The 2022 State of the Functional & Industrial Printing Segment
As a segment of the printing industry, functional/industrial printing is vast in scope and volume, but remains largely hidden from view. This reality comes from the fact that many serving this segment use printing as a single step within a broader manufacturing process, but do not generally classify themselves as printers. Printing, for them, is a means to an end — a viable, controllable solution among many used to produce, for instance, a coffee maker, a snowmobile, or the graduated lines and markings on medical devices.
As a printing sector, the functional/industrial segment can be seen as an outlier in a number of ways. First is the afore-mentioned identity of the segment. On top of that is the fact that functional/industrial printers often use highly-specialized technologies (bespoke in some cases) and ink sets formulated for high durability, adhesion to uncommon substrates, even electrical conductivity.
About the segment, Andy Paparozzi, chief economist at PRINTING United Alliance, says functional/industrial printers “appear to have a much more differentiated product — a very specific market that they sell into.” He says printers in the segment operate in an area that has a much bigger barrier to entry and a larger, required degree of expertise. Functional printers he has interviewed, he says, “have a bigger moat around their businesses regarding skills and knowledge. I’m really impressed by that. Not just equipment, but knowledge — that really differentiates them to me.”
In some cases, what differentiates industrial printing from graphics printing is really a matter of scale, such as in textile printing, where producers of garments or décor fabrics are printing using higher-grade, revved-up versions of the dye-sublimation systems used by many graphics printers. In many cases, the difference here is in volume, end product type, and business model.
In an article published in the Nov./Dec. 2021 issue of Wide-format Impressions, Laura Maybaum, market segment manager — screen ink, at ink manufacturer Nazdar, said that as digital printing becomes compatible with the needs of industrial printers, and becomes more widely adopted, companies using printing for industrial applications will be able to move away from rigid production approaches, and can thus seek more viable and commercially available technologies, such as inkjet.
While the growing presence of digital imaging technologies — particularly inkjet — is changing industrial printing, it also offers opportunity for appropriately-equipped sign and graphics printers to access graphics-adjacent product areas, in many cases as contract printers serving the supply chains of manufacturing entities. Grasping that opportunity, however, may have complicating factors, which is discussed at the end of this article.
Data: State of the Segment
Using data gleaned from the recent PRINTING United Alliance State of the Industry Report, which was published in November 2021, a snapshot of the functional/industrial segment is included below. Data shown is from the responses of companies who self-identified as primarily serving the functional/industrial segment.
For fiscal year 2021, a full 94.1% said they expect a higher level of sales over 2020 figures. When considering this data, it is important to consider what a dramatic, tumultuous year 2020 was. That said, companies reported an annual expected sales growth of 20.5%. Looking forward to 2022, the numbers are more realistic but still positive: 58.8% expect 2022 sales to be higher than in 2021, with an annual expected growth rate of 6.8%.
Within the survey, functional/industrial companies were asked if they could make any investment they wanted to, which technologies would they purchase. Their top five responses to the question were:
Following up on the previous question, respondents were then asked why they chose the investments they did, and what need the investments would, in theory, fulfill. Their top five responses were:
Segment Conditions at a Glance
Figures below are presented on a -100 to +100 scale, with -100 being the most negative possible, and +100 being the most positive possible. The number reflects the percentage of companies answering that they experienced an increase in the current quarter, versus the previous quarter, and then subtracting the percentage experiencing a decrease.
A Company in Profile: Romo Durable Graphics
One way to gain a deeper understanding of the current state of the segment is to take a detailed look at a single company. In doing so, it is possible to provide a bit more granularity to the statistics. While it is difficult to generalize industrial printers, given the diversity found in the segment, the responses featured here encapsulate some of their unique concerns.
Romo Durable Graphics is a functional/industrial printer located in DePere, Wisconsin, not far from Green Bay. According to company president Jonathan Darling, the company currently has around 150 employees and has annual revenue of $20-$25 million. Darling describes the work his company does as, “decoration of durable products. Our customers all make durable goods of one sort or another. We do branding, caution, and warning messages — things like that.” Product types most produced by the company are in-mold graphics, dimensional graphics, and traditional decals.
Romo Durable Graphics uses screen printing for the vast majority of its work. “We’re capable of doing some inkjet,” says Darling, “but it’s not what we do.” To fulfill its product mix, the company also uses plotter cutting systems and forming technologies. To bolster its production, Darling says Romo Durable Graphics is looking at automation, but says any system must fit with the company’s production model, which focuses on unique products, so flexibility is essential.
