The exceedingly long shipping lead times in 2021 and the first half of 2022 saw many publishers doubling or tripling order quantities to ensure timely book launches and sufficient retail stock. “Most publishing clients are still selling those inventories in their warehouses, and this has partially caused a slow stream of incoming new orders,” says Mae Zhao, senior v-p of marketing and head of international sales at Toppan Leefung Printing Limited, whose sentiment is shared by other print manufacturers and management companies PW talked with for this report.
Macroeconomic factors have come into play in recent months as well. “Inflationary pressures in overseas markets coupled with sudden interest rate adjustments are pushing consumers to cut spending in anticipation of a potential recession,” says Matthew Yum, executive chairman of Hung Hing Printing Group. “Our publishing clients are certainly taking a much more conservative approach to the whole of this year while carefully managing their excess inventories—which were manufactured well in advance in 2022 to circumvent shipping issues—in order to control their own costs.”
Print management company Imago also experienced a slowdown starting in late 2022 that continues into this year. “After the pandemic-era book-buying boom, our year-on-year project volumes are down,” says president and CEO Howard Musk. “Freight costs are now back to pre-pandemic levels, and shipping schedules and capacity are no longer problems. However, higher material costs combined with excess inventory—which importers and retailers are now working through—have taken a toll.”
Numbers are down, but optimism remains high
Industry numbers confirmed the above sentiments: According to NPD BookScan, unit sales of print books dropped 6.5%, from $843.1 million in 2021 to $788.7 million in 2022. However, the 2022 figure was an increase of 11.8% from 2019, the last pre-pandemic year. As for the first six months of 2023, unit sales of print books went down 2.7% compared to the same period a year earlier. Now that travel and other entertainment options have resumed after the lifting of Covid-19 lockdowns, reading is taking a hit.
The number of print books sold in the U.K. in 2022 was also down, from 212 million in 2021 to 209.1 million. Over in Continental Europe, it is a mixed bag, with some countries seeing book sales soaring after the pandemic while others face declining numbers.
Zhao, of Toppan Leefung, adds that the overall print book industry remains healthy. “The children’s book segment, for instance, is vibrant and resilient,” Zhao says. “We probably won’t have another extraordinary year like 2021, but publishers and print manufacturers alike must readjust and find their footing in the new normal.”
Certain sectors, especially those with clients that are primarily in the promotional and merchandising business, are growing. “These clients are taking advantage of movie franchises and other licensing ventures to launch projects and products to attract impulse buying,” says Yum, of Hung Hing, who has set out to diversify the company, geographically and business-wise. “Diversification offers continual growth for the company and positions Hung Hing not just as a major print manufacturer but also as a strategic partner with variable businesses that provide publishing clients with new and unique market and revenue opportunities.”
“Supply chain disruptions,” the most dreaded phrase of 2022, has all but disappeared, according to Musk, of Imago. “There have been a few instances of port slowdowns related to West Coast longshore contract negotiations, but the impacts have been minimal. Additionally, shippers have diversified their entry points to avoid bottlenecks, with Gulf and East Coast ports seeing larger volumes.”
Paper prices remained quite high throughout the second half of 2022 given the hikes in energy costs. “But we are now seeing a slight softening in paper prices,” Musk says. “In Asia, there have been no issues with paper supply, and the outlook is positive for a steady supply with stable prices going forward.”
Future investments in the pulp-and-paper industry are unlikely to slow down, which means that paper supply should not be a concern going forward, given the big numbers coming from various research reports. Reportlinker, for instance, estimates that the global printing paper market will grow from $61.9 billion in 2022 to $91.1 billion by 2030. Another report by Technavio predicts the global printing and writing paper market will grow by as much as $7.92 billion between 2021 and 2026, with 61% of the growth coming from the Asia Pacific region. Of course, these figures represent a fragmented market that covers all types of paper, from coated freesheet for books and catalogs to uncoated mechanical grades for newspapers and paperbacks.
Chinese paper companies have been busy planning foreign investments while expanding locally to meet domestic demands. Nine Dragons Paper, China’s top producer of paper and paperboard, for instance, has invested $1.16 billion to purchase and expand two pulp-and-paper mills in Malaysia; the company already has facilities in Vietnam and the U.S. Another company, Lee & Man, has also started a mill in Malaysia while expanding its huge facility near the border between China and Vietnam.
