The Three Market Laws of Additive Manufacturing
If a law in any field is convoluted and hard to understand, it means someone’s pulling a scam
For over 10 years, I ran 3D printing-based businesses in Poland. It's a tough market for AM. It’s very wealthy and receptive when it comes to traditional manufacturing technologies, but very frugal and hesitant when it comes to adopting new solutions like 3D printing. Everything that was quickly implemented in the US or Western Europe would take several years to catch on in Poland. Maybe it’s due to our deeply rooted conservatism? “Why change something that works?” I don’t know...?
Anyway, for most of those 10 years, I felt like I was doing everything wrong because I wasn't achieving results proportional to the effort I was putting in. I should have been making millions by now, but I was still counting everything in thousands. I felt like the last failure. I was disappointed in myself. I wondered how to walk away from it all?
But the closer I got to 10 years in this career, the more I began to see things differently. Setting aside the issue of Poland, I looked at companies worldwide.
First, all the bright stars of consumer 3D printing suddenly dimmed. Solidoodle, M3D, Printrbot, NewMatter—all gone. Cubify by 3D Systems—gone. MakerBot—a massive identity crisis that ended with a miserable merger with Ultimaker.
Then, even the brighter stars of industrial 3D printing—ehm—Additive Manufacturing, also started to fade. Shapeways, FastRadius, SmileDirectClub—all gone. EnvisionTEC—sold to Desktop Metal. Desktop Metal, Essentium, Markforged, Velo3D—hard struggles, vital remains. 3D Systems, Stratasys—oh wow… even them?
Suddenly, I realized that compared to all of them, I wasn’t doing as badly as I thought? True, I never operated with the kind of money those companies had, but I never lost (burned) that kind of cash either. I didn’t rack up those kinds of debts. Damn, for a really large majority of the time, I sustained myself on what I earned. Unlike all of them, I had years when I was profitable.
And when I finally completed the full 10 years and entered my 11th year of business, I started asking myself new questions.
What if?
What if it’s not the fault of the companies, but the market they operate in?
What if selling 3D printers is like selling ice cream in winter? Or rain boots in the desert? You know, there’s always going to be some customer, but it’s hard to become a billionaire in that kind of business…
What if the 3D printing market is just small, and the aspirations of the companies operating in it are too big?
What if everyone is doing everything right, but the results they want to achieve are impossible to attain?
And that’s how my three laws of the Additive Manufacturing market were born. At first glance, they seem very simple—almost obvious and trivial, but I assumed:
if a law in any field is convoluted and hard to understand, it means someone’s pulling a scam.
So mine are easy, simple, and downright transparent.
Introduction
Let's start by distinguishing three things that are often perceived as one and the same:
3D printing technology – the manufacturing method, along with its associated hardware, software, and materials.
Users of 3D printing technology – companies and individuals who use 3D printing technology to execute their own projects, not related to 3D printing itself.
Companies in the 3D printing industry – entities that manufacture or supply 3D printers, materials, and software, as well as those that provide 3D printing services to other companies and individuals.
Although they are interdependent, in a market context, we must view them separately. History shows that a successful implementation of 3D printing in another industrial sector can significantly impact the development of that sector, but it doesn't necessarily translate to the growth of the 3D printing sector itself.
A great example is the technology developed by voxeljet. It had a huge impact on the development of casting in the automotive industry (giga-casting), but this did not translate into a proportional growth of voxeljet itself. In short, "one 3D printer" proved to be so effective that it significantly advanced a particular industrial sector but did not generate a demand for additional 3D printers.
What's more - paradoxically, the greater the benefits the foundry industry had from voxeljet’ 3D printers, the worse voxeljet was in. Absurd, but that's how it was...
As for end-users, they invest in additive manufacturing for various reasons:
Quality
Availability
Price (implementation cost)
Operating cost (materials + consumables)
Marketing
Interaction with the sales team (quality of sales)
What do partner companies or competitors have?
The possibility of obtaining independent financing for the purchase of technology.
The end-user may purchase a 3D printer in a particular technology completely disconnected from its actual functionality or application in their production environment.
A real life example:
A company prints parts on a desktop-grade FDM/FFF 3D printer and is very satisfied with them.
They learn about Multi Jet Fusion technology and eventually begin to desire it even though their actual need for parts could be met with much cheaper and smaller solutions offered by Formlabs Fuse or Sinterit.
