The Evolution of the Additive Manufacturing Industry
There is currently much discussion around the 3D printing industry (or additive manufacturing). It is often bundled together with robotics, digitisation and big data in the ‘Industrie 4.0’ or ‘fourth industrial revolution’ vision of the factory of the future. Such is the power of the media’s futuristic visions for the 3D printed future, the general public is unaware that 3D printing is not new. The technology has existed for several decades — the first commerical systems were on the market in the late 1980s.
Industry, government and academic attention tends to focus on additive manufacturing (AM) in terms of technological advancement, novel applications and the broader contribution of the technology to productivity and economic growth. Meanwhile the AM industry itself is worthy of more interest. It is a sector that is growing and changing quickly and is set to challenge conventional understandings of how industries growth and evolve.
Additive Manufacturing: Early beginnings
In many respects the additive manufacturing industry — as an industrial sector itself rather than a form of technology used in many other sectors — conforms to existing models of how industries change and mature. Contemporary strategy anlaysis suggests that there are four stages in the life cycle of industries — introduction, growth, maturity and decline. The introduction stage is characterised by small sales, low rates of market penetration, high costs and low quality. AM spent quite some time in this stage with barriers to growth including industry-wide innovation hampered by patent restrictions and difficulties reducing the cost of machines.
Additive Manufacturing: Growth stage
The AM sector is now in the growth stage. This stage sees accelerating market penetration as prices fall. The 2018 Wohlers Report tells us that worldwide revenues from AM products in 2107 totalled $3.133 bn, a 17.4% increase from $2.669 bn in 2016. While many in the sector continue to debate the methodologies behind the Wohler figures, few would dispute that the industry is growing, and at a fast pace. Large annual increases in revenues continue to attract interest from other sectors (finance, manufacturing).
Standardisation: For many industries, the growth stage results from the standardisation of technology (easing sales and distribution and producing economies of scale in production). AM covers multiple processes (material extrusion, material jetting, binder jetting, sheet lamination, vat photopolymerisation, powder bed fusion, directed energy deposition) and materials (polymers, metals, ceramics, composites and others). We are not yet witnessing the dominance of any one process or material across the sector, although particular processes and materials suit specific applications. For example, the production of metal dental implants is led by the powder bed fusion process (selective laser melting) using titanium.
Professionalisation: During this growth stage, the AM industry is rapidly professionalising. This doesn’t mean that the industry wasn’t professional during the introduction stage, rather that the size and scope of the firm activities is increasing and requires the input of supportive services such as human resources and business management (strategy is particularly important here). Many additive manufacturing firms are run by the engineers who founded the firms. Of course, those firms are supported by entrepreneurs (many of whom are/were entrepreneurs, venture capitalists and other financial backers). Now we are now increasingly seeing the influx of business and management talent from other sectors — filling important roles in senior management, supply chain operations and consulting.
Industry composition: We can also expect to see a shift in the composition of the industry by firm size and type. At present there are a large number of firms in AM. Exact numbers are not available but all indicators suggest that there is substantial growth in the number of firms. In 2016, the global industry AM conference, Formnext, attracted 470 exhibitors. In 2017 that number rose to 632.
The number of machine producers continues to increase. The Wohlers Report estimate that in 135 manufacturers from around the world produced and sold industrial grade AM systems in 2017 (having quadrupled in the last five years). New market entrants are attracted by market growth and technological developments in processes and/or materials as they seek to have a competitive edge over competitors. These equipment manufacturers vary in size from the large firms (Concept Laser, Desktop Metal, EOS, Formlabs, GE Additive, HP, Markforged, Renishaw, Stratasys, SLM Systems, 3D Systems), surrounded by a large number of smaller equpiment manufacturers.
The rest of the AM sector is made up of providers of associated equipment (measurement and scanning, safety, materials handling, post processing) and services (software, consulting). Like the equipment manufacturers, some of the firms have their origins squarely in AM, others are part of larger firms with origins in other industries.
Consolidation: we can expect to see a continuation, and probable acceleration, of merger and acquisition. Firms competing for market share will use merger and acquisition. We will also see increased vertical integration as firms bring more AM services and processes in-house to offer a full service range to customers. We can also expect to observe a continuation of new market entrants and firm exits.
Additive Manufacturing: Maturity stage
While elements of maturity can be seen in AM — for example in applications such as spare parts and prototyping — the overall industry sector is still firmly in the growth stage. The tipping point will likely be wider scale application of AM technologies in mass manufacturing.
However, it seems unlikely that AM will conform to existing models of industry development. For example, the maturity stage is characterised by cost efficiency through capital intensity, scale efficiency and low input costs. This is unlikely to apply to AM — in fact the utility and application of AM in manufacturing is counter to these understandings of the logic of design and production. AM is not going to replace traditional forms of manufacturing (injection molding, subtractive methods), it will be complementary. And based on a business model that takes a wider view of value and costs savings.
The maturity stage also traditionally sees production shifting first to newly industrialised then to developing countries. AM has the potential to radically change not only how products are made, but where they are made. There is much hype around the ‘relocalisation’ of production (some of it politically motivated), but we are starting to witness the return of some manufacturing by US and Western European firms to their home markets.
It will be several years before the AM industry matures. Then it is likely we will need to reconsider what industry ‘maturity’ is for the AM sector, its impact on manufacturing and for those observing the evolution of the sector. There is currently little definitive data available on the AM sector. As AM reaches maturity, more large and pubicly owned firms will develop. This will provide more data on equipment, materials and services sales and more insight into profitability.
We will shortly be at a watershed. In the main, the AM industry has so far followed a traditional industry development trajectory. However, as it reaches maturity AM will likely challenge the models. Conventional understandings of the different factors needed for industries to mature will have to change, particularly as the increasing adoption of AM will also change the evolution of those industries in which it is applied.
