Global, European specialty tape markets & growth opportunities 2016 (AWA)

Overview:

• The worldwide tape market represents ~39.1 billion square metres (bsm) of tape materials produced annually, 12% or 5.1 bsm of which are specialty tapes
• The global specialty tape market had a growth CAGR of 5.1% from 2011 to 2014
• A primary shift of production from North America and Europe to the Asia geographic region is taking place 
• Although the Asian market will continue to drive global growth of the specialty tape market (but notably at a decelerating rate), Europe, which has seen moderate growth, is expected to see slightly higher growth in the future
• With a 22% share of the global market, Europe’s specialty tape market is growing more dynamically than its economy
• The automotive segment saw the highest CAGR growth worldwide at 7.9%, and it is expected to continue through 2019 at a slightly lower rate of 7%
• Asia’s growth in percentage of the total automotive market will continue to increase compared to the more mature markets of North America and Europe
• In addition to automotive, the white goods, electronics, medical and hygiene segments also offer opportunities for growth
• New and improved high-performance characteristics of tapes as well as adhesive developments will continue to drive the specialty tape market
• Growth in the automotive industry, increased construction and renovations in the developing world, and growth of the world population and disposable income are a few of the factors creating growth opportunities within the specialty tape market.

View the complete slide presentation (members only)

Afera's Marseille conference presentation series

At Afera’s Annual Conference in Marseille, Corey Reardon shared the preliminary results of AWA’s extensive research into the specialty tape market worldwide over the last year. President and CEO of AWA Alexander Watson Associates since acquiring the business in 1999, Mr. Reardon has 30 years of experience in the pressure sensitive and materials industry, having worked in product management, marketing and business development in companies such as Loparex and Avery Dennison.

AWA’s Global Specialty Pressure Sensitive Tape Market Study 2016 highlights the specialty PSA market, which makes up 12% of the total tape market worldwide or 5.1 billion square metres (bsm). To an audience of roughly half adhesive tape raw materials suppliers and half manufacturers and converters, Mr. Reardon highlighted the market characteristics, growth trends, opportunities and challenges of the specialty tape market. He then offered some recommendations and warnings to those investing and operating in the market.

The bottom line: There is a primary shift in production of pressure sensitive specialty tapes from North America and Europe to Asia, although its markets are less homogenous. With a 22% share of the global market, Europe’s specialty tape market is growing more dynamically than its economy. Geographical and application segment growth opportunities for specialty tape markets are present in both Asia and Europe in automotive, white goods, electronics, medical and hygiene.

Methodology

AWA conducted a large market research project to update and publish its global specialty tape study in Q1 2016. Maintaining its databases on an ongoing basis, AWA collects both primary and secondary data not only in the specialty tape segment but in the adhesive technology and release liner segments and other areas within the value chain that are related to specialty tapes. AWA measures market size and analyses growth trends through conducting a broad base of interviews and surveys across the value chain and various geographies.

The global tape market and specialty tapes

As of 2015, the global tape market represents approximately 39.1 billion square metres of tapes produced. The total tape market can be split into key groups of allocation segments: packaging tape representing 67%, masking tapes 8%, consumer and office products tapes 11%, and specialty tapes 12% of total tapes produced on a global basis. “Specialty tapes” include a wide range of specialised tape constructions for a wide range of applications, often featuring a customised solution. In measuring the market, AWA analyses each stage of the chain, mainly focussing on the centre where materials are coated and converted.

Specialty tape production breakdown by region

In 2014, the global market size for specialty tapes was approximately 5.1 billion square metres. The regional shares of the specialty tape market: Europe 22%, North America 26%, Asia 43%, South America 5%, and Africa & Middle East 4%. These shares differed in 2011 when AWA published its last global study assessing market size and characteristics. What is revealing is a primary shift in production from North America and Europe to the Asia geographic region. Asia, which was 39% of the total market in 2011, now represents 43% and will continue to increase to 48% of the total market by 2019.

Unlike Europe to a certain extent and North America even more, the Asian market does not display homogenous growth characteristics. The Japanese, Korean and Australian markets are more mature in their growth characteristics compared to those of China and India, which are classified as more emerging. The Southeast Asian market lies somewhere in between.

