Additive Manufacturing Industry Spotlight
The 3D Printing Media Network reported in early January that the global Additive Manufacturing (“AM”) market in 2019 generated over $10 billion in revenues. Also, there has been a flurry of activity not from the larger more established players, but rather from 3D printing startups that are playing a key role in accelerating the pace of innovation. Ernst and Young has calculated that $1.1 billion of investment was made in 77 early stage AM companies in 2019, concentrated in printer systems manufacturing with capital sourced in the US.
The overall trend for AM adoption was accelerating, that is until the global pandemic turned economies upside down. While 2020 may become a “lost year”, the AM systems market may emerge for the better. In the face of a crisis of production and supply caused by the pandemic, there will be a lot of pressure to put new safeguards in place and additive technologies are proving one of the most flexible and quick response tools for production. 3D printing is playing a key role in demonstrating its ability to respond to the need for on-demand production and help alleviate supply chain disruptions. Additive Manufacturing has also become part of the broader trend of digitization within the manufacturing industry. As manufacturers increasingly embrace digital strategies, AM adoption is only likely to continue to grow.
Research is showing that metal 3D printing is one of the fastest growing additive manufacturing segments and has seen shipments grow at an average rate of +30% over the last two years. Customers have a much better understanding of where metal AM is applicable, how to develop use cases, and how to apply the tools for functional prototyping, tooling, and low-volume production. Metal tops the list of materials that customers would like to use in their next AM application(s).
In conjunction with manufacturing printing systems, a services model for metal parts will play a vital role within the industry. Outsourcing AM production will further the advancement of the technology and broaden the range of applications. This Manufacturing-as-a-Service (“MaaS”) model provides on-demand manufacturing for low volume production without having to make relative capital expenditures. In the United States, key industries like aerospace and industrial goods are making AM one of their key investment and research areas. The automotive industry has become a leading user with Ford Motor printing functional parts in some of its vehicles and General Motors is developing approaches to using AM in its electric vehicles. More than half of North American companies plan to increase their investment in AM by at least 50% percent giving the adoption rate of 3D printing a positive picture.
3D printing is transforming key elements of traditional manufacturing and opening new avenues of value across entire businesses. Beginning with how parts are designed, 3D printing technologies are increasing efficiency, reducing costs, improving supply chain logistics, shortening lead times, innovating new products that were impossible to build with traditional methods, and enabling customized/personalized products.
Acceptance and adoption of AM has been increasing but change creates resistance, and many companies are hesitant to introduce or extend application for three reasons: high price of systems and materials, lack of capability and know-how and technical limitations. The high cost of systems means that companies which are still exploring the potential of AM prefer to work with service providers, rather than investing in their own equipment. Lower systems prices could especially boost use of AM in developing countries with strong enthusiasm for the technology. Many organizations have no experience with AM, or are experimenting with the technology, finding the right use cases, and quantifying the benefits for its adoption. Technical limitations such as production speed, product quality, or parts size limitations are obstacles that will require time to overcome. Over the next several years we anticipate that systems manufacturers will be or already are addressing these challenges.
From 2016 through the end of 2019, the AM market has continued to grow at a compound annual growth rate (“CAGR”) of 29% driven mainly by the production of industrial systems for metal AM and services. Future growth estimates based on historical data, and analyst consensus forecast potential overall market value through 2023 from $20+ billion to as much as $33 billion depending on variable factors. The pace and impact of changes to feedstock prices and specifications, system prices and finding a systematic approach to new applications will play a major role in the outcome.
What factors are driving deals? Strategic buyers from other sectors are the largest pool seeking changes to production processes or providing new offerings in a high growth market. Financial investors have an opportunity to close the gaps in the sector by focusing on systems manufacturers that are driving change by overcoming the three obstacles noted above.
EY believes this moment in AM’s evolution is comparable to the point, a century ago, when industry moved from steam power to electricity. Do you agree? I welcome your thoughts and opinions!