TOKYO — When Ricoh and Toshiba announced plans Friday to combine production of printers, copiers and other office machines, they cited declining demand and the rise of remote work. But preventing the outflow of cutting-edge technology to China might have also factored in.
“The coronavirus changed the landscape,” Ricoh President and CEO Akira Oyama told a news conference here in a blunt assessment of the restructuring’s timing.
Ricoh expects the office machine market to continue shrinking even after COVID-19. It approached Toshiba Tec, a Toshiba subsidiary with the industry’s seventh-largest market share, about integrating production operations.
Ricoh and Toshiba Tec will own 85% and 15% of a joint venture to be formed in 2024 to integrate design and development. Parts and materials will be purchased jointly, and production bases will be shared.
“Sales are expected to decline in the medium to long term, but standardizing core parts for both companies will improve our cost structure,” said Hironobu Nishikori, president and CEO of Toshiba Tec.
Ricoh had a 15.2% share of the global market for A3 laser multifunction printers in 2022, second only to Canon’s 17.9%, according to U.S. market research firm International Data Corp. Ricoh and Toshiba Tec would have a combined 22.4% share, taking the top spot.
An office machine manufacturer’s competitiveness stems from how well it combines chemical, optical, machinery and communications technologies. The sector has become a specialty for Japanese makers including Canon, Konica Minolta and Fujifilm Business Innovation, which control roughly 80% of the global market.
But demand for printing has decreased with the global trend of digital transformation, and speculation of an eventual industry shakeout has long simmered.
Global shipments of copiers and multifunction printers totaled 4.06 million units in 2022 in member data tallied by the Japan Business Machine and Information System Industries Association — down 16% from five years earlier.
The pandemic-era spread of telecommuting further cut into demand for paper, and demand for office machines has plunged. Many workers have still not returned to the office even though the pandemic has largely receded, making a dramatic market recovery an unlikely prospect.
“It’s difficult to just cut costs on our own,” an executive at an office machine manufacturer said. Other companies, concerned about the shrinking demand, are rushing to cut costs through such steps as consolidating production bases. But they can do only so much by themselves.
Konica Minolta, which ranks third in the industry, has diversified into such areas as genetic testing but booked a huge impairment loss in the fiscal year ended this March, finishing with a group net loss of 103.1 billion yen ($744 million). With a need to improve profitability in its office machine business, restructuring with another company could be an option.
Fujifilm Holdings’ office machine subsidiary is set to renew a supply contract with Xerox in 2024. If the partnership crumbled, Fujifilm’s factory utilization rate could drop.
First-ranked Canon’s earnings are stable, thanks to production automation and in-house cost cuts. But as rival Ricoh moves to restructure, Canon will also be expected to boost its own competitiveness.
Ricoh and Toshiba plan to encourage others to join the new joint venture, which could become a home for spun-off office machine production operations as Japanese manufacturers restructure.
Asked about the possibility of participating with other companies, Oyama said Ricoh would first “develop core parts that other companies find attractive.”
One possible reason for the heightened momentum toward reorganization in the industry is a desire to prevent technology from leaking to China.
The Chinese government aims to have high-tech products produced domestically and is working to put in place regulations forcing foreign companies to transfer their technologies. Japanese companies would then have to design, develop and produce core parts in China, with office machines and their underlying tech as prime targets.
Companies including Ricoh, Konica Minolta, Canon and Seiko Epson have Chinese assembly plants and have produced key parts in Japan and other countries outside China. But de facto technology transfers are being forced on them.
“Core technologies such as printheads and device control engines are the source of our competitiveness,” an executive at a major office machine company said. “There is concern that the transfer of production to China will lead to technology outflows.” Efforts have begun at companies to rework supply chains around the globe.
To shift production from China to Japan, domestic cost-competitiveness will need to be improved. More companies may see restructuring with others as a solution in the future.