Additive Manufacturing (3-D Printing) Reduces Manufacturing Costs and Spawns New Companies

The 3D printing market is expected to grow at 15-20% annually for a number of years, according to one report, so I periodically attend Silicon Valley events to remain abreast of this rapidly developing manufacturing technology.

3D printed automobile parts

Being familiar with this technology may enable me to add more value as an investment banker advising established, mature manufacturing companies that may have little or no knowledge of 3D printing, but which may benefit from it.  For instance, if I’m working with a manufacturing company that may benefit from reducing costs associated with small scale production, or drastically reducing the cost and time of new product prototyping, my knowledge provides the opportunity to potentially improve that client company’s profitability, and thus economic value.  This is only one example of how I strive to build the value of client companies.

3-D printing has been around for about 30 years, widely in use in the industrial market, but entrepreneurs, small, and mid-market companies have really begun taking notice of it in the past couple of years.  This is because of a convergence of advancing technologies that now enable its use for a broader array of applications, at a higher degree of precision, and its price has dropped precipitously.

I have heard projections of 3-D printers going into everyone’s home just like computer printers in the next decade.  I’m not betting on it.

In fact, just last week HP announced its intent to enter the 3-D printing market – as people have eagerly awaited – but, rationally, they are only entering the commercial application of this market.  This is where the potential lies.  At least, for a long time.

The rapidly developing industrial market for 3-D printing is where the action is.  Additive manufacturing, another term for 3D printing, is used widely in the aerospace industry already.  All the big players – Lockheed Martin, Boeing, GE – utilize additive manufacturing throughout their production processes, and have for years now.  It’s used widely in the automotive and medical devices industries, as well, and its use is growing.

SVForum at Lawrence Livermore National Lab’s High Performance Computing Innovation Center (HPCIC)

The last SVForum meeting on 3D printing was at Lawrence Livermore National Laboratory (LLNL), one of the U.S. leading national laboratories, to learn what they are doing with the latest in 3D printing technology.

According to the invitation, “Lawrence Livermore is revolutionizing the design to product cycle with additive manufacturing, moving national security innovation forward. Unique to their approach to 3D printing is the integration of manufacturing expertise, materials science R&D and high performance computing capabilities.”

LLNL said that they are aggressively ramping up their capabilities, and want to work with companies across the private sector – not just in the security and defense industries.  They cited these priorities:

1. Utilize and push the development of additive manufacturing technologies, with constant improvement.
2. High performance computer simulation and modeling.  They are modeling all the way down to the molecular level of the additive substance.
3. New product development, invention, and continuous innovation in material sciences.

They are building feedstock additive materials from the molecular level, not just parts.  They develop their own feedstock, including mixtures of materials such as metals, polymers, particulate polymers, ceramics, in order to achieve specifications at the particle level (perhaps 30 microns).

I think that it is fair to say that Lawrence Livermore’s work in additive manufacturing is state of the art, and I understand that the same can be said of Oak Ridge National Lab in Tennessee.

Market Growth and Scope

As far as I know, the market is concentrated in the U.S. and Europe.  In fact, I recently met the CEO of a European Company who claims that their company’s technology can perform 3-D printing at the smallest scale of anyone in the world (nano).  I don’t know if that’s currently accurate, though.

While the market for equipment and related services is supposed to grow to $6 B by 2017, according to a consulting company that has tracked the industry for almost 20 years, Wohlers Associates, I think the bigger story is the economic activity that the technology spawns.

Economic Value and Social Implications

For instance, a lot of entrepreneurial activity is being created by companies who can now afford the lower cost threshold of prototyping, testing and refining new products as they bring them to market.  Just as cloud computing has drastically dropped the cost of starting a software company, 3-D printing is drastically dropping the cost of starting a manufacturing operation.

Example of a Prosthetic Application of 3-D Printing

The same point applies to improving the profitability of an established manufacturing company.  For instance, some parts no longer will need to be injection molded, machined or assembled for short run manufacturing—these parts may be more economical to print by additive manufacturing if production runs are relatively low and production throughput speed is not crucial.  The innovation cost of building new molds, and/or machining and assembling new parts for prototyping is expensive.  Additive manufacturing can drop this cost and speed to market dramatically.  Additive manufacturing makes customization on a scale of one a possible option.

Interestingly, this technology also has the capacity to rebuild American manufacturing to a small degree in highly educated urban centers which long since lost their manufacturing businesses.  In general, precision manufacturing is highly dependent upon a more educated and trained workforce, who tend to reside in urban centers, and smaller footprint additive manufacturing facilities are less dependent upon large, costly real estate.

Mostly though, this technology will become so integrated within all manufacturing environments that we won’t even talk about it in twenty years.

McGavock Dickinson (Dick) Bransford is a Managing Director in San Francisco with Mid-Market Securities, LLC, an investment bank headquartered at 11 East 44th Street, 19th Floor, New York, New York 10017.  Member FINRA/SIPC.  He can be contacted at (415) 294-0002 or mdb @ mid-marketsecurities.com.

Disclaimer: The companies above are named in the context of a general discussion of manufacturing trends, and neither the writer nor firm have an established relationship with them. This article provides general information, and is not intended to constitute, and should not be construed as, legal, tax, accounting or business advice, nor does it constitute an offer to sell or to purchase securities. Rather, it is summary compilation of timely issues confronting your industry and as such does not purport to be a full recitation of the matters presented.  Prior to acting upon any information set forth in this article or related to this article, you should consult independent counsel and/or more detail contained in the Source Information. The article reflects the opinion of the writer, and does not necessarily reflect the opinions of Mid-Market Securities, LLC, or its affiliates.  IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax discussion contained in this communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.