Andy Lippman, Industry Analyst

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JapanInk Jet Media Briefing

• Andy Lippman, Industry Analyst

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Desktop Ink JetMedia Market
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Installed Base by Region

• Mature North American market to shrink
• Emerging markets in Asia Pacific and Latin
  America
• to spur growth
• EMEA to remain
• largest region
• for installations

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Media Use per Installation

• Lyra has three media segments specific to ink jet
• Ink jet coated paper
• Papers sold as coated premium, brochure, or
  presentation paper that range in weight from 90
  to 200 gsm
• Ink jet specialty media
• Transparencies, t-shirt transfers, greeting
  cards, postcards, photo cards, CD/DVD labels,
  decals, watercolor, canvas, and other unique
  media
• Does not include general-purpose labels
• Ink jet photo paper
• Matte, satin, and glossy coated papers intended
  for high-resolution photos ranges from 150 to
  300 gsm
• Includes photo papers sold together with ink
  (photo value pack)

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Media Use per Installation

• Only average photo paper use expected to grow
• Coated use to decrease
• Uncoated paper quality
• Price consciousness
• Color laser use
• Specialty use to fall
• On-demand
• specialty print
• services
• Lower demand for
• transparencies and
• CD/DVD labels

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Media Shipments by Type

• Plain paper expected to account for most growth
  in desktop ink jet pages

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Photo Paper Shipments and Revenue

• Photo paper shipments forecasted to increase 23
  percent between 2006 and 2011
• Volume growth offset
• by falling prices
• Revenue expected
• to stabilize and
• begin increasing
• in 2011

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Photo Print Volume Distribution

• Home photo printing is isolated to a select group
  of consumers
• Group A is differentiated
• by affinity for
• technology and
• life-stage
• Group A is not
• unique on the
• basis of age,
• income, or gender

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Where Chinese and AmericansPrint Digital Photos

• Digital photo printing is evolving differently in
  emerging markets

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Photo Paper Use per Installation

• Average photo paper use to remain highest in
  North American market
• Use expected to be
• flat in Asia Pacific
• region due to
• competing
• photofinishing
• services

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Photo Paper Shipments by Region

• North America and EMEA to retain about 70 percent
  of photo paper market by 2011

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Why Europeans Print Digital Photos

• Consumers have a wide-range of photo-print
  applications
• The most popular applications
• require high-grade
• photo paper and
• a range of sizes

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Photo Paper Shipments by Printer Size

• Snapshot photo-printer segment expected to
  capture only 6 percent of volumes by 2011
• Snapshot printer
• format limited its
• lack of versatility

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Photo Paper Shipments by Paper Size

• A/A4-size photo paper to remain the largest
  segment in terms of volume

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Photo Paper Pricing by Grade

• Photo paper pricing expected to drop quickly for
  all grades
• Much of better photo
• paper volumes will
• be A6 format

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Photo Paper Revenue by Grade

• Good photo paper revenue forecasted to shrink
  nearly 50 percent between 2006 and 2011

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Photo Paper Shipments by Coating

• Photo paper volumes to continue shifting to
  microporous coating technology
• Change due to
• Improved finishing
• capabilities
• Better ink
• longevity
• Universal
• compatibility

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Photo Paper Shipments by Package Type

• Photo value packs forecasted to represent 10
  percent of photo paper volume by 2011
• Consumer advantages
• Discount on supplies
• Matched ink and
• paper
• Estimated cost per
• photo
• OEM advantages
• Promotes branded
• ink and paper
• Ensures quality and
• reliability

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Desktop Photo Paper Market Share
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Chinese Ink Jet Photo Paper Manufacturing
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Mitsubishi Papers Post Phoenix Plan

• MPM has surpassed its 2005-2007 financial goals
  (called the Phoenix plan)
• Digital imaging paper sales to grow 33 percent
  between FY2005 (33 billion yen) and FY2007 (44
  billion yen)
• MPM to invest 10 billion yen by 2010 to increase
  IJ photo paper production by 10 percent
• Will expand RC paper facilities at Kitakami
  Hi-tec Paper and finishing at Kyoto factory
• Sales strategy will utilize Fujifilm alliance and
  expand volume of high-end products (Pictorico,
  Gekko, etc.)
• Will transfer German finishing operations to
  Poland
• Digital imaging paper sales forecasted reach
• 56 billion yen by FY2010

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Oji Paper Invests in Ilford Imaging

• Oji Paper acquires Ilford Imaging Switzerland in
  July 2005
• October 2006, Ilford Imaging announces Ojis 10
  million investment into Marly, Switzerland
  coating facility
• Complete solution from plantation to pulp to
  finishing
• Ojis profits suffering from price increases in
  fuel and raw materials
• FY sales for Oji other (includes Ilford)
  products expected to decline 7 percent between
  2006 (87 billion yen) and 2007 (82 billion yen)
• New ink jet products
• Galarie Smooth High Gloss
• Professional Inkjet Gloss FB AL with Baryta

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Felix Schoeller Restructuring

