Markets by Grant | Additive Manufacturing (Updated!)

9 min readJul 7, 2021

Alternate title: “What is 3D Printing and Why Should I Care, Grant?”

Let me break that down for you. First, what is 3D printing? I’ll get to that later. Second, why should you care? Because 3D printing is one of the tangible opportunities for the resurgence of American manufacturing. As a Detroit native, I’m legally obligated to start with a longwinded tirade on this topic:

Whatever Happened to American Manufacturing (and Jimmy Hoffa)?

Thanks to the acclaimed film The Irishman, we now know that Jimmy Hoffa was whacked by Robert De Niro in the summer of ‘75. Case closed, baby.

Now, American manufacturing. Manufacturing competitive advantage can best be understood through the framework of cycles of disruptive innovation, modularization, and commoditization (s/o Clay Christensen). Long story short, an innovation ends up reaching a level of maturity which yields sustaining competitive advantage as a means of production. Next, the manufacturer realizes that it can improve operating outcomes further by zeroing in on its areas of strength and outsourcing others. The truly ‘value added’ aspect of manufacturing shifts up or down the value chain as these technologies gradually become commoditized. Finally, the competitive advantage goes to the manufacturer with the cost advantage — that is, until a new disruptive innovation arrives.

An interesting example is Henry Ford’s River Rouge Complex. Ford was among the first not only to use connected flow processing for car manufacturing, but also to create a system of labor organization and specialization. And he initially conceived and controlled every aspect of Ford’s car manufacturing. In its heyday, the Rouge Plant received the rawest of raw materials (we’re talking iron ore) on one end and spat out cars at the other end. At that time, nobody could compete. But Ford eventually realized that its strengths were not in smelting, casting, or even subassembly. So it slowly began to outsource those things — creating new competitive landscapes for suppliers to play in. Eventually, Ford found itself where it is today, only handling design, final assembly, and marketing (and it outsources a fair amount of these capabilities, too).

Subplot: Meanwhile, Toyota entered the space and introduced Kaizen principles to automotive manufacturing, which afforded it a strong competitive advantage. This too, was slowly adopted across the board, diluting its competitive advantage. You get the picture.

And now here we are, playing the tariff game to try to offset clear cost advantages of competitors abroad. That’s obviously a drastic oversimplification, but I introduced the overall story arc as a foil for my discussion of additive manufacturing:

The questions: Does additive manufacturing really have the potential to meaningfully disrupt traditional forms of manufacturing? Does it need to? And how might its competitive advantages play out across OEM markets?

Let’s dive in…

The Tech

Definition: Commonly known as 3D Printing, additive manufacturing is a process by which a three-dimensional object is created from a digital 3D model, without the use of casts/molds or additional mechanical manipulation (ie: cutting, shaving, drilling).

Contrast this with subtractive manufacturing, where a solid is formed and then whittled or cut down. Subtractive manufacturing is how Michelangelo created David. He took a big chunk of marble and cut it down to his desired design. If he were to make David with additive manufacturing, it would have to have been with clay, or snow, or lava or something — where he builds up his design over time using a hardening material.
Contrast also with injection molding/casting, which is the most commonly used form of large-scale parts manufacturing today. It’s where a cast or mold is filled with a liquid, which then hardens. When I compare additive manufacturing with ‘traditional manufacturing’ later on — I’ll be referring to this.

Inputs: Today, common materials for 3D printing are thermoplastics (polymers), metals, and other media which can be melted and hardened easily. Carbon fiber (composite/fiber) is a newer 3D printing material, which employs a separate process.

Outputs: Today, 3D printing is typically used to create manufacturing prototypes, parts, scaled models, and other objects — and is used across industries (most heavily in manufacturing and healthcare).

The Process

Ok, now get the bad Michelangelo metaphor out of your head and imagine the 3D printers you’ve seen. Here’s how it actually works:

The Competitive Advantages (and Disadvantages)

Before I attempt to answer the question of whether this tech is poised to disrupt, let’s look at its comparative current state, and relative advantages and disadvantages.

Historically used only for prototyping and small-batch or highly customized production, the latest generation of 3D printing companies are starting to become competitive with traditional mass production methods.
With new patent-protected methods of 3D printing at higher quality speed and lower costs, this market disruption is the bet of ‘pure-play’ additive manufacturing companies. These companies develop comprehensive 3D printing solutions (hardware and software), and sell them to businesses.

Here’s the breakdown. Legend: red is bad and green is good.

