Services and supplies drive the 9% growth in Q1 2018 peripheral spending

In Q1 2018 the peripheral market (including supplies and services) grew by 9% in revenue and 10% in units, while the installed based contracted by 2%. In the year to the end of March both revenue and shipment growth was 5%. My Figure shows the revenues of printers and others (which are mostly digital cameras); it shows the extent to which supplies have taken over the engine of growth for an otherwise highly mature market area. I’ve excluded services here, because the revenues are so much greater than these other categories; the revenue trend (like supplies) also shows an uptick in the most recent quarters).

The peripheral market is almost entirely based on proprietary products with the vendors working hard on technologies and policies to retain customers through tight control of aftermarket products and services – the majority of which is made up of printer cartridges.

The strategy of the printer manufacturers has been to create highly functional laser and ink jet machines, sell them as cheaply as possible, establish an installed base of millions and then farm the aftermarket through selling expensive supplies which are difficult to imitate (even if made legally allowable by the EU and other government legislators).

The two leading suppliers are Canon and HP Inc., which dominate both the laser and ink jet markets (see Figure, which gives market shares for the 161 million printers sold worldwide in the year to the end of March). The printer market is disadvantaged by the increased screen resolution of monitors allowing millions of computer users to complete processes entirely online without having to print out the results (which we all had to do in the past). It is also hampered by the slow development of the 3D printing market, where those with their eyes opened by the possibilities are being held back by a lack of major products and the lengthy process of ‘printing’ solid objects. Increasing revenues from services and supplies has helped peripheral suppliers create more positive financial results. I expect Chinese suppliers to take a bigger interest and share of the market in future for products which aren’t dependent on the established patents of US- a Japanese-based manufacturers.