Asked whether his company produces work that could be considered “display graphics,” Darling reiterates the company’s industrial focus. While the company produces graphics using screen and digital technologies, “it doesn’t go into that industry.” He says the company was producing banners and signage “back in the 90s,” but industry changes led the company toward deeper specialization.
For 2020, which was an “interesting” year for companies across the printing spectrum, Darling says Romo Durable Graphics came out flat. “Overnight,” he says, “50% of our orders evaporated. We’re strictly OEM (original equipment manufacturers), and we run to our customers’ demand, not to their forecasts — so we saw the difference instantly.” Conversely, he says, the pickup in business was immediate as well.
The company’s biggest, current challenge, says Darling, is in acquiring needed material. He says that before the current supply chain challenges, the company would never have to consider whether needed stock would be there. As a company providing key marking and branding components for, as one example, outboard motors — a nightmare scenario for Romo Durable Graphics would be to hold up completion of a customer’s products.
In the next 18 months, Darling expects his company will be “through the primary material challenge.” He says his suppliers expect improvement in their ability to get raw materials and base stocks. Also by that time, Darling says, the company will have implemented higher levels of automation that will provide additional access to the industrial segment. Within the industrial segment, he expects continued consolidation based around markets, instead of geography.
The Supplier Standpoint: FLEXcon
For manufacturers and suppliers of consumables and materials, serving the needs of the industrial segment can be quite different from serving graphics producers. While quality is always a paramount concern, industrial producers may have specific performance or adhesion requirements, and may need to more extensively process or convert substrates. On a deeper level, some end products may call for custom formulations of inks and substrates — some by spec, others by necessity. Serving these areas requires high levels of producer and printer expertise, and key partnerships with suppliers.
Asked to describe the industrial printing segment and the companies that serve it, Mike Merwin, manager, business and tech discovery at FLEXcon, says what makes the segment unique is that it requires engineered solutions to meet specific needs. As a manufacturer for the industrial segment (and others), FLEXcon produces transfer tapes and double-faced tapes that can be used for high and low-temperature bonding, as well as the bonding of dissimilar materials. These tapes are widely used in the manufacture of, for instance, membrane switches, and for conductive printing.
Technologically, Merwin says screen printing is still widely used in the industrial space because it can produce the fine lines needed for printed circuitry. He says many people hold a misconception that screen printing is “old technology.” While screen printing certainly is old (and analog), it is essential to understand that, to date, it is the right technology for a wide variety of specialty applications. This same technology is also making possible innovations such as in-mold electronics manufacturing, the production of smart fabrics, and micro-fluidic technologies used in medical testing. He expects that emerging digital printing technologies will come to the fore, likely at first for niche medical applications.
As a manufacturer serving the needs of the industrial segment, Merwin says product testing — ensuring the material truly works for its intended purpose — is commonly done. He shared that the company worked with one manufacturer to produce materials for a flexible electronic application process. Success in this product development was such that the material is now a part of the product spec, Merwin says, noting it will be “locked in for quite some time.”
Overall, Merwin says the biggest difference between functional/industrial printers is the need for the end product to perform as expected, “in high and low temperatures, in harsh environments, and all sorts of challenges a typical printer may not run into.” As an example, he says the keypad on a gas pump must work over and over, with very high performance, whether it’s placed in Alaska or Arizona.
While Merwin says industrial printers are facing many of the pricing, labor, and supply issues currently experienced by companies across the manufacturing spectrum, he believes the low quantity/high profit reality of many industrial printing projects can, to some degree, temper the effect of supply chain challenges.
Asked whether strong growth opportunity exists in the industrial sector, Merwin says, “yes, look at the growth of the CES show,” where flexible electronics are being placed into a wide variety of devices, and smart fabrics — printed with internal conductive circuitry — are being used for medical, military, and sports applications.
About That Opportunity …
In a printing industry where convergence is offering opportunity for new, profitable areas, some printers may view the industrial segment with interest, while others may view it with confusion. Surely, the types of applications produced by Romo Durable Graphics are a closer reach for signage and graphics producers than, say, in-mold electronics. In some cases, technologies used within areas of both segments may provide a production entry toward an opportunity. In others, technological incompatibility may be a strong, limiting factor. On the business side, industrial is a whole different model: while sign and graphics producers generally sell to marketers, industrial producers sell to manufacturers.
All this said, the move toward any opportunity must be done after conducting careful research; developing a strong understanding of technologies, materials, and tools; and gaining (or acquiring) the expertise needed to access and thrive in an area with deep barriers to entry. Today’s industrial printers are well-positioned to continue to compete strongly in their highly focused areas, and possess unique knowledge that gives them a competitive advantage.
Related story: Three Views on Digital Conversion in the Functional/Industrial Sector