3D printing industry poised for extraordinary growth

I came across this great presentation while reading a piece from my favorite economics/investing writer, John Mauldin. He recommended watching this talk by Alex Daley, Chief Technology Investment Strategist at investment research firm Casey Research, where he and his team identify the most promising up and coming public companies in the technology sector. 3D printing is one of the four areas he highlights for extraordinary growth in the talk.

The entire 40-minute video, entitled The Greatest Growth Sector in the World, is fascinating, and I highly recommend you watch it all, not just the 3D printing part. I especially recommend it in its entirety if you are a technology investor. For your convenience, I’ve set the video to begin at 20:17, where the discussion of 3D printing begins. But you should make the time to start it at the beginning.

 

For your reference, I’ve manually transcribed (so, sorry about any errors) the 3D printing part of the talk for you. It follows below:

The future of manufacturing is a little machine like this (shows 3D printer). This is built by a company called Stratasys. Stratasys is a result of a merger between a large the U.S. corporation and a large israeli corporation [Objet], are both leaders of the technology called additive manufacturing or what most people call this 3D printing. And the 3D printing analogy comes from the very old version of this kind of technology where people take literally the heads off of an inkjet printer — these little cheap printheads– and instead of shooting out ink, they shoot out plastic, and they run over over the same spot, over and over and over again, building up a little layers of plastic, and they could build little toys, and models and things like that. Well this is actually an industry that’s been around for most people don’t realize longer than most people realize, since the early 1980’s.

Additive manufacturing has been growing at a 27% rate since that period of time and it’s hit that hockey stick–it’s at the beginning of that growth curve, for where now the companies in the space are selling tens of thousands of systems a year. The price of a machine has dropped from $800,000 to $80,000 in the industrial space; there are 3D printers that cost as little as $2,000 now for doing things like prototyping.

It’s just like the PC industry was. In fact it’s so much like the PC industry that it’s driven by hobbyists. The 3D printing industry–what’s really fascinating about it is there are these maker clubs out there, Makerfaire and Makerbot, and all these kind of clubs. It’s where guys like this, guys who were Bill Gates and Steve Jobs, members of the Berkeley Computer Club at the same time, before the PC took off. The geeks were off twiddling around with this stuff, bringing down the cost of the stuff, experimenting. In 2007, five years ago, there were less than a hundred personal 3D printers even built. We pretty much know where all of them are thanks to the fact everybody shared them on the internet–‘I built a 3D printer!’

These personal level printers, defined as costing less than a thousand dollars to build–now there are greater than fifty thousand of these things and by the end of next year there will probably be somewhere on the order of about a quarter million of these machines out there. Cheap machines. In fact, they make one called the RepRap, that can actually build 90% of the parts required to build itself. Thank you my robot masters, I hereby secede, you guys are in charge. Now that they can replicate, they can walk, well give me my little black matte i’ll stand there and when trucks…

No, in all seriousness, additive manufacturing is revolutionary for a whole bunch of really interesting reasons. Number one, is in the early 1980’s the only thing you could do was thermal plastics. They weren’t useful for anything, they were brittle, they fell apart, they were these kind of silly little things. Now, with manufacturing you can do all kinds of different metals–aluminum and steels and stuff–there are techniques like Selective Laser Sintering. Selective Laser Sintering is actually what built this little guy here (shows photo). This is an electron microscope looking at an item that was carved to a precision of ten nanometers, or about a third of the size of the transistor on the average Intel chip. I mean we’re talking molecular scale.

This technology is still in the lab but it’s based on the same technology that 3D Systems in the United States, the second largest 3D printing company in the world, that they have out there for producing metallic objects. This thing is precise to the atom yet can produce a meter of material a second. So think about that. Think about how imprecise manufacturing is today– retooling, testing, molds, all this stuff. With good software, with techniques like Selective Laser Sintering, with the traditional thermoplastic extrusion, with some of the other really advanced 3D printing technologies out there, we’re now in a position where we can manufacture things without waste, we can manufacture them when we need them because we don’t have all the tooling changes, all the complications. One machine can make two entirely separate different shapes of parts one right after the other with no context switching cost. Nothing. So instead of having a factory that makes widgets and a factory that makes wadgets, just have a machine that prints four widgets, five wadgets, four widgets, nine wadgets, depending on who orders what.

It’s revolutionary because it gets rid of inventory. It moves production to a more local environment. Labor is no longer what makes production important, skill is what makes production. The intellectual value of an invention is where all of the value is created with additive manufacturing. But it doesn’t just end there; it doesn’t just flip the economics of manufacturing on its head and make it so that shipping material over to China only to put it together and ship it back here is cheaper. It allows us to make things we could never make before. You can make shapes you can create these tessellations, you can print out things…I’ve seen people print out using plastic a full-sized mattress that weighs maybe about twenty pounds and yet is as firm and secure is one of those thermo…memory foam mattresses. You’re talking about something that weighs, like, a little bit.

Why that’s important is that we can create all those lightweight materials we’ve been reading about in Popular Science and in Wired and Popular Mechanics for 30-40 years. These materials are going to allow us to have cars that go 200 mph. Look, your car can’t get 200 mpg unless it weighs two hundred pounds. It violates the law of physics. But, if you can make a car that’s as strong as a current car and gets hit by a Hummer and does just fine but really only weighs two hundred pounds, you’re gonna have 200 mph. (not sure if he meant to mix mph and mpg here, or just meant mpg).

That’s what’s interesting. Additive manufacturing allows you to create shapes in infinite amounts of detail and in infinite amounts of construction patterns–anything you can come up wit–because you built it from the ground up, you’re not trying to drill holes in something and you can’t reach the middle of it. It’s going to lead to a generation of people that look like this guy, that reinvent every object that we have in our hands, because every object we have in our hands is built with the idea of subtractive manufacturing.

So the same way that the PC has led people to rethink every aspect of communication, the reason that the the PC era was the precursor to things like the smart phone, and the internet and all these incredible inventions that have changed our lives, additive manufacturing has the ability to do that, to do what the PC did for information and knowledge work, and manufacturing will do for things.

If you like what you heard and you are a high net worth investor, you might want to check out the offerings at Casey Research.