Fuji Xerox, the biggest supplier of multifunction office printers and document management systems in Asia Pacific, plans to launch its “cloud” business in mainland China’s major cities later this year, as the company starts to sharpen its focus on more sophisticated products and services in the world’s second-largest economy.
The Tokyo-based company is also looking to enter the mainland’s fast-growing market for 3D printers, according to Fuji Xerox executive vice-president Masataka Jo, who is also president of the firm’s Greater China operations.
“What we are trying to do is create a sustainable business model in China by enhancing our solutions development capability there,” Jo said in an interview. “So our strategy will increasingly focus on the higher end of the market.”
In November, Hong Kong became one of the first markets outside of Japan where Fuji Xerox launched its new cloud services package known as “Smart Work Gateway”.
Cloud services enable companies to buy, lease or sell software and other digital resources online, just like electricity from a power grid. These operations are hosted and managed in so-called data centres.
The Fuji Xerox package combines a new “smart” multifunction device with technical support, apps-based automated document workflow and XpressGateway, an online hub that allows users to upload content to multiple cloud storage services – including Box, Google Drive and Dropbox – and print directly from those sites.
“Hong Kong is one of the most profitable markets for Fuji Xerox as more than 50 per cent of its revenue now come from services,” Jo said.
He pointed out that introducing Fuji Xerox cloud services on the mainland may require the firm to engage with a local third-party service provider, such as Alibaba Cloud, China Telecom or Neusoft Corp. Alibaba Cloud is a subsidiary of New York-listed Alibaba Group, which owns the South China Morning Post.
According to a Forrester Research report, the largest public cloud platforms on the mainland as of the fourth quarter of 2016 were Alibaba Cloud, Amazon Web Services, Tencent Holdings and Microsoft.
“As a foreign company, we may need a data centre located in China to provide local cloud services,” Jo said. “Hopefully, we can start in the second half of 2017.”
He indicated that initial Fuji Xerox cloud operations on the mainland are currently targeted at Beijing, Shanghai, Tianjin, Guangzhou and Shenzhen.
“The majority of our sophisticated business solutions are in demand at those major cities,” he said. Other cities with rising demand for such solutions are Chengdu, Hangzhou and Chongqing, he added.
Fuji Xerox, a joint venture 75 per cent owned by Fujifilm Holdings and 25 per cent by United States-based Xerox Corp, has invested an estimated US$150 million in China since it started doing business in Shanghai in 1987.
As Fujifilm’s documents solutions subsidiary, Fuji Xerox contributed 47 per cent of its parent’s ¥2.49 trillion (HK$165.98 billion) revenue in its fiscal year ended March 31.
The company’s Greater China operations cover the mainland and Hong Kong, where it has almost 15,000 total staff. Sales in the year to March reached ¥100 billion.
Manufacturing operations in Shenzhen, Shanghai and Suzhou provide 80 per cent of all products shipped by Fuji Xerox worldwide. It also has a software development centre in Shanghai, and currently has direct sales and services in more than 30 cities.
“China is 26 times bigger than Japan, so we also have to develop an elaborate channel strategy for this market,” Jo said.
China is 26 times bigger than Japan, so we also have to develop an elaborate channel strategy for this market
Masataka Jo, executive vice president, Fuji Xerox
He said the next challenge for Fuji Xerox would be entering the country’s nascent 3D printer segment, which has fuelled increased design prototyping and printing of customised products.
Research firm IDC said the mainland was already the fastest-growing market for 3D printers, with total shipments forecast to reach 440,000 units by 2020 from about 77,000 in 2015.
In 2015 the Chinese government identified 3D printing as a major aspect of the country’s “Made in China 2025” industrial transformation plan, according to IDC.
However, existing 3D printing data formats have certain limitations, such as being unable to produce objects with a complicated internal structure with multiple materials.
That has prompted Fuji Xerox and researchers at Keio University in Japan to jointly formulate a new printing data format that can retain an object’s multiple 3D information, including colours, materials and internal structures. The format’s specification was released online in July.
Jo said Fuji Xerox intends to forge strategic partnerships to enter the 3D printer segment, in which US firms control most of the intellectual property. “I don’t think we can do everything ourselves initially,” he said.
While its cloud services and 3D printer initiatives are pushed forward, Fuji Xerox expects to further grow its existing printer business on the mainland.
In terms of A3 multifunction office printers, the company has been the market leader in China in recent years.
“We had an overall market share of 19 per cent in 2015, and expect to record more than 20 per cent share in 2016,” said Jo, citing IDC data and the company’s own estimates.
One of the unique features of the printer industry in China is that there is huge demand in the very low end of the market
Masataka Jo, executive vice president, Fuji Xerox
He estimated that more than seven million units of office printers and multifunction devices, large-format production systems, and low-end desktop printers were sold on the mainland in 2015.
HP, meanwhile, had an estimated market share of nearly 50 per cent in China’s vast, but highly price-sensitive consumer desktop printer segment.
“One of the unique features of the printer industry in China is that there is huge demand in the very low end of the market,” Jo said. “But I don’t think all vendors are making money there.”
“In the next five years, we expect other vendors to gradually move away from the very low end of the market,” he added.
During the discount-friendly Singles’ Day online shopping festival in China, IDC estimated that HP sold 136,054 consumer desktop printers through Alibaba’s Tmall, JD.com and other online retail sites to account for more than 57 per cent of printer sales on November 11.
Fuji Xerox sold 12,508 consumer desktop printers on the same day, behind Canon’s 51,598 units and Epson’s 23,275.