The Future Implications

Is it so tough to believe that 3D printing can eventually be competitive with traditional manufacturing, for the same volumes and use cases? No — at least I don’t think so. Here’s the academic representation of the economic decision framework for a manufacturer considering what type of parts production to use:

So…if additive manufacturing companies are able to push down the unit cost line, they may be able to move upstream to conquer more of the parts manufacturing market. And how might they do this, you ask? I’m seeing three significant trends which may have the potential to do so:

Speed: Utilizing single-pass binder jetting technologies to accelerate production speeds and scale (by 10x — 100x)
Process Automation: Combining previously separate de-binding, de-powdering, and sintering processes
Use Case Expansion: Making machines less energy-intensive, more human-safe, and more office-friendly

And what does the market look like, anyway? I’m glad you asked. Time for some stats:

The Market

From 10,000 Feet:

Fueled by a new wave of innovation and upmarket movement to mass-production applications, the additive manufacturing market is large and growing:

CAGR is estimated at ~15% through 2028
Current market size is estimated at $10-$12B, reaching $27-$31B by 2028

Drilling Down:

Players:

The market is composed of 3D printer manufacturers, service providers, software vendors, and raw materials suppliers. The manufacturers continue to dominate, having produced the only unicorns in the space, and controlling >56% of the total market value (and growing).

Industries + Materials:

Growth has long come from the healthcare industry, which is still bringing up the CAGR, at 18% YOY. However, healthcare applications are typically smaller volume, higher complexity runs using biocompatible polymers.
More promising growth is coming from manufacturers of metal 3D printing hardware. Sales of metal 3D printers have steadily outstripped polymers over the last few years, and metal now controls ~20% of the overall market. This is the market moving toward mass-production, starting with parts for OEMs, who account for 33% of the market by industry.
Composite/fiber printing, a relative newcomer, shows promising growth — with expected market value of $10B within a decade.

So What?

Here’s what I’d take away:

The winners in this market are still the ones who manufacture the hardware for the hardest of materials: metals and composites/fibers. These markets are the largest, growing the fastest, and have the most disruptive potential relative to traditional manufacturing methods.

The Players

Here’s my breakdown view on the prominent players in the space and their respective competitive advantages:

Many of the players in the segment I’ve identified have gone public via SPAC over the past year and a half. And it makes sense :

These are very capital-intensive bets with uncertain timing on liquidity events and long-term profitability. Rather than raising round after round of dilutive growth capital, SPAC-ing gives these companies more power to control their own financing destinies over the long-term.
The combination of this market uncertainty and the deeply technical nature of these companies makes them good candidates to ‘dazzle’ the public markets into buying into their own growth narratives — at least in theory. This positioning sets up the company’s stock as a long-term ‘hold’, as the clearly important and growing market figures itself out. Understanding the deep nuance of these markets and businesses takes time. Lord knows I haven’t even done it properly.
Lastly, the network effects. Once one SPACs, a competitor which views its capabilities favorably is incentivized to do so with the hopes of winning a higher price (especially when the SPAC market is running hot). And even if the shares end up trading below $10 (which they largely have), these companies have achieved their objective: they’ve raised significant, potentially less-dilutive capital, given themselves and their investors some liquidity, and set up their long-term growth narrative on the public markets.

I’m not a public markets guy, so I won’t spent too much time opining on overall stock performance. It’s easy to write off the companies’ consistent underperformance on the markets to ‘going public too soon’ or ‘the SPAC bubble’ —so I won’t go there. Like I said, these are groundbreaking, $1B+ companies which have made early investors a lot of money, and have just raised giant piles of cash to fund their futures.

Put another way, when you take your unicorn to the Kentucky Derby and it loses, it doesn’t become less of a unicorn — just an unpopular unicorn. It does, however, make the horses which won the race look at whole lot better. I’m talking about the long-public incumbent, 3D Systems, which has benefitted handsomely from the attention with 5-year trading highs.

It’s still early. Desktop Metal and others would have ‘patient investors’ buy into their long-term vision, but I won’t ask you to do that. Instead, I’ll just say easy, non-committal things like “it’s still early.”

Final Thoughts (and TLDR)

I’ll reiterate the things which I believe need to come true for these technologies to meaningfully disrupt. And of course, these capabilities are tied to what I view as the most promising segment of the parts manufacturing market: metals, composites, and fibers for OEMs.

Speed: Utilizing single-pass binder jetting technologies to accelerate production speeds and scale (by 10x — 100x)
Process Automation: Combining previously separate de-binding, de-powdering, and sintering processes
Use Case Expansion: Making machines less energy-intensive, more human-safe, and more office-friendly

Of these three, I think the second is the most uncertain. The labor input required for most 3D printing, although advertised as minimal, is comically high. The big leap that needs to take place to move 3D printing from niche to commonplace is process automation of the human steps required to move and manipulate parts. Even when this is done, the fundamental limitation of 3D printing will be that it is restricted to batch processing. If capabilities evolve to fully automated continuous or connected flow processing, then we’ll be cooking with gas.

Thanks for sticking with ol’ Grant — feel free to ardently disagree or personally attack me in the comments. And let’s all hope that Robert De Niro sees justice for what he did to Jimmy Hoffa.

— G