The impact of HP's entry into China's A3 copier MFP market post-Samsung

• A3 copier base laser multifunction peripherals (MFP) only made up 6% of the overall shipment in China’s hardcopy peripherals market in the first half of 2016, while sales revenue accounted for 34% of this market.
• HP’s move into the A3 copier base laser MFP market will break the monopoly currently held by Japanese brands, and is expected to bring major changes to China’s printing market in the product upgrade and business model transformation arenas.
• With HP entering China’s nascent printing management service market, more third-party agents will adopt the printing management service business model, further expanding this market.

HP’s entry into the A3 copier base laser MFP market after its acquisition of Samsung Electronics’ printing business – a deal announced earlier this month at its Global Partner Conference in the US and valued at US$1.05 billion – is expected to bring major changes to China’s printing market in the product upgrade and business model transformation arenas, IDC predicts.

The move by HP, which also said it plans to launch 16 new A3 copier base laser MFP products in the near future, reflects its upbeat outlook of the relatively high profit margin of the market and its greater expectations of the printing solutions and printing management services market, IDC believes.

“The acquisition will allow HP to build on its own strength in printing solutions and leverage Samsung’s leading position in the smart office sector to expand its printing management service business,” said Donna Wang, Research Manager at IDC China, “To a certain extent, HP’s focus on these two areas will trigger major changes in China’s printing market.”

IDC believes that the acquisition of Samsung’s printing business and the launch of the new A3 copier base laser MFP will help HP improve its existing technologies, expand its product portfolios and speed up business model transformation. Meanwhile, such moves will also facilitate the product lineup upgrade and sales model transformation in China’s printing market.

IDC’s China’s Hardcopy Peripherals Market Quarterly Tracker 2016Q2 shows that A3 copier base laser MFP only made up 6% of the overall shipment in China’s hardcopy peripherals market in the 1H16, while its sales revenue accounted for 34% of this market, meaning A3 digital composite machines had a substantially higher average price than desktop printers. Moreover, A3 copier base laser MFP generally have a bigger printing volume than desktop printers, which means larger potential profits from follow-up consumables and services.

HP’s entry into the market will break the monopoly currently held by Japanese brands. Leading Japanese vendors such as Fuji Xerox, Canon and Ricoh which control the core technologies for copier base laser MFP, will also suffer from the change. They will be forced to increase investments in R&D and product upgrades and attach greater importance to black-and-white medium and high-speed models as well as colour models. This will be particularly true in the colour machines arena, where three of the 16 new products to be launched by HP will be A3 page wide copier base laser MFP.

In terms of printing speed, colour imaging effects and printing cost per page, these products will have more advantages over the traditional colour copier base laser MFP. Consequently, colour copier base laser MFP will see fiercer competition in China’s A3 copier base laser MFP market in the future, accelerating the replacement of black-and-white products by colour products.

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After entering the A3 copier base laser MFP market, HP is likely to attach more importance to printing management services, which are still at a nascent stage in China. However, more and more contracted businesses will replace transaction businesses. Under the traditional direct sales model, Fuji Xerox has clear advantages in the printing management service market while HP is trying to expand its share of this market by enlisting more third-party partners.

It is expected that HP will turn its printing management services into compact modules and packages and help third-party agents to complete pre-sales and after-sales support. It is believed that this will encourage more third-party agents to adopt the printing management service business model, further expanding China’s printing management service market.

The biggest asset HP will obtain from its acquisition of Samsung’s printing business will be possession of Samsung’s 6,500 printing patents, said Wang. This will allow HP to amass more comprehensive core intellectual property rights in printing and make up for its lack of core technology in laser printing in the past.