Regional growth trends

The above illustrates the macro trend in regional shift in the global tape market: Over the past few years, Asian market growth has driven global growth and will continue to do so in the coming years but notably at a decelerating rate. Europe, which has seen moderate growth, is expected to see slightly higher growth in the future. North America is expected to grow in line with GDP, while South American and Africa & Middle East continue to be fairly steady, growing from very small bases.

Specialty tape market breakdown by application segment

Growth and opportunities can be seen from another perspective when looking at the various application segments of tapes. Mr. Reardon noted that there are many different ways to segment and subsegment a market. In conducting their market research at AWA, they have broken down the global specialty tape market into the following main end-use applications: aerospace, automotive, building & construction, defence & military, electrical, electronics, hygiene, medical, miscellaneous, paper & printing, retail & graphics, sports & entertainment, and white goods.

Electronic and medical each represent 15% of the total market worldwide, automotive and electrical each 13%, and white goods and hygiene each 12% and 11%.

Segment growth trends

From 2011 to 2014, overall global growth for the market was 5.1%. The automotive segment saw high CAGR growth at 7.9%. Other segments which saw good growth included white goods at 7.3%, hygiene at 5.5%, aerospace at 5.4%, and electronics at 5.2%. CAGR growth rates for the same period in other segments included building & construction at 3.5%, defence & military at -0.3%, electrical at 4.6%, medical at 5%, paper & printing at 1.3%, retail and graphics at 2.3%, and sports & entertainment at 2%.

Looking ahead, CAGR from 2014-2019 is expected at ~4.7%. The highest growth is expected again in the automotive segment at 7%, softening from its previous 7.9%. Other segments with above average growth rates will include white goods at 5.6%, electronics at 5.3%, medical at 5.1% and hygiene at 4.8% respectively. CAGR growth rates for the same period in other segments is forecast for the aerospace industry at 3.7%, building & construction at 2.5%, defence & military at 3%, electrical at 4.6%, paper & printing declining at 1.2%, retail and graphics at 3.4%, and sports and entertainment at 2.3%.

Segment growth drivers

What has been fundamentally driving growth and will over the next few years? According to Mr. Reardon, it’s actually quite simple. Advanced, specialty tapes offer functionalities that allow tapes to be used in areas where they were not used before. The functionalities of new applications (and their growth) are driven by adhesive developments. Adhesive solutions that are formulated to deliver performance in extreme conditions, such as low and high temperatures and humidity, will offer new opportunities for growth in tapes.

Automotive

The automotive segment is one of the largest and fastest growth segments within the specialty tape market, representing 13% of the global market and expected to increase to 15% by 2019. In Europe, the automotive market represents 21% of the global specialty tape market and is growing at the forecast 1-2%. North America represents 25% of the tape market for automotive applications and is expected to grow ~6-8%, while the Asia Pacific region represents 47% of the market and is expected to grow ~12-14% over the period to 2019. This is dramatic growth, and, as you will see in this segment as well as others, Asia’s growth in percentage of the total market will continue to increase compared to the more mature markets of North America and Europe.

Growth in the automotive industry will continue despite economic uncertainties in the Eurozone. There are even prospects of growth in Russia and China in this sector. Lower fuel prices, relatively low average age of cars in Europe (~13 years), and new car trends such as smaller city cars and eco-friendlier cars are factors also driving growth. Security requirements and quality and environmental issues are evolving and increasingly influencing the sector. The growing foci on lightweighting and hybrid and electric vehicles will boost demand for specialty tapes in this segment.

Across the globe, volumes of specialty pressure sensitive tape used in automotive manufacture have increased. Specialty pressure sensitive tapes are replacing traditional methods of fastening, saving time, money and weight. Asia – especially China – is gradually moving from a position of follower of new technologies to one of technology developer. This especially applies in electronics. Mr. Reardon quoted one expert at tesa: “In the future, as new functions for adhesive tapes in automotive are developed, they will take over functions and tasks that are beyond the traditional role of sticking things together.”

The production of acrylic foam tapes, which provide bonding strength to metal and plastic more than any other technology in the automotive sector, continues to grow. Foam tapes with acrylic and/or rubber adhesives are a key driver for application of specialty tapes in the automotive industry.

White goods

In 2014, the market size for specialty pressure sensitive tapes in the white goods segment represented about 655 million square metres (msm) of tapes. White goods make up a 12% share of the global specialty tape market, Asia 67%. From 2014 to 2019, growth in the various regions included Europe at 1.3%, North America at 2.8%, Latin America at 3%, and Asia at two-to-three times Western geographies at 7%.

