The tools and rules of the trade are getting ever more complex, but Asian suppliers are taking to them like ducks to water.

Time was when any self-respecting book would be encased in covers of minimal embellishment; gilded lettering proclaiming its title was the standard fare, with maybe a simple watercolor rendition to go with it. Nothing ostentatious, please.

Well, that's when not judging a book by its cover was in vogue. Today, books come in all shapes and sizes, and covers have appeared in metal, plastic and embossed suede while interiors have boasted all shades of the rainbow in multiple gatefolds, inserts, flaps or tabs. Some get sophisticated, with shimmering silver-foil dust jackets, or miniaturized as gift items with a 24-karat gold-plated charm or bookmark. In short, if book design and manufacturing has a default setting, it's currently fixed at "Gimme more!"

Why has this happened? One word: competition. Both the book publishing and print manufacturing worlds have gone competitive—make that hyper-competitive. The product parade PW saw rolling off the assembly lines in much of Asia isn't just about showing off; it's a matter of survival. Convergence is key and originality king. Publishers are rushing to grow their product portfolios—both vertically and horizontally—by leveraging on their assets, synergizing manufacturing methods, pushing existing technology to the very limit and striving to hit the stores first and hard. Print suppliers, meanwhile, are re-engineering, reinventing and retrofitting their operations to rally behind their clients. The result of this dynamic publisher—manufacturer partnership is a plethora of the new and improved (read: trading up) in almost every product category.

Anatomy of a Business

Print manufacturers' services are now built around customer needs, both demanded and anticipated. Aided by production technologies such as CtP (computer-to-plate), digital photography and remote proofing, print manufacturers are fast becoming full-service pre-press vendors. Throw in PMS (print management system) and order-tracking capabilities, and these same suppliers also function as logistics experts on call 24/7/365. Some even offer delivery tracking and paper management to their ever-growing service roster. Intensified research and development as well as sourcing efforts are almost a prerequisite synonymous with the industry.

Inevitably, these extra services come with a price tag. And as basic economic law goes, when cost goes up, profit takes a beating. On the supplier side, the strategy is always one of sacrificing short-term profit (which barely exists nowadays) for long-term returns. As one veteran puts it, "If I have 10 projects from one client and my finance people tell me that two are not even close to breaking even, I'm happy with that. Down the road, it's the relationship and potential business that counts." This win-some, lose-some philosophy is a mantra among Asian suppliers.

The client side, not surprisingly, advocates a less philosophical and more profit-oriented stance. Comparison shopping has long been used to locate the lowest manufacturing prices for the best quality money can buy. Armed with spreadsheets and backed by procurement deals that leverage on volume purchase, production personnel invariably demand special pricing and bulk discount. Talk of pricier fuel and the ensuing increase in freight rates usually fall on deaf ears. It's a close-minded stand, which is grudgingly accepted by suppliers.

To a certain degree, the stronger euro has had a positive impact. Many suppliers reported more queries and projects from Europe. However, this is not much of a godsend, as European publishers manufacturing in Asia are mostly selling to the U.S. Thus, prices are dictated by the target market and are automatically depressed to the same level as those offered by American publishers. Still, Europe is a largely unexplored market for most Asian suppliers, whose clientele is predominantly North American. As with any new market, opportunities abound.

Of Trends and Buzzwords

The overriding trend in the past five years has been shorter runs with frequent reprints. For publishers, this strategy reduces warehousing costs, frees cash and enables faster response to market changes and consumer demands. For suppliers, on the other hand, this calls for more complex project scheduling that requires extra vigilance in maximizing press utilization.

On the publishing front, money-making "eureka!" ideas are now largely based on repurposed archived materials, legacy or otherwise. Consider some of the evidence: coffee-table book publishers with their calendars, postcards and stationery items; elhi ones with activity kits and ancillaries; children's book publishers with board games, card games and puzzles; and inspirational/DIY types with titles for the gift section. The crossovers and spinoffs are myriad, mind-boggling and seemingly endless. On the whole, publishers are no longer content to play in their traditional fields because extending and repositioning their product lines is the way to positive bottom lines and to consumers' minds and wallets.

The shifting sands in the publishing world have prompted an operational swing on the supply chain, switching it from being productivity-driven to being innovation- and service-centered. Most suppliers welcome the change, as higher product values bring higher profit margins. Presently, secondary processes are the rage: flocking, glittering, spot UV, foil stamping or fancy die cutting. No part of a book, it seems, is exempt or considered off-limits. Giving an old title a makeover also heralds a revival of some sort. Witness the revamped Bible with its patchwork leather covers or battle-proof metal casing. Whatever the process, the idea is to differentiate a title from its nearby competition. And nothing does it better than the "plus" factor in book-plus. Consumers get books packed alongside ceramic bowls, crayons, rubber stamps, perfume bottles, color swatches, finger puppets or a plenitude of doodads. What's not to like? No marketing ploy works better than selling one item and giving away a freebie at the same time.

