A Path to Survival in Additive Manufacturing
Dr. Wilderich Heising
Partner & Associate Director bei Boston Consulting Group (BCG)
By Dr. Wilderich Heising , Dominik Deradjat , Thomas Krüger , and Daniel Kuepper
The market for additive manufacturing (AM) has experienced fierce competition over the last few years amid slower than expected growth. Companies harnessing 3D-printing technologies and materials for rapid prototyping and manufacturing are emerging from a supercharged period in which small players entered the market hoping to disrupt existing traditional processes and go public. Meanwhile large corporate players staked out aggressive competitive positions through M&A, only to gradually lose interest, sell AM units, and put expansion on hold.
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The industry is now undergoing a new phase of consolidation and steady growth. While growth for many players isn’t as fast as the 30% to 50% expansion of earlier years, most companies today are ?still seeing robust growth rates of 15% to 20% per year. Companies that want to succeed in this space need to understand where they fit into a changed AM landscape and chart a sustainable path. The winners will be those that differentiate their offerings, meet stringent industry requirements, facilitate automation across processes, and partner with customers to meet their needs and deliver value.
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A Return to More Rational Expectations
After a period of rapidly rising valuations following the IPOs of Desktop Metal and Velo3D, as two examples, valuations have come back down to earth (see exhibit). Valuation-to-sales ratios of equipment providers that sometimes exceeded 10 to 1 in 2021, with an average of 5 to 1, have once again stabilized to more realistic levels, with an average ratio of about 2 to 1 in 2022-2023.
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Despite the recent correction in valuations, the AM market demonstrates future promise. BCG expects the industry to grow to $95 billion in size by 2032. We predict that metals will experience the fastest growth by 2032, while polymers and composites will make up more than half of the AM market over the same time period.
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The replacement of traditional manufacturing processes and the rise of new manufacturing applications using 3D-printing technologies will capture much of this growth. We estimate a still-thriving growth rate, owing to the increasing number of manufacturing use cases capitalizing on ongoing trends toward mass customization, decentralized production, and rising product complexity.
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Researchers are experimenting with 3D bioprinting to fabricate tissue-like structures for use in areas like drug development. Apple will reportedly use 3D printing for titanium parts in the next generation of the Apple Watch Ultra . SpaceX uses 3D printing for crucial components of the rocket engine on its manned Dragon spacecraft , and Astrobotic's Peregrine Lander hopes to deliver a payload using the first 3D-printed parts to land on the moon .
Major players have leaped into the space, including GE and HP. GE entered the AM market in 2016 with its acquisitions of Concept Laser and Arcam in 2016 and 2017, respectively, worth more than €1 billion combined. The GE Additive business unit produces equipment for aerospace, medical, and automotive applications, in addition to offering services and software. After years of development, GE’s metal-printing binder jetting became commercially available in 2023, complementing existing laser and electron-beam technologies.
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HP is collaborating with Siemens to combine Siemens’ autonomous mobile robots with HP's printing unit to build the “factory of the future.” Adoption has been rapid: From 2017 to 2021, HP customers have printed 100 million parts. In 2022 alone, that number reached 70 million.
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The AM market faces headwinds, however. Companies have seen a robust trend toward consolidation around a few equipment manufacturers (see exhibit). Players that make materials in the chemicals industry are gradually moving out of the market given high costs and lower than expected growth, after entering a much smaller space as a hedge against disruption. Only a few specialists remain.
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Companies that face mounting cost pressures have been reluctant to remain in the market over the long-term. Xerox sold its AM unit to AddiTec in August 2023, after reporting a 65% decline in AM revenues from 2013 to 2022. The high-stakes, billion-dollar attempts throughout 2023 to craft a takeover or merger deal of Stratasys with Nano Dimensions, Desktop Metal, or 3D Systems, even as the deals were eventually called off, show just how fierce the battle for leadership has become among some of the major players in a consolidating market.
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One major company that still seems to see opportunity in the space is Nikon. The Japanese optics and imaging giant has made additive manufacturing a priority in its “Vision 2030” strategy. After acquiring four AM companies throughout 2021 and 2022, Nikon spun off an advanced manufacturing unit in July 2023, to be based in California, its first-ever unit headquartered outside Japan. The new company says it aims to integrate production processes across Nikon’s acquired companies, as well as the company’s existing 3D-printing business.
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Who Will Survive?
While it’s difficult to predict the future of any industry based on the recent past, we see a continued trend of big, highly integrated players creating broad offerings featuring technology, materials, and services. However, a rapidly consolidating industry will make life difficult for many subscale startups that have appeared on the scene. Smaller start-ups experiencing funding difficulties in the current financial climate will find it highly challenging to compete in such a competitive AM market. Companies partnering in the space must place their bets wisely on the players that are most likely to survive the shakeout.
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Smaller players will need to differentiate. Either they will become highly specialized companies with a unique value proposition, or they will find a way to go public, merge, or be acquired. The bigger players will need to demonstrate top-line growth in a market that is expanding more slowly than they had initially expected. They will also need to make sure to capture opportunities from the smaller players that are pushed out.
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Each player will have to ask a series of strategic questions in order to survive, including:
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How to Unlock Value
As they navigate the recent market turbulence, companies can consider four proven strategies we have helped market leaders successfully deploy:
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Tailor products and services to specific use cases. Examine your company's strengths and capabilities to determine where you can differentiate yourself in the market. To gain a competitive edge, specialize in niche areas that align with your expertise. A printer manufacturer that simply sold industry-specific products in the past may need to tailor its offering (including designs, materials, and printing technologies) in order to target specific clusters of applications.
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Ensure qualification and certification of materials for critical use cases. Industries like healthcare, aerospace, and automotive are heavily regulated and require parts and materials that meet stringent standards for durability and safety. A company may need to ensure materials going into a 3D-printed medical device can be qualified as safe for use, for example, or that a part is going to hold up on the road, or in the unforgiving environment of space. Materials and printer companies can work together with customers to ensure these standards are met and exceeded.
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Facilitate automation along the entire AM process chain. In a typical manufacturing environment, companies rely not only on a single process, but also on a chain of processes to produce a finished part. One step in that process may involve a 3D printer, but the process may also involve filling the printer with materials or post-processing to improve surface finish. Since labor is currently 20% to 40% of the cost for final printed parts, huge potential exists to reduce cost through automation. Companies need to automate those steps as much as possible. Automation not only improves efficiency but also lowers costs and enhances a company’s ability to deliver consistent, high-quality products. It also enables seamless integration of AM processes into the broader manufacturing structure, so that additive and traditional manufacturing can work hand in hand in the same facility.
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Partner with customers to identify relevant AM opportunities. To truly deliver on the need to tailor products and services to specific use cases, players in this space must act like consultants with their customers. Manufacturers are in an excellent position to understand the problems customers must solve, and they can often work together with customers to solve them. In the process, they can improve margins and foster greater customer loyalty.
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Companies throughout the AM industry face challenging strategic choices as they chart a path to survival amid a looming shakeout. Expectations have returned to reality. Wholescale disruption may not have happened yet, although substantial changes can also be seen across many industries.
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Equipment manufacturers, materials producers, chemicals players, and multinational industrial giants are all jockeying to refashion the ecosystem to their advantage. Many players no longer trust the previous hype about AM, but some still see strong potential and continue to invest in the long game. To survive and thrive amid consolidation and rapid change, incumbents and upstart companies alike understand that they need to stay nimble and adaptive whatever happens in the future.
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