THE RISE OF THE NEW-BUILT REMANUFACTURED CARTRIDGES

[Anonymous]

THE RISE OF THE NEW-BUILT REMANUFACTURED CARTRIDGES

Two Categories of Aftermarket Toner Cartridges Gaining Traction

This toner refill kit does not come with a hole-making tool, but promises to take only 10 minutes and save users up to $300

Normally, we divide toner cartridges into four categories: original equipment manufacturer (OEM), remanufactured (reman), compatible, and, unfortunately, counterfeit. There are two other categories that go largely unnoticed, however—toner refill kits and so-called new-build remans. Refilling kits have been around for years. Such kits tend to be popular mainly in emerging markets, but lately they are catching on in more mature markets. The other overlooked category, new-build remans (also known as “new plastic,” “new mold,” or “remanufactured/compatible” cartridges), are brand-new compatible cartridges that are marketed as remanufactured. While the popularity of refill kits will always be limited to do-it-yourselfers, new-build remans have a huge impact on the imaging supplies industry. Such products take away share from both OEMs and remanufacturers. The growing availability of new-builds has also triggered legal actions by OEMs—and we expect to see more lawsuits in the future.

Return to Recharging

Refill kits represent only a small portion of the current market but are gaining share. Kit users employ simple but relatively inefficient techniques used by the industry’s old-school “drill-and-fill shops.” In the 1980s, desktop printer manufacturers combined toner and OPC drum in the same package, embracing engine designs that featured integrated toner cartridges. In no time, so-called rechargers began collecting spent integrated cartridges and refilling them using fairly crude methods. Using a drill or a tool with a hot tip like a soldering iron, rechargers would puncture a hole into a spent cartridge and refill it with toner. The hole would be filled with some sort of a plug, and the refilled cartridge could be used again. This, of course, ignored wear or damage to the OPC, the degradation of other components, and, especially, overflowing of the waste hopper.

This toner refill kit comes with more equipment than its sibling shown above

Refilling a toner cartridge with a kit is nevertheless based on this technique. Most kits come complete with a bottle of toner plus a funnel cap, gloves, seal, and illustrated instructions. Some even come with a soldering iron. Toner refill kits are popular with price-sensitive consumers in countries such as China, and they are widely available in emerging markets. Now they are gaining traction with certain frugal laser printer owners, especially people who are more technically inclined, in more established markets. Toner refill kits are priced at roughly half the price of a compatible cartridge and often around 10 percent of that of a new OEM product.

Drilling and filling cartridges leaves a lot to be desired. It can be a messy process, and the reliability and print quality of refilled cartridges are not very good. Because the OPC drum and other critical components are used repeatedly, image quality suffers degradation each time a cartridge is refilled. And simply filling a depleted cartridge with toner typically results in only a fraction of the original yield. A poor-fitting plug or overflow of the waste hopper can lead to an annoying and potentially printer-damaging tendency to leak toner inside the device. Drill-and-fill shops went the way of the buffalo in the 1990s as the remanufacturing industry flourished. It appears, however, that certain users in the 21^st century are employing the old drill-and-fill techniques of yesteryear to save on toner cartridge replacement costs.

Rise of the New-Built Remans

Compatible integrated toner cartridges are certainly not new to the market. They first appeared in the 1990s. Thanks to cross-licensing agreements with Canon way back when, both Xerox and Lexmark built legitimate, new HP compatibles for a time. The licenses didn’t apply to newer patents used in newer cartridges, however, and eventually both firms abandoned the compatibles market, leaving it primarily to the dominant player in the space, GCC (formerly The Green Cartridge Company) of Shenzhen, China. (Xerox still markets remanufactured toner cartridges for Brother, HP, and Lexmark laser printers and MFPs.) Hiring a small army of patent experts, GCC invested heavily to reverse-engineer older integrated cartridges and claimed its compatibles did not infringe any OEM patents.

For a time, compatibles toner SKUs showed some promise of being an attractive alternative to new OEM products and remanufactured cartridges. Early in the last decade, compatibles started to enjoy wider distribution and eventually gained shelf space at some of the big box retailers. GCC achieved a high degree of legitimacy in the market, and rumor had it that the firm supplied Staples with its line of store-branded HP compatibles. Then, a spate of unconnected legal actions related to third-party inkjet products cooled the ardor of many retailers for non-OEM products, especially compatibles. Staples also made the strategic decision to strengthen its alliance with a key supplier, HP. As part of a deal with the printer OEM, the office superstore stopped selling Staples-branded HP remans and compatibles altogether at its retail stores (see “Will Staples Carry HP Remans Again?”). Not longer after, GCC went bankrupt after suffering the double whammy of losing its huge office superstore client and being forced to settle a long-running and costly patent-infringement suit filed by Canon. At about that time, compatibles all but disappeared from major channels in Western markets.

Why retailers abandoned the market is no mystery. Integrated cartridges, featuring imaging technology and toner in one package, are incredibly complex. Often, they employ breakthrough inventions from a diverse range of technologies including electronics, chemistry, mechanics, optics, and more. OEMs invest billions of dollars to bring increasingly technically advanced cartridges to market. To protect their investments, OEMs patent their cartridges to the hilt. Third-party manufacturers often find it is impossible to work around all the various patents. As a result, most compatible integrated toner cartridges infringe at least one patent issued for the original design. Regardless of their efforts to avoid violating intellectual property, companies that bring new new-build cartridges to market risk legal actions—as do their channel partners. Even worse, many newly built cartridges sold today are falsely promoted as remanufactured when not a single part in the cartridge has been reused or recycled. Manufacturers and distributors alike can face serious legal trouble and huge fines if it is proven that they attempted to deceive consumers by selling a new-build product as remanufactured.