The proximity of Asian print manufacturers to cheap and abundant labor, especially in China, carries the day. Sourcing is made easy with their expert knowledge of the region, the players and the language. Unfortunately, cost isn't suspended in time, and a shortage of skilled labor is giving suppliers pause. With various regions in the vast mainland striving to catch up with the richer and more developed coastal areas, the labor market in China is positively cutthroat: poaching of skilled workers is common, and there are fewer scenes of job seekers queuing in front of Shenzhen factory buildings with a No Vacancy sign. Now, maintaining good employees means offering higher wages.

Mindful of this potential glitch in their hitherto well-oiled operations, major Hong Kong/China suppliers have arrived at a simple solution: automate. Basic functions previously performed by human assembly lines are being phased out. Nothing new here: industries typically evolve from being labor-intensive to being high-tech in order to bring about improved efficiency, speed and precision. What these suppliers are doing is equivalent to replacing a scribe with a suite of desktop publishing software.

License to Invest

Following Shanghai's All in Print exhibition in November 2003, Sino-foreign joint ventures are sprouting up everywhere on the mainland, with one urgent goal: a complete overhaul of the largely traditional printing industry with its obsolete machinery.

Agfa's $64-million Wuxi Imaging plant in Jiangsu Province, with an annual capacity of 25 million square meters of printing plates, will meet approximately 70% of the domestic demand. Also eyeing the digital printing plate market, which is expected to expand 20% annually over the next three years, is Creo. Partnering with Sichuan Juguang Printing Apparatus—one of the mainland's largest offset plate manufacturers—it has introduced a high-resolution thermal plate suitable for commercial long runs. Long-term, Creo hopes to convert the remaining 80% of China's printing companies into direct-to-plate devotees.

Of the 300-odd CtP systems installed in China since 2003, most went to newspaper and magazine printing facilities. Other commercial entities, except for those with Hong Kong management/ownership, are holding back on the investment. While most mainland printing companies have neither the capacity nor the money to invest in CtP technology, the influx of foreign investments will make it more affordable. The average plate price of $11 per square meter—compared to only $4 for the conventional type—is poised for a markdown. Meanwhile, CtF (computer-to-film)—the "in" thing—is flourishing.

At the same time, MAN Roland, the major contender in a primarily Heidelberg market, has unveiled its seventh sales office in the vast western hinterland, in Chengdu. Cleverly planned in accordance with Beijing's "go west" policy, MAN Roland's marketing strategy has netted top local newspaper and commercial printers. With printing material consumptionper person averaging less than half of the national average of $9.30, the rapidly expanding economy of Sichuan Province—earmarked for supergrowth by the central government—is becoming a focal point for most foreign investors.

In the south, print manufacturers are expanding their operations way beyond the Pearl River delta. Both Shanghai and Beijing are targeted by larger outfits eyeing a piece of the domestic market, especially in the packaging sector. The influx of investment and sudden surge in this sector over the past 12 months have the government scrambling to impose growth-limiting measures. For a start, the number of new packaging enterprises is capped at 10% annually. The book and periodical printing sector is also growing fast, which has spurred the government to step in early, setting the growth cap at 3%.

Looking Ahead

Recent statistics show that Guangdong's printing industry contributed over 55% to the national output, with foreign-invested companies—comprising only 5% of the total 20,000 operations—account for more than half of that figure. Preferential policies on land use rights and taxation are the major inducements to foreign investors heading toward the Middle Kingdom. Speculation about the possibility of the central government opening the printing sector even wider, allowing foreign ownership to exceed its present cap of 49%, is setting the stage for more M&As (mergers and acquisitions) and joint ventures. It will be interesting to see if North American players will jump onto the bandwagon to join lone ranger R.R. Donnelley, which has just made waves with its South China Printing take-over deal.

In view of the crowded marketplace and the rapid expansion in the industry, many observers fear the worst: that overcapacity and undercutting will soon rear their ugly heads. Looking at the present Hong Kong/China market, overcapacity is nowhere on the horizon. If anything, the flood of projects—from smaller and independent North American publishers and from Europe and Australasia—heading toward the mainland will necessitate additional capacity to cope with the demand. As for undercutting, it happens all the time (as in any other industry), but it is certainly not rampant. No savvy Asian suppliers would slice their price so deep that it hurts the bottom line.

PW's conclusion? The present Asian print manufacturing industry can be represented by one equation: keeping the best + improving the rest = a well and truly hooked publishing industry. It's obvious that its growth is bound for an upward trajectory for many years to come. Not bad for an industry that germinated from a collage of mostly father-and-son back-alley outfits.