The picture, unfortunately, is not as rosy in Europe, where hikes in raw material and energy prices—largely due to the Russo-Ukrainian War—as well as prolonged worker strikes have resulted in mill closures amid industry consolidations. These have resulted in a severe drop in paper production capacity—of more than six million tons. Forestry giant Stora Enso, for instance, is shuttering its pulp production unit in Sunila, Finland, and its Napi, Estonia, sawmill and stopped one book paper production line at its Anjala, Finland, site. Higher costs of wood, increased competition for pulp, and the embargo of wood imports from Russia are the main reasons behind many of the European/Scandinavian mill closures and paper-line stoppages.
The race to get pulp—or fiber, to be exact—to feed the mills is intensifying. Over in Brazil, the world’s biggest pulp producer Suzano is building a new mill in Ribas do Rio Pardo that is capable of producing 2.3 million tons per year and has spent $667 million to purchase 2,000 square kilometers of plantation forests that it was leasing. However, even the fastest-growing eucalyptus trees take time to mature, and there are only so many trees that can be planted on a plot of land. Then there is the sustainability issue, which has everybody searching for greener alternatives to existing substrates as well as inks and pigments. (See “Of Algae, Grass, and Such,” below.)
Changing business nature and buying patterns
Samuel Chung, sales and marketing director of Chang Jiang Printing Media, who has spent nearly 50 years in the industry, has come to an interesting conclusion about the nature of the print-manufacturing business. “There is no lack of printing plants out here in China, or elsewhere in the region, with modern presses and the latest technologies,” Chung says. “But for these plants, there is a lack of orders to keep them going. Our company is the conduit to working with these companies. We bring them business. This makes our operation flexible and nimble, affording us the ability to award an order as needed or as we see fit based on a factory’s capability, capacity, cost, and schedule.”
Such a stance keeps Chang Jiang’s investment expenditures low while opening up resources near and far. “In other words, we buy smarter and cheaper and transfer the cost savings to our clients, and that in turn makes everybody happy,” says Chung, who also operates two production outfits in China for special orders or those requiring close monitoring and tight schedules.
Print-manufacturing companies located in Indonesia, Malaysia, Thailand, and Vietnam are not used to dealing with overseas clients, says Chung. “We offer our expertise to these factories and our publishing clients. My senior staff and I understand what the clients want and need, having spent decades in the industry, and we share this knowledge with the factories that we work with. In short, we train the factories and get them ready for the export business, which is far more stringent in terms of quality and turnaround time.”
Trade tariffs, content censorship, and the diversification of the manufacturing supply chain are the main reasons publishers look for options outside of China. “But China can be the cheapest option still, and some clients may be more focused on price after dealing with higher paper costs and shipping charges over the last couple of years,” says Musk, of Imago, who has production facilities in India, Korea, Malaysia, and Thailand on speed dial. “As a print management company, we are not tied down by a physical manufacturing plant in China—or elsewhere. We have a vast print manufacturing network in Southeast Asia as well as an expanded operation in South Korea that is managed by Chris Kim, a seasoned printing executive. If a client comes to us for options outside of China, we have the experience, expertise, and resources to help.”
As for the peak manufacturing season, it is no longer confined to the traditional period of August through September, says Francis Ho, deputy general manager of C&C Offset. “This is due to the current overstocking in the U.S. and inflation in Europe shifting buying patterns. What we are seeing now are very conservative order placing and short-notice purchasing to quickly replenish inventory from publishing clients, who are trying to meet shifting consumer behaviors post-pandemic.”
More evident is the publishing clients’ tendencies to place low-volume orders followed by frequent reprints, often below 3,000 copies, Ho says. “Nowadays, it is no longer strange to receive a reprint order while the initial order is being manufactured on the floor. So we are dealing with higher numbers of orders even as the total volume of books produced is declining.” This translates into increasing demand on print manufacturers such as C&C Offset on less tangible—and definitely less quantifiable and billable—pre-production and, at times, warehousing services.
Rolling out automation and going greener
Problematic for many printing facilities are rising labor costs—and this is happening not just in China but also in the so-called low-cost countries like Malaysia and Thailand, says Chung, of Chang Jiang Printing Media. “Rising minimum wages and worker insurance have seen many factories, not just those in the print-manufacturing sector, downsizing and turning to automation. And the bigger the factory, the higher the fixed costs even as its production capacity is limited by its four walls.”
All across China, minimum wages have been rising. Minimum monthly wages now range from $206 to well over $308. In contrast, back in the late 1980s, production workers at print-manufacturing facilities were paid around $30 per month. The strengthening of labor rights and laws as well as a greater awareness of work-life balance—all good things to have, for sure—have impacted company bottom lines and long-term workforce planning.