• In October, Fujifilm announced strategic
  partnership with Mitsubishi Paper Mills ending
  contract with Felix Schoeller
• Felix Schoeller supplied Fujis Tilburg,
  Netherlands finishing factory as well as Fuji
  sites in U.S.A and Japan
• Loss of business represents 35,000 tonnes and 40
  million Euros between October 2007 and April 2009
• Will terminate about 300 of 1,050 employees
• Reasons MPM products that Schoeller cannot offer
  and stronger Euro currency against the Japanese
  Yen
• Plan to rebuild paper machine to produce ink jet,
  thermal transfer, and décor papers

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ColorLok Technology Adoption

• ColorLok is a sizing agent that improves uncoated
  paper performance on ink- and toner-based devices
• Co-developed by HP and International Paper
• Enhancements more significant for ink jet
• Introduced in 2005 with only HP Everyday papers
• In 2007, HP announces it will offer ColorLok
• royalty-free to any paper mill
• As of January 2008, adoption includes
• OEMs - Kodak and Epson
• Paper manufacturers Domtar, Mondi,
• M-Real, and others

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PMA 2008 Highlights

• HP expands photo/fine art portfolio
• New A3 Photosmart Pro B8850
• New photo and fine art media varieties
• New retail photo products
• Polaroid Zink 149 instant photo printer unveiled
• Xerox to co-brand Epson Stylus Pro 7880 and 9880
• Noritsu D701 dye-based ink jet minilab for
• 4x6- to 10x36-inch prints
• Epsons Stylus Pro 11880 with TFP
• Kodak introduces of ESP 3 All-In-One
• for 129
• New photo paper sizes 5x7, 8x10

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Update on Memjet (as of Sept. 2007)

• Speaking with 16 potential clients including
  printer incumbents, PC vendors, and WW
  electronics brands
• New schedule
• Memjet A6 photo kiosk launch moved from Q4 2007
  to Q2 2008
• A4 desktop top priority by request of technology
  partners
• SMB, SOHO, and home recreation (in order of
  importance)
• Goal is a Q1 2009 introduction
• A6 home photo printer pushed back to second-half
  2009
• Memjet development ongoing
• Updated print head surface design
• Identified final photo ink set
• Optimizing print head manufacturing process
• Finalizing photo media selection

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The Three-Horse Aqueous RaceCanon, Epson, HP

• Canon, Epson, and HP are invested in aqueous ink
  jet despite shrinking installed base
• Second-tier players look elsewhere (ColorSpan,
  Kodak, Mimaki, Mutoh, Roland)
• In 2007, HP updated its aqueous wide-format
  product line
• Seven-year-old Designjet 5000 series replaced by
  Z6100
• 12-color Designjet Z3100 introduced for high-end
  photo and fine art applications
• In July 2007, Epson introduces new TFP
• print head - 2.6 times faster
• Canon has releases over ten new
• models in 2006 and 2007

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WF Aqueous Media Revenue by Type

• New and improved aqueous wide-format printers
  expected to push sales of roll media
• Most media types
• including WF
• photo paper
• to grow in
• revenue

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Looking to the Future
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Coated Laser Media

• Monochrome laser quickly replaced with color
  laser tech
• Color laser print quality improving chemical
  toner
• HP is leading the retail push for coated EP
  papers
• Heavyweight coated laser papers are becoming
  competitive with coated ink jet papers- price in
  particular

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Desktop Media Volumesby Imaging Technology

• Desktop color laser is capturing some pages from
  monochrome laser and ink jet devices
• In 2008, more pages
• to go through
• desktop color laser
• than ink jet segment

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Revenue for Coated IJ and EP Paper

• Digital color production and in-house marketing
  is increasing the demand for color
  electrophotographic media
• Coated ink jet paper
• revenue is declining
• due to slowing
• volume growth and
• decreasing prices

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HP Retail Photo Services

• HP is quickly implementing its retail ink jet
  plan in USA
• As of November 2007, HP has 792 retail partners
  in the United States
• 472 Photosmart Express Kiosks installed
• 385 Photosmart Studios installed
• Top U.S. channels for HP Express Kiosks are
• 85 percent grocery
• 15 percent drug
• Top U.S. channels for HP Studios are
• 40 percent mass-merchant
• 32 percent drug
• 18 percent photo specialty
• HP has not reported integration of Swiss
• company Silverwire (23,000 photo kiosk
• licenses in 30 countries acquired in June 2006)

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Other Retail Ink Jet Photo Developments

• Noritsu continues to update ink jet dry lab
  using Epson technology
• In Japan, Epson releases photo lab - Crystario
  EasyLab
• KIS-Photo Me to begin test marketing
  Memjet-enabled photo ink jet kiosk in Q2 2008
• Fujifilm predicted to develop ink jet minilab
  because
• Piezo head technology
• Fujifilm Dimatix (Spectra)
• Ink technology
• Fujifilm Imaging Colorants (Avecia)
• Alliance with paper manufacturer -
• Mitsubishi Paper Mills

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Questions?