3-D printing promises to be a disruptive technology that will change the way goods are manufactured and the way people do business. 3-D printers are devices, small enough to fit on a desktop, that can produce tangible objects specified by computer software containing a virtual 3-D model of that object. The printers do this by incrementally putting down layer by layer of substrate such as plastics, metals, ceramics, or even wood or food products. For example, if you had a computer file depicting a coffee mug, you could “print it out” with a 3-D printer and then use it for your morning pick me up.
Prices on models for home and industrial use have fallen drastically in the past few years, making the promise of a 3-D printing revolution more realistic. As of early 2015, the MakerBot Replicator Mini sells for $1,375, the 3-D Systems Cube 3 for $999, and the Kickstarter-funded Deltaprintr as low as $499 for an un-assembled kit.
Other services such as Cubify, Sculpteo and ShapeWays allow users to upload their 3-D computer file to the cloud where they can rent time on industrial printers, and the finished product is then shipped to the end user. If you had a virtual rendering of a silverware set, you could upload the file and have it printed in stainless steel and on your doorstep in just a day or two.
The technology is currently limited to producing basic products using simple ABS plastics as substrates, but there are hopes that 3-D printing with more complex materials and multiple substrates will soon propel it beyond a hobbyist pastime and into regular use.
Technology think-tank International Data Corporation (IDC) predicts that by the year 2020, more than 10% of all consumer products will be available through produce on demand via 3-D printing – in home or through companies offering such services.
The Rise and Fall: 2012 to 2014
The 3-D printing sector was one of the fastest growing and most exciting in 2012 and 2013. Its biggest players, 3-D Systems Corporation (DDD) saw its stock rise over 260% in 2012 and nearly 154% in 2013 and Stratasys, Ltd. (SSYS) grew at nearly 158% in 2012 and 66% in 2013. 2014, however, proved to be a bearish year for this emerging technology industry. Last year, DDD dropped by a staggering 64% and SSYS by almost 36%—meanwhile the tech-heavy NASDAQ 100 index rose by 18%. Newly-listed stocks in the sector also fell markedly: Exone Co. (XONE) lost 73.3%, Voxeljet AG (VJET) dropped 78.7%, and bio-tech start-up Organovo (ONVO) which promises to 3-D print biological tissues and organs fell 22%.
In 2012 and 2013, DDD and SSYS grew by leaps and bounds by making numerous acquisitions in the 3-D printing space. Notably, Stratasys acquired Brooklyn-based MakerBot. All this M&A activity caused investors to question whether such rapid rates of growth were sustainable and whether enough research and development was taking place in-house. The P/E ratios of 3-D printing stocks rose to extraordinary levels, reminiscent of the speculative bubble of the dot-com days just over a decade ago.
Even now, in January of 2015, DDD commands a P/E ratio of 150 and SSYS reports negative earnings.
2014 also saw increased competition with announcements by major technology players to enter the 3-D printing space, such as GE (GE), Canon (CAJ), Ricoh, Epson, and Hewlett Packard (HPQ). (For more, see: 2015 Tech Trends.)
2015 and Beyond
Despite the large degree of volatility and questionable valuations of companies in the 3-D printing space, the industry as a whole is poised for increasing growth and capital investment. IDC predicts that in 2015, spending on 3-D printing will surge 27% to over $3.4 Billion
At the 2014 EuroMold conference in Germany, a trade show featuring cutting edge products in the 3-D printing space, exhibitors showed off the next generation of multi-color, multi-material printing with increased precision and speed. It appears that in just a few short years the scale, scope and quality of what can be 'printed' on demand has increased dramatically. Medical applications also seem to be drawing a lot of interest, with the ability to custom produce implants, prosthetics, and even replacement tissues.
Increased competition is sure to occur as well, as high-growth industries often attract new players – both from start-ups and large corporations. Eventually, however, the sector can get crowded by too much competition, driving prices – and profits – down for everybody and pushing out the smaller players. While this may be bad for the companies, it can certainly be a good thing for consumers and users of 3-D-printed products, the prices of which are likely to continue to fall.
The longer term implications of a 3-D printing economy are certainly disruptive if they happen on a large enough scale. If even 10%-20% of all consumer goods can be manufactured on demand and customized to the end-user's preferences, it would transform the modern factory and manufacturing process. Inventories would no longer need to be stocked, as goods would be produced only as needed, reducing the demand for warehouse space and inventory management systems. Many of these items would initially be simple, solid items such as toys, flatware, jewelry, and other trinkets, currently made by China or other exporters whose services would no longer be needed.
In time, people would be able to make more complicated and expensive items, even items containing computer chips and circuitry. Logistics and transportation could be hurt as these goods would no longer need to be shipped overland or overseas, but simply be produced at home.
The Bottom Line
3-D printing is increasingly within reach for everyday households. Advanced technological progress has caused the prices of 3-D printers and 3-D-printed products to drop drastically as the industry has grown rapidly over the past few years. While share prices of 3-D printing stocks skyrocketed in 2012 and 2013, their sky high valuations were questioned by investors, and subsequently tumbled in 2014.
The coming year will prove to be another year of industry growth as the capabilities and quality of these printers increase, which will be good for consumers. Investors, however may have to continue to experience a roller coaster ride as volatility may remain strong amid high levels of competition and the entrance of new players to the space. It may not be long before a sizable number of families have a 3-D printer in their home, sitting on the desk next to their color ink-jet printer, manufacturing products for them on demand.