Major applications driving growth in the white goods sector include tapes for trim and graphics mock-ups, sound deadening, wire harnessing and protection in heating elements. Pressure sensitive tapes also provide benefits such as highly specified product characteristics for UL, CSE, CSA, TUV and other approvals, as well as low toxicity and flame retardancy.

A growth driver of the white goods segment is the push to design lighter, more energy-efficient products. Internal growth in Asia is being driven by increases in disposable income, and Asia has become home to the leading manufacturers of white goods. This is due to increasing internal demand in Asia, particularly China, and exports to Europe and North America from manufacturing sites in Asia.

Growth drivers in specialty pressure sensitive tapes include tapes designed to improve the operational efficiency of white goods. Some examples: moisture control and vibration minimisation, metal-to-glass bonding and aluminium shielding to help to contain heat in washer and dryer units.

Electronics

The worldwide electronics market is 837 msm in size and represents 15% of the global specialty tape market. This is expected to increase to 16% by 2019. Growth in the tape market for electronic products continues to be dynamic, and AWA expects CAGR of 5.3% on a global basis over the period from 2014 to 2019. Used in the manufacture of micro-electronics and electrics assembly, tape products for electronics have one of the highest technology demands of any market.

Major applications for growth in the electronics market include mobile phone; disk drives, seals and gaskets; semiconductor manufacturing; and PCB fabrication. Growth could be offset by the evolution of electronics components into smaller sizes and hence using fewer tapes. The net gain, however, is based on the growth of electronics, not the downsizing of microelectronics.

The main growth drivers of the electronics market are socio-economic developments including growth of disposable income, particularly in the developing and emerging markets. This is especially true in Asia, and AWA anticipates that it will become true in South America over the next five years.

The fact that specialty pressure sensitive adhesive tapes are widely used in electronic components and assembly will continue to drive growth, and new opportunities are only increasing. The replacement of more traditional forms of fastening, as well as developments and innovation in tapes materials and constructions, provide for growth. Adhesive technology used in the electronics segment is highly specialised and continues to help drive application growth in the electronics market. Tapes used in electronic equipment are high performance tapes with heat resistant, insulative and/or weather resistant properties among others.

Medical

What is interesting about the medical segment is that it is a bit less concentrated in Asia than the above segments, with only 31% of medical specialty tapes produced concentrated in the Asia Pacific region. The breakdown of the market over the rest of the regions includes Europe with 26%, North America with 28%, Asia with 6%, and Africa & Middle East with 9%.

The medical segment makes up 15% of the specialty tape market worldwide, and it is expected to grow to 16% by 2019. Growth in Europe is expected to be 4% through 2019, 4% in North America, 6% in South America, 7% in Asia, and 4% in Middle East and Africa.

Overall global production and population increases are linked. Growth and penetration of products in the medical market in developing countries, along with growth in disposable income, is driving the market for medical specialty tapes. The aging global population is also a key driver for growth in the medical tape segment. The number of people aged over 60 will grow by 25% to reach over one billion by 2019. Improved healthcare systems and growth of western welfare diseases will also drive the market.

Growth in specialty pressure sensitive adhesive tapes is also being driven by adhesive-based wound care products, drug delivery systems and pressure sensitive diagnostic tapes, which will continue to be the fastest-growing applications for specialty medical tapes. As new functionalities are in place, new applications within the segments appear. For example, for wounds: Skin friendly medical tapes or surgical tapes that are equipped with gel adhesive, or heat-activated diagnostic tapes, are areas of potential growth.

Hygiene

The hygiene segment represents 11% of the total market for specialty pressure sensitive adhesive tape worldwide and is closely related to the medical market in growth drivers. In terms of regional breakdown, Europe has 28% of the market, North America 17%, Latin America 15%, and Asia Pacific 38%. Here again, there is a lower concentration of hygiene tape production in Asia than in North America and Europe, but this will change as demographic trends favour growth in the Asia Pacific region.

Specialty tapes used within this segment become component parts within the final consumer hygiene product and are hence driven by the market demand for those products. They create closure and fastening mechanisms that are unlikely to be replaced with any other technology. Future growth therefore relies on the level of penetration of the finished disposable products within each country and its demographics.