For Ho, of C&C Offset, automation is now absolutely critical on the modern print production floors. “Some processes, especially those requiring laborious and repetitive tasks—from hardcover binding to packing books into cartons, labeling, and taping them up, for instance—are simply more efficiently done by robotics,” Ho says. “Moreover, the younger generation much prefers service-oriented jobs in large cities to working on production floors or assembly lines. Add rising minimum wages and intense intra- and inter-industry hiring competition, especially in southern China, and increasing automation is par for the course.”
China is currently #5 in terms of robot density in the manufacturing sector, behind South Korea, Singapore, Japan, and Germany, according to the International Federation of Robotics; the U.S. is #9. Collaborative robots, or cobots, are now the norm on assembly lines and manufacturing floors, working alongside human coworkers. There were 322 units of robots for every 10,000 employees in the Chinese manufacturing industry last year. An aging population, a declining birth rate, and a tighter labor force have driven the Chinese government and its manufacturing sector to see Industry 4.0 technologies, which includes AI, automation, and robots, as means to achieve smart and lean manufacturing while accelerating sustainability and boosting productivity.
Modern warehouses in China are gearing up for more automation and robots, particularly autonomous mobile robots (AMRs) and automated guided vehicles (AGVs), which offer improved accuracy, operational efficiency, and speed. Automating menial and repetitive tasks allows human workers to focus on the more complex duties. Using robots to transport heavy inventory or retrieve inventory from heights also reduces the physical strain on human workers. AGVs, for instance, can replace manually driven forklifts or pick carts, and cobots, accompanied by human pickers, act as mobile storage bins for picked orders before heading to the sorting or packing stations. Robotic arms can be deployed for picking and receiving raw materials for production as well as sorting and palletizing items for order fulfillment.
On the print manufacturing floor, newer machines offer greener technologies with improved efficiencies, says Ho, of C&C Offset. “Take the eight-color Komori LED UV printing press that we have installed: it can print up to 16,500 sheets per hour and the UV inks dry immediately. Fewer people are required to monitor the press and process since it’s highly automated, and we free up the floor space that was previously needed for the pallets of printed sheets to sit while drying prior to being folded. The downside is that UV inks are more expensive. But there is no question that we will continuously replace older presses and go for greener and better solutions.”
The data generated by the C&C Energy Management Center fully supports Ho’s observation: the capacity of a new printing press almost exceeds the total capacity of three older presses combined, while the energy consumption of a new press is approximately 40% less than that of an older model.
Not surprisingly, another Komori LED UV press is on the way to being installed at the end of this year. “We have also added a new Aster automatic book-sewing machine and a Martini Vesta auto-jacketing line,” says Ho, who is looking forward to the arrival of a new one-color inkjet web-fed digital press. “What can I say? The search for new printing technologies and methodologies is never-ending.”
The increased awareness of the environment and its impact on Toppan Leefung and its business has made sustainability a major goal for the company’s management team. “Our guiding principles are set in accordance with the United Nations Global Compact, and sustainable development goals are now an integral part of our corporate philosophy,” says Zhao, adding that both Toppan Leefung and Toppan Excel facilities in Dongguan use exclusively FSC-certified papers and have proactive environmental initiatives in place to meet and exceed targets on CO2 emissions reduction and other green requirements set by industry organizations and the French government.
“Aside from the capability to use nonplastic packaging, we have also installed nearly 10,000 solar panels on the roofs of our Dongguan facilities, converted fully to electric forklifts, centralized the air conditioning system, and put in vacuum pumps,” says Nigel Shu, managing director of Toppan Leefung, pointing out that these improvements have yielded a 30% energy savings and a significant reduction in carbon emissions. “We are also committed to offering mineral oil–free (MOF) inks.” In fact, since October 2022, Toppan Excel has provided MOF inks at no extra charge to clients.
Over at Hung Hing, all of its double-sided presses have been converted into UV LED printing. “We continue to propose various green solutions to clients, such as using environmentally friendly coatings and PP lamination sheets for post-press processes,” says Yum, whose goal is to see the whole operation using MOF inks by the end of this year. “This is in line with the global trend toward more environmentally friendly materials as well, with Hung Hing’s objective being to become more socially responsible. In fact, we are currently ahead of the mandatory adoption of MOF inks for the Pan European region, and our team is busy helping clients to stay ahead of the regulatory requirements.”
