“Perfect position in Hype Cycle! Share prices of 3D companies seem to follow almost perfect “hype cycle” with a bubble about 2 years ago that burst. We are now way below peak and if the hype cycle is followed, we would now move into a long period of years of secular uptrend.”
Wherever there is talk of the digitization of the economy and Industry 4.0, one technology has been unavoidable for some time now, namely 3D printing. The manufacturers of the new generation of printers are stumbling over ever new potential applications, promising the segment high growth. Yet the shares of these firms have had a real rollercoaster ride in recent years. Precisely because of this, with a view to risks and opportunities now is an auspicious time to enter the market.
Almost all of us have a regular computer printer at home. But how about having a 3D printer, which you can use to print nails, screws, plates, cutlery or that missing Lego brick and the other little things in everyday life quick as a flash? No wasted time standing around in lines at the DIY store to pick up spare parts; even auto and airplane parts can be made with 3D printers. The private 3D factory for the living room has now become affordable and is as easy to use as a conventional ink-jet printer. Only a 3D printer doesn’t use ink, but plastic, which is heated to several hundred degrees and formed into an object in various layers. Today, they can even produce 3D items made of glass, metal or ceramic.
The 3D trend is now moving towards industrial pre-production and serial production, which will ensure high growth in the 3D sector. An increasing number of companies are now using 3D technology to produce end products. Ernst & Young expecting the growth to be particularly rapid in the area, especially in China and South Korea.
According to an EY survey of 900 companies worldwide, to date 24 percent of them use 3D prints. Germany leads the way, with the figure at 37 percent. In coming years, so the survey suggests, the proportion of companies relying on the technology looks set to rise significantly the world over.
3D prints are being used for an ever greater number of industrial and private applications. Alongside the aerospace and auto industries, the greatest potential is discerned in medicine and the plastics industry.
Diverse application options
Years ago making such products was the domain of scientists and inventors, who researched 3D-printing production processes in so-called fab labs. Numerous universities experimented with the method. The result is diverse potential applications today, and the success story is surely not over yet. “The new technology will first gain market relevance in the field of medical technology,” comments economic analyst Terry Wohlers with confidence, who has followed the technology’s development since 1988. Companies such as Arcam AB from the Netherlands use 3D printing to produce artificial hips that are precisely adjusted to the recipient’s body and more than two kilos lighter than conventional prostheses. Yet in other sectors too, such as the aerospace and automotive industries, 3D printing is frequently employed to manufacture prototypes.
Demand primarily from Asia
The next step however is now industrial pre-series and series production, which is expected to lead to high growth in the segment. “Ever more companies are now also using 3D technology to manufacture end products,” according to Andreas Müller, Partner at the professional services firm EY (formerly Ernst & Young), which recently compiled a study on the prospects of the sector. Recently, for example, a component from a 3D printer was fitted in the engine of a passenger aircraft. EY expects rapidly growing demand for the new technology particularly from China and South Korea. The firm anticipates average annual growth of 25% for the next five years.
3D printers for home use
Alongside industrial applications, 3D-printer business for private households is an important growth driver. Some machines cost less than 1,000 dollars and are enjoying strongly rising demand. According to Wohlers’ 2016 report – the standard industry reference – last year global sales shot up by more than 70% to approx. 280,000 printers. No doubt private users want to not only replace that missing Lego brick or screw, but also benefit from the numerous applications of 3D printers.
Consultant EY is expecting the growth to be particularly rapid in the area, especially in China and South Korea.
Demand for 3DP systems and related services has been increasing over the last five years with an annual growth rate of 28%. EY expects that this growth will continue, and estimate that the 3DP market will grow by about 25% annually until 2020 – resulting in a total market value that year of US$12.1b.
Shares in 3D printing companies have followed a kind of hype cycle. They rose very rapidly several years ago, then they fell back, and now they’ve recovered. And that could mean it’s potentially at the start of a long, ongoing upswing across many years.
Rollercoaster ride in the stock markets
After the ups and downs on the stock markets, the topic is now once again attracting investor attention, among other things because of late several manufacturers of 3D printers have been bought out and others are currently being considered targeted for takeovers. For example, US corporation General Electric has been engaging strongly in this future market and has acquired majority stakes in both Germany’s Concept Laser and in Sweden’s Arcam. At present, sector heavyweights 3D Systems, Stratasys and EOS together still hold some 70 percent of the market and are themselves repeatedly focusing on smaller, specialized service providers. After valuations tripled in the 2011-2014 period, prices have since fallen sharply, meaning that in terms of risk/return profiles there are now interesting entry opportunities.
As soon as the technology has become established, all the dog and Christmas lovers can look forward to immediately recreating that one missing Lego brick at the press of a button. The 3D printer will of course not be able to do anything about the dog’s tummy trauma, but in the medium term, who knows?
“They even built a house on 3D printing in China! I’m sure, 3D printing is a great tech for medicine and distant production which need to be instantanous, reliable and flexible production and for remote places.”