Value creation in 3D printing

3D printing has been around for decades, but the technology has gathered more mindshare and media attention in the recent years. Still the state of the industry is in its infancy and is tiny ($1.7B) compared to the making industry as a whole ($280B) [source]. There are a lot of opportunities in the market. In this post, I will explore where I think those opportunities are.

Although the 3D printing industry and products reside in different segments, for the purpose of this article I will focus on 3D printing to manufacture goods / products. In this context, it does not really matter if it is a semi-office printer or a manufacturing-grade machine.

In general, I see 3 areas for value creation in the 3D printing market. These are:

  • Marketplace
  • Manufacturing
  • Equipment

The top of the vertical is the marketplace. It is the interface to consumers. It adds value on top of manufacturing by selling and distribution of products to customers. The essence in this area is empowering consumers to cope with the wealth of products and variations of products. These will become available due to endless product life cycles and the extremely low barrier of entry for product designers. The ability for limitless options for personalization and customization will also have a significant impact on the marketplace for 3D printed goods. Personalization and customization are new features and attributes to products which will be unlocked thanks to 3D printing.

Current market places are rigid and focus on in stock items. They will not be able to easily adapt or tap into this new market. The market place needs tp be redefined to enable the new way to select and buy products made using customized and one-off production.

With regard to 3D printing, you see different types of business models at work currently in manufacturing. Most of them are geared towards low volume, high margin opportunities. Not many companies specialized in 3D printing are employing the high volume, low margin business model. Though that is where the value in manufacturing is created. Essentially it is chicken and egg problem. As long as there are no real 3D printing factories, then there will be no demand. With no demand, nobody will build a factory. The technology — speaking of machines and materials — is still immature to a certain extent and relatively unknown in its application to a lot of manufacturing engineers. I expect the industry to bootstrap itself in the next 5–10 years.

Another challenge is the lack of off-the-shelf solutions and tools necessary to support 3D printing and one off production. Most equipment and software for 3D printing is delivered and operated as an isolated island. Integrating them into a larger environment or finding specialized equipment to support the 3D printing process is hard or it does not exist at all.

I expect that significant value creation is going to take place in both tools — meaning hardware and software — and in building and operating manufacturing plants.

Obvious as it may sound, there are huge opportunities for equipment manufacturers. The current state of affairs is that the current systems are relatively limited in their applicability, and do not yet meet requirements necessary to mature this industry for manufacturing. For instance, the reliability and fault tolerances still leave things to be desired. Next to that, the choice of good, relevant materials is limited. Current equipment manufacturers are very much focused on capturing the SME market for prototyping and understandably so. There is a real world demand in this market segment for making prototypes fast and easy. Cool as it is, that is not manufacturing.

The oil of the industry
Around — or between if you will — these main areas, there are opportunities as well. For example, tools and service companies providing support to companies in the main areas. I see them as the oil smoothing the value creation in the vertical, making it easier to build and extend the main companies. Although it seems niche, I think major opportunities lie in this area as well.

A great example is what Kiva Systems is for ecommerce and distribution with their specialized warehouse management and automation systems. They have been recently acquired by Amazon.

Design and creation
I don’t believe there is a lot of value creation possible in design tools. Although it receives significant mindshare in the industry. Of course, design software will get better and some companies will make money of it. But it will be a crowded market with large market share for a few off-the=shelf software packages and lots of small home grown solutions. The competition in this market will be fierce. It is an important aspect to enable consumers to access the capabilities of 3D printing, but the value creation in this area is hard.

Materials are interesting too. But the equipment manufacturers resist that at this moment. They try to emulate HP’s business model by monopolizing and protecting their own market for materials. Though this could make sense in the consumer and SME markets, it does not make a whole to of sense in the manufacturing market. I see this as a major hurdle the industry need to overcome to open up the market to real world manufacturing. It will allow for bigger innovation on materials, and it makes the technology a more viable option. Companies can tune the materials to their requirements instead trying to fit the existing materials on their design requirements.

There are lots of opportunities in the 3D printing market. I expect that the existing marketplaces like Amazon will move into customized and one-off manufactured products when the industry starts to mature. These are great exit opportunities for current market places. At the same time, you could perceive it as a threat to these market places. The consolidation may not happen, and maybe they will enter the market on their own. Time will tell which direction the market places will go.

Manufacturing has major opportunities. But it can only grow and foster when the equipment manufacturers start to build systems and platforms to allow manufacturing. An important prerequisite is that they open up their equipment for new materials and stop monopolizing the material market for their equipment. Both the manufacturing industry as well the equipment manufacturers are going to benefit from that. Given the fact that the manufacturing market is so much bigger than the 3D printing industry is today.

An important part of the 3D printing industry ecosystem are the companies who tie the different segments of the vertical together. There is room between all segments for new opportunities and a lot of innovation is going to happen in this area. I think this is one of the exciting space to watch over the coming years.

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