Pianos: Economic and Competitive Conditions Affecting the U.S. Industry Investigation No. 332-401 Publication 3196 May 1999 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov U.S. International Trade Commission COMMISSIONERS Lynn M. Bragg, Chairman Marcia E. Miller, Vice Chairman Carol T. Crawford Jennifer A. Hillman Stephen Koplan Thelma Askey Robert A. Rogowsky Director of Operations Vern Simpson Director of Industries This report was prepared principally by: Project Team David Lundy, Project Leader David Dominique Peter Pogany Carl Seastrum Ralph Watkins Primary Reviewers Gerry Benedick John Davitt Danielle Kriz With assistance from: Sharon Greenfield, Justin Jee, Harpreet Kaur Under the direction of: Ralph Watkins, Chief Miscellaneous Manufactures Branch Larry Brookhart, Chief Minerals, Metals, Machinery, and Miscellaneous Manufactures Division Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 www.usitc.gov U.S. International Trade Commission Washington, DC Pianos: Economic and Competitive Conditions Affecting the U.S. Industry Investigation No. 332-401 Publication 3196 May 1999 ITC READER SATISFACTION SURVEY Pianos: Economic and Competitive Conditions Affecting the U.S. Industry The U.S. International Trade Commission (ITC) is interested in your voluntary comments (burden < 15 minutes) to help us assess the value and quality of our reports, and to assist us in improving future products. 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WASHINGTON, DC 20277–2840 ATTN: OFFICE OF INDUSTRIES Pianos: Economic Conditions ABSTRACT On December 4, 1998, at the request of the Committee on Ways and Means, U.S. House of Representatives, the U.S. International Trade Commission instituted investigation No. 332-401, Pianos: Economic and Competitive Conditions Affecting the U.S. Industry, under section 332(g) of the Tariff Act of 1930 (19 U.S.C. 1332(g)). As requested by the Committee, the Commission’s report is a factfinding investigation of the current conditions affecting the domestic piano industry, and it includes the following: an overview of the global market; a profile of the U.S. piano industry; profiles of leading manufacturers in Japan, Korea, China, and Indonesia; and a comparison of the competitive strengths and weaknesses of U.S. and foreign producers. Public notice of this investigation was posted in the Office of the Secretary, U.S. International Trade Commission, Washington, DC 20436 and published in the Federal Register (63 F.R. 69305). A public hearing regarding this investigation was held on February 17, 1999, in Washington, DC. The products of interest to the Committee are acoustic pianos, which are designated as vertical and grand pianos. Demographic changes and competition from digital pianos have caused the U.S. acoustic piano market to contract for most of the last 20 years, although consumption grew moderately in 1997 and January-September 1998. During this period, the U.S. industry also has seen reductions in shipments and in the number of producers, suppliers, and dealers, although during January-September 1998, there was a small increase in piano shipments. Data gathered from questionnaire responses indicate that imports, by quantity, supplied 46 percent of U.S. apparent consumption of vertical pianos during January-September 1998, up from a 35 percent market share for the same period in 1997. Imports of vertical and grand pianos from Japan, Korea, China, and Indonesia accounted for 93 percent, by quantity, of total U.S. imports of pianos during January- September 1998. U.S. producers are major importers, buying foreign-produced pianos to complement their product lines. In foreign developments, the growth of Chinese production and exports in the 1990s has been notable, both from independent Chinese producers and operations established in China by other Asian producers. During January-September 1998, the quantity of U.S. vertical piano imports from China more than tripled compared with the same period in 1997, increasing China’s share of U.S. apparent consumption from 6 percent to 16 percent. U.S. piano producers faced numerous competitive disadvantages during 1994-98: Japanese and Korean producers’ operations in Asia were more automated than operations in the United States; Asian producers, with the exception of Japan, have considerably lower labor costs than U.S. producers; the East Asian financial crisis drastically curtailed piano sales in the home and regional markets of principal Asian piano manufacturers, and it appeared that pianos were redirected from these markets to the U.S. market; and the national currencies of three of the four principal Asian competitors significantly depreciated in real terms against the dollar during the period under consideration. U.S. producers, however, have the following advantages: close proximity to wood resources, more experienced labor force in making furniture-style pianos, and lower transportation costs when selling in the U.S. market. i FOREWORD The information and analysis in this report are for the purpose of this report only. Nothing in this report should be construed to indicate how the U.S. International Trade Commission would find in an investigation conducted under other statutory authority. iii TABLE OF CONTENTS Abstract ................................................................... i Foreword .................................................................. iii Executive summary .......................................................... xi Chapter 1. Introduction ....................................................... 1-1 Purpose and scope of the report ...................................... 1-1 Product coverage ................................................ 1-1 Previous Commission investigations .................................. 1-2 Study approach and organization ..................................... 1-2 Chapter 2. Product and market overview ......................................... 2-1 Product characteristics ............................................ 2-1 Manufacturing processes ........................................... 2-5 Market characteristics ............................................. 2-6 Market segments .............................................. 2-6 Factors affecting overall market size ............................... 2-8 Recent changes in demand and supply .............................. 2-11 Chapter 3. Profile of the U.S. piano industry and suppliers ........................... 3-1 Piano producers ................................................. 3-1 Raw material sources and parts producers .............................. 3-4 Importers, distributors, suppliers, and retail dealers ....................... 3-5 Chapter 4. Trends in U.S. consumption, shipments, production, and trade ............... 4-1 Consumption ................................................... 4-1 Producers’ domestic shipments and exports ............................. 4-4 U.S. imports .................................................... 4-8 Customs treatment ............................................ 4-8 Trends in U.S. imports ......................................... 4-9 Import inventories, shipments, and penetration ....................... 4-14 Condition of the U.S. industry ....................................... 4-17