Major printing press manufacturers are not standing idle either. The search for greener solutions with higher throughput and better utilization of raw materials has seen them upping their game. Heidelberg, for instance, has rolled out the Speedmaster SX 102 with a new format option that reportedly cuts printing plate costs by up to 20% compared with the conventional 102 sheet format, which is great in view of rising raw material costs. The printing press also comes with a host of AI-enabled and enhanced automation along with improved ergonomics to reduce manual interventions and operations, which saves time and labor and reduces errors.
As for Komori, its System G38 H-UV curing printing press operates at a speed nearly double that of a traditional sheetfed perfector and is capable of producing 30,000 sheets per hour. With printed sheets folded off the press, it is a great solution for signature-based production—books, catalogs, and magazines, for instance—that also maximizes floor space, shortens production time, and is greener to boot.
Keeping the faith and forging ahead
China has many more years ahead of it to spend in manufacturing books for the world. “This optimism comes from our experience in print technology and our staff’s technical know-how,” says Shu, of Toppan Leefung, adding that Southern China, where his printing facilities are located, also has the most developed and efficient ports for transporting books to the rest of the world. “The technology may be easier to transfer to other countries, but the infrastructure and availability of paper and other raw materials may not be there. Moreover, the technical know-how and diligence of the Chinese people are tougher to replicate.”
The book publishing industry, says Zhao, of Toppan Leefung, will continue to grow, especially for English-language books that are brought into non-English-speaking territories. “BookTok has positively influenced a younger generation of book readers,” Zhao says, “while new platforms and creative initiatives from physical bookstores such as Barnes & Noble are making bookselling more attractive. These innovations will draw more readers and talent to the publishing and book retail sectors. No matter what, print books will be around and remain close to our hearts.”
Musk, of Imago, remains hopeful that print book sales will stabilize and not continue ticking down compared to the previous year. “I also hope that inflation will continue on its current path and go down steadily so that both publishing and print-manufacturing can breathe easier,” Musk says. “My other hope, which is a tough one even for a genie out of the bottle to achieve, is for an easing of U.S.-China tensions and the revival of normal trade relations with zero tariffs.”
Zhao, of Toppan Leefung, also hopes that the U.S.-China relationship will finally improve and that trade tariffs will come to an end soon. “Worldwide inflation is a worry, and so too is the continued Russo-Ukrainian War,” Zhao says. “Nearer to home, the impact of the pandemic and long lockdowns on China’s population and economy—and the global economy at large—remains to be seen. Hopefully, despite all these uncertainties, the publishing industry, and the print-manufacturing sector by default, will find its new safe haven and grow.”
Unbeatable infrastructure—think ports, 5G networks, high-speed trains, for instance—and a comprehensive supply chain are China’s biggest advantages. “These have enabled China to remain competitive and be less adversely affected by the inflationary pressures seen in other economies,” says Yum, of Hung Hing. “At the same time, China is a producer of enormous scale that is able to cope with huge orders once the export market recovers.”
Many manufacturers in China, including Hung Hing, have world-class printing capability; they are equipped with the latest machineries and technologies to produce high-quality products that meet any compliance standards required for export, and yet they still manage to do it in a cost-effective way, Yum says. “That combination is not easy to find in other countries. The huge domestic Chinese market means that as a print manufacturer, we can and will pivot our capacity toward supporting local demands whenever orders for export slow down. These options and flexibility are great things to have.”
Left unsaid are the constant challenges—ever-shorter production lead times and razor-thin margins, for instance—faced by these print manufacturers and their counterparts. For them, these challenges are simply part and parcel of doing business. Like it or not, the goal is to deal with these issues internally by deploying new machineries, technologies, and tools while working aggressively to expand sales and markets. That’s the conclusion PW drew in its 2013 coverage of the Hong Kong print-manufacturing industry, and it remains true to this day.
But changing corporate citizenship and ethics have placed additional burdens on these companies. Their responsibilities no longer extend just to their clients but also to their workers, to their immediate environment, and to local and global communities, and all these come with hefty price tags on top of the ever-increasing investment and operational costs.
However, the companies featured in this report and many others parlaying their business acumen and product expertise in the field are savvy and highly adaptable to changes in the marketplace. They are busy tailoring their capacity and expertise to meet client demands for the novel and unusual as well as for the standard fare in order to fatten their profit margins while attending to sustainability issues. Some are boldly venturing into new business segments and manufacturing locations while others are touting more personal client-supplier relationships with nimbler operations from different sources. Whichever path they take, publishers are definitely spoilt for choice when it comes to print manufacturing in Hong Kong and China and elsewhere in the region.
This feature is published with the support of the companies covered in these articles.