In recent years, OEMs have become aggressive in their pursuit of third-party supplies vendors, including legitimate remanufacturers and makers of new-build cartridges, whether they advertise their products as compatible or remanufactured. As readers of this website well know, Canon and Lexmark have filed actions with the U.S. International Trade Commission (ITC) and with federal district courts claiming patent infringement by third-party toner cartridge manufacturers, importers, distributors, and dealers. (For our latest coverage of the Lexmark case, see “ITC Finds Jahwa Respondents in Default in Lexmark Toner Cartridge Complaint.” For our latest coverage of the Canon lawsuit, see “Having Finalized Settlement Agreement, Canon and Ninestar Move to Terminate ITC Investigation.”) While these lawsuits did not exclusively target new-build remans, we see these legal actions as a sign of things to come. We have also heard that Samsung has taken steps toward initiating lawsuits by sending cease-and-desist notices to certain third-party firms alleged to be trafficking in infringing compatibles and/or new-build remans.

Adverse Market Impact
The U.S. market has become inundated with new-build cartridges that are sold as remans. They have wrought havoc on both the OEM and aftermarket toner cartridge business. New, compatible toner cartridges are available for a fraction of the price of the equivalent OEM product and a quarter or less of the price of a remanufactured cartridge. To make matters worse, “new plastic” products are readily available from popular supplies dealers and various web retailers.  Amazon.com seems to offer an endless variety, for example.  

To understand how difficult it is to compete with new-build cartridges, consider the following. We have heard from various sources that certain manufacturers currently offer a new-build HP 12A (Q2612A) monochrome toner cartridge at a wholesale price of around $7.50, which is less than one-tenth the OEM retail price of $77.99. On Alibaba.com, we found Photomaster-branded HP 12A compatibles selling for between $8.40 and $10.70. More interesting was the so-called remanufactured HP 12A we found selling on Amazon. A package of three sold for $41 plus shipping, just $13.67 each, and Amazon had individual “remanufactured” cartridges for $20.99 apiece. AwesomeToner offers refurbished 12As for $12.50 each plus $5.99 shipping and handling. The lowest price found for a compatible HP Q2612A on Amazon was $9.15 (plus $5.99 shipping) from TonerQueen. Also available at Amazon are compatible 12A cartridges from Blue Image and Cartridge Express, which offered their SKUs for $9.39 and $10.70, respectively.

This three-pack of “remanufactured” HP Q612A toner cartridges sells for $41.01 and is available with free shipping for those who don’t need a replacement immediately. In our estimation, these are probably new-build cartridges.

The pricing structure with new plastic is so out of whack, it is impossible for legitimate firms to compete. Although we did not actually order the products, we are all but certain they are new-build because of their incredibly low price tags. The cost of producing a new plastic cartridge is far less than that of remanufacturing a cartridge. The main reason for the imbalance is that compatible manufacturers do not face the costs associated with the remanufacturer’s most pricey raw material—the empty core. The price of a virgin empty 12A in North America is between $3.50 and $4.50. It would be impossible to purchase this empty, remanufacture it, and make any margin by selling it for $7.50 to $8.50. Compatible makers invest once in reverse-engineering a cartridge and fabricating a mold. After that, they are free to mass-produce thousands of empties cores for pennies apiece.

The HP Q2612A is not the only example of new-build remans currently available. We found plenty of other deals that were too good to be true online. Searching on other popular cartridges at Amazon.com, we found what appear to be compatibles for the HP CB435A and CB436A. Prior to our online activity, sources told us that HP 35A and 36A compatibles were available at a wholesale price of between $11 and $12. Again, such a low price for a finished cartridge is suspicious because the empties sell for between $8 and $10. At Amazon.com, we found that Inkers offered a CB435A cartridge for $15.98, and Greattoners had the CB435A for $15.05.

The above are only a few examples of cartridges available at Amazon.com with jaw-dropping price tags. There are plenty more. And consumers seem to like them. Similar to other online retailers, Amazon encourages users to rate and review the products that they purchase. Perusing a random selection of compatible cartridges, we learned that most compatible customers are well-satisfied, although a few complained of low yields.  There is no wonder that compatible manufacturers are having such a big impact on the industry given that these extremely low-priced products apparently work well.

We expect to be writing more about the toner supplies market’s two seldom-mentioned categories—new-build remans and toner cartridge refill kits. The kits, of course, will never have much impact on the overall market. But, we think those consumers who successfully fill a cartridge once or twice will probably opt to refill rather than purchase other remanufactured or OEM cartridges because the savings are so big. As far as the new-build cartridges are concerned, we expect to hear much more about these products in the future. The OEMs have demonstrated some concern, and this concern is bound to grow as new-build cartridges continue to flood the market. Just like OEMs such as Epson set out to rid the world of infringing compatible inkjet supplies five years ago, we expect hardware manufacturers will clean up the market of infringing compatible toner cartridges. In fact, they have already started.

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April 13, 2011 at 10:23 AM