 EGIN April 2008 INTERGRAF Place Eugène Flagey 7 BE Bruxelles Tel: Fax: More Information …. Thank you for your attention! Beatrice Klose -