Opportunities and challenges

After reviewing market characteristics and growth trends and highlighting demand drivers, Mr. Reardon focussed “outside in and inside out” on the key segments to identify some of the opportunities and challenges in the specialty tape market.

Opportunities:

1. Keeping it specialised: The best opportunity in the specialty tape market is adding value wherever it can be added, whether to adhesive technology or incorporation of functional characteristics into the product itself.
2. The growth of the automotive industry: Growth in the automotive industry will be driven by economic growth, lower fuel prices, low average age of cars and new car trends.
3. Construction activity in developing countries: Brazil, for example, has seen construction growth increase by 10%, and especially in glass facades in which tapes are used.
4. Building renovations in developed countries: This activity is driving growth.
5. Growth in aviation: Growth in the aviation segment continues to be attractive.
6. The reshoring of manufacturing back to the U.S. and Mexico: This is also driving increased use of tapes in North America.
7. Growth in air traffic: This is driving the growth of the commercial aerospace industry.
8. Socio-economic development, including the growth of disposable income: This is a main driver of consumer electronics and will drive growth especially in developing and emerging markets in Asia and South America.
9. Growth in hygiene and medical markets: Both of these markets will be driven by population growth, penetration of hygiene products into developing countries, growth of disposable income, aging population, improved healthcare systems and growth of western welfare diseases in developing countries. Adhesives and application innovations will expand the medical segment over the next five years.

Challenges:

1. Regional differences in what drives the market: The growth of emerging markets outstrips that of developed markets. Asia will continue to grow in terms of volume base percentage compared to North America and Europe.
   The global middle class will expand. There will be over one billion additional middle class consumers in the world by the end of 2019, and 85% of those will be in the Asia Pacific region. Asia will have a significant share (70%) of market growth in the coming years. Growth in Asia is especially in electronics, although tapes markets are growing in all segments.
2. Supply chain trends: Supply chain volatility in terms of costs driven by concentration and fewer suppliers and natural resources shortages. Globalisation but also specialisation triggers the volatility of prices too. Markets are becoming more regionalised in that tape materials are manufactured and converted regionally. The importance of regional markets will continue to be a challenge for producers wherever you are on the globe.
3. Adhesives: Solvents have been predicted to decline as water-based and hot melt are growing. This decline has not happened yet because there are so many constant developments and requirements for high-performance adhesives that only solvent technology can prevail. This means that although water-based tapes with performance requirements are not so high and hot melt tapes have grown, solvent tapes have maintained their share mainly because the need for high-performance adhesives has grown in the specialty tape market, particularly in Asia but in North America and Europe as well.

We also see a certain polarisation in the market: on one hand, price-driven, low-demanding applications of tapes, and on the other hand, high-technology, demanding applications in which new adhesive and tape solutions are developed to be used where tapes have not been used before.

What should tape companies do?

Mr. Reardon emphasised that tape companies should focus on the following areas for success:

1. Globalise: Look for business outside your own region.
2. Embrace technological development: Not only in adhesives but in other material components. In today’s world, R&D can be conducted anywhere, and the key is to understand the market and what segments and products innovation needs to be focussed on. Opportunities in the medical market lie in Europe, as well as Asia and North America. These attractive growth opportunities determine where R&D should be focussed.
3. Move with continued growth in the automotive segment: Future growth will be spread more evenly across the regions. Other segments highlighted above, such as medical and electronics, are also seeing above-average growth and are still relatively attractive on a global basis.

Watch out for:

1. Fluctuation of raw materials costs and supply.
2. Quality issues in Asia: Quality is improving but still not on par with North America and Europe.
3. Cost and productivity issues: Particularly in Europe.
4. Finding and maintaining a skilled workforce: This will become difficult in the future.

Learn more

More information about the AWA Global Specialty Pressure Sensitive Tape Market Study 2016 is available in the prospectus. Afera Members receive a 20% discount on the regular prices for single and corporate user licenses of the report

About Corey Reardon

Corey Reardon is President and CEO of AWA Alexander Watson Associates since acquiring the business in 1999. He began his career nearly 30 years ago with Loparex (then HP Smith and Rexam Release, where he held a number of positions in product management, marketing and business development). He then joined Avery Dennison as Marketing Director for Europe until he acquired AWA.

Questions and comments?

Corey Reardon
President and CEO
AWA Alexander Watson Associates
c.reardon@awa-bv.com
www.awa-bv.com
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