Why Desktop Metals Could Change the Future of Manufacturing & Supply Chain
The current process for prototyping and mass scale manufacturing include the use of additive manufacturing (3D printing) as well as casting (sand, investment, die), machining, and metal injection molding. Now there are pros and cons for each type of manufacturing process.
MIM : Metal Injection Molding
Summary: It injects molten metals into a mold to create a part.
Pros: It’s great for small parts and is able to scale (20k-30k parts per year).
Cons: Molds are expensive and best use case is for parts that don’t require much change. Lacks strength as parts become larger.
Machining:
Summary: It utilizes numerous tooling to turn a chunk of metal into an intricate part by chipping away at the metal. (It’s a subtractive type of manufacturing)
Pros: High strength parts and very precise
Cons: Requires Skilled labor to operate machine. Creates High amount of waste of original material. High energy consumption. Not Scalable and slow.
Casting:
Summary: Material, such as sands or metal, and plaster are heated into molds.
Pros: Wide variety of materials to choose from. Cost depending on material. Size can be large or small based on materials (Metals are small and sands can be large)
Cons: Some materials can only produce up to a size of 75 lbs. Only economically feasible for mass production.Some materials(sand) are not Precise. Low Strength (depending upon material).
3D printing:
Summary: Utilizing variety of materials to construct an object layer by layer.
Pros: Wide variety of materials to choose from. Cost depending on material. Fast & Cheap to prototype.
Cons: Slow to mass produce due to post processing as well as printing one item at a time. Weak structural integrity (depending on material)
Future of Manufacturing
With these different types of manufacturing listed, we can see that the only downside of 3d printing is that it is slow to produce and depending on the material type, can be weak (such as plastic for prototyping), limiting additive printing to be limited to prototyping.
However, as research firm ARK invest has listed, they believe through Wright’s law (When units double, prices fall) that additive printing will disrupt the manufacturing sector as 3d printing becomes more widely available due to cheaper prices and flexibility to change the design of one’s parts quickly.
What does Desktop Metal do?
Desktop Metal is a additive company which manufactures 3d metal printing machines able to both prototype as well as mass scale produce at lightning 100x faster than the current conventional 3d printing machine due to a patented Single Pass Jetting technology which reduces wasted motion and thus increases production speed and decreases cost per part. They create the machinery, but also supply the metal powder for these machines to create upcoming metal parts.
Desktop Metal wants to capture different industries which rely on both prototyping as well as mass manufacturing of parts. The current manufacturing process is old and creates a lot of environmental waste.
Different industries, such as the automotive sector as well as healthcare, mining, mechanical machinery, consumer goods, and tooling can utilize Desktop Metal’s different products, such as the Studio to prototype and Production to Scale, which all utilizes the same software modeling known as CAD (Computer Aided Design).
Suppose buyers purchases these machines, they’ll need to buy the filling (metal powder) to actually create their items, resulting in a moat for Desktop Metal if they’re able to continuously leverage existing customers for a continuous stream of revenue, similar to the successful subscription model in the likes of Netflix, Amazon, Spotify, etc.
Financials and Industry Outlook
The expected trend for the additive industry is expected to grow at a 25 compound annual growth rate, meaning Desktop Metal may be positioned in a great position to capture a large portion of the market relying on 3d printing for both prototyping, but also creating end parts.
As expected, with this rise in market cap, revenue should also increase accordingly with a compound annual growth of 87% over the next 5 years, which is very high.
As revenue increases, the company will also turn a profit based on decreasing operating expenses due to economies of scale and should be cash flow positive in 2023.
This is largely due to the metal powder subscription model as the major profit puppy.
Competitors
Whitest there does exist competitors in the same industry, the technologies are vastly different. Take Protolabs, another 3d printing company; they offer a wide variety of 3d printing services, such as Direct Metal Laser Sintering, Carbon DLS, PolyJet, etc. However, their business model is one of prototyping, meaning companies send them files to prototype and then Protolabs ships out the prototype. This delays the product iteration cycle due to transit time and the slower speed of Protolabs 3d printing.
For instance, in Direct Metal Laser Sintering, it takes at least 3x as many machine operations as compared to Desktop Metals, increasing printing time.
Desktop Metals will allow users to buy their machines to produce prototypes and hardware in house while competitors like ProtoLab require customers to send them their files to produce and send it back. Thus, Desktop Metal allows for further vertical integration within a company and its faster production speed bolsters the use of 3d printing for manufacturing as opposed to cnc machining or casting.
Conclusion
Desktop Metal will plan to IPO through a SPAC merger (Special purpose Acquisition Company) under ticker symbol TRNE and it might be a company that is worth investing in!
