Additive Manufacturing Industry Continues to Evolve
The 3D Printing Media Network reported that the global Additive Manufacturing (“AM”) market in 2019 generated over $10 billion in revenues. 3D printing startups 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.
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. Additive technologies are proving one of the most flexible and quick response tools for production. 3D printing is demonstrating its ability to respond to the need for on-demand production and help alleviate supply chain disruptions. The Additive Manufacturing Industry 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.
Metal 3D Printing Stands Out
Research is showing that metal 3D printing is one of the fastest growing segments in the additive manufacturing industry. The segment 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 AM 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 also become a leading user. Ford Motor has begun 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. This gives 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. Additive Manufacturing technologies are increasing efficiency, reducing costs, improving supply chain logistics and shortening lead times. With the technology, companies are also innovating new products that were impossible to build with traditional methods and enabling customized/personalized products.
Overcoming Barriers to Adoption
Acceptance and adoption of AM has been increasing but 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. 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 forecast potential overall market value through 2023 to be from $20+ billion to as much as $33 billion. 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 the evolution of the Additive Manufacturing Industry 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!
Alex Kramarchuk is a licensed investment banker and Managing Director of Colton Alexander, LLC. Colton Alexander provides strategic advisory services to public and private sector issuers through private placements of debt and equity, M&A, private markets research and advisory. Alex holds Series 7, 66 and 79 FINRA licenses. He is passionate about contributing to society through the formation of capital and its role as an engine of commerce in today’s market drive system. Colton Alexander, LLC is an affiliate of Weild & Co., broker-dealer.