They obtain additional funding from government sources (e.g., EU funding) and use it to purchase Multi Jet Fusion technology.
After implementation, they either do not use it at all or use it very sparingly due to higher operating costs compared to desktop FDM/FFF 3D printers, which were sufficient for them from the beginning.
Opposite example:
A company wants to print large objects (50 cm XYZ) from high-performance plastics.
To achieve this, they need to purchase an expensive FDM/FFF machine.
Due to budget constraints or simple lack of awareness, they buy a cheap, semi-professional 3D printer with a large build area, which never meets their technological expectations.
The 3D printer fails, the company is deeply disappointed with the technology and the industry, and ultimately abandons 3D printing.
Therefore, the increase in sales of 3D printers of a given type may not have any justified and logical connection with the specificity and features of the technology itself. Especially in the long term.
Regarding manufacturers and suppliers of 3D printers/materials or software:
One company may achieve spectacular and media-successful advancements in a particular additive technology, but this may not translate into business growth; as a result, it may be seen as important in the hierarchy due to its technological achievements but will be bankrupt in a business context.
Another company, on the other hand, may thrive by "feeding off" the solutions of the first company but will achieve much greater business success by offering simplified or imperfect versions of the first company's products at much lower prices; thus, it will be less respected within the industry but profitable.
In summary, these three things: 3D printing technology, 3D printer users, and 3D solution providers, must be viewed independently. They may be—but are not necessarily—interconnected.
Below, I present the laws with their basic definitions, and later, I provide proofs and explentaion for them.
I Market Law of Additive Manufacturing
A company identified or perceived as a "3D printing company" will never achieve significant success in any other market than the 3D printing market.
The market expects only one of four things from a 3D printing company—nothing else:
It will produce or sell 3D printers.
It will produce or sell 3D printing materials.
It will provide 3D printing services.
It will engage in other related activities within 3D printing, such as designing 3D models, preparing and optimizing models for 3D printing, creating 3D printing software, 3D printing training, 3D printer servicing, etc.
A company identified or perceived as a 3D printing company will have serious difficulties being seen as a regular user of the technology. Its attempts to change industries will be very difficult or impossible (i.e., they will always end in failure).
There’s no escape from 3D printing. If you’re in - you’re in.
II Market Law of Additive Manufacturing
A successful company in the 3D printing industry will always be smaller and less profitable than a successful company in another industrial sector.
In other words, "the largest 3D printing company in the world" will always be smaller and less profitable than "the largest company in the world in injection molding, casting, machining, or any other related fields."
Historically, 3D printing technology was developed to create individual prototype parts relatively quickly and cheaply compared to other conventional manufacturing methods. In subsequent years of technological development, 3D printing began to be used for low-volume production of end-use parts.
Nevertheless, despite continuous development, at the moment 3D printing will not replace high-efficiency manufacturing methods, remaining only a complementary technique where high-efficiency methods are more expensive or have longer production lead times. If this changes, this law will no longer apply.
3D printing is the ugly girl at the party.
III Market Law of Additive Manufacturing
An increase in the value of the 3D printing market may or may not correspond to an increase in the value of the 3D printing companies that make up that market. Market value and company value are not correlated.
The number of companies in the 3D printing market is disproportionately large relative to the market's value. As a result, at any given time, only a small number of companies are able to generate extra profit—most companies operate at or below the profitability threshold.
Thus, companies that create a growing market may lose value due to the lack of profits or returns on investments.
The 3D printed cake is too small for such a party.
1.
I Market Law - A company identified or perceived as a "3D printing company" will never achieve significant success in any other market than the 3D printing market.
This can be a bit tricky because we first need to understand when a company is considered a "3D printing company" and when it is not. Let’s start with what’s obvious—manufacturers of 3D printers, filaments, resins, and 3D printing software are 3D printing companies. It gets more complicated when it comes to service companies.
According to my definition and understanding:
A company that provides 3D printing services for other companies and individuals by taking their files and producing them is a 3D printing company.
A company that uses 3D printers to produce on-demand own products, such as lamps, interior decor elements, toys, car parts, tools, phone accessories, etc., will be perceived as a company from the industry for which it creates products (i.e., lighting, home decor, toys, automotive, etc.). Such a company may have "3D" in its name and showcase 3D printing as its main tool, but it will be perceived differently by customers.
Why is this important at all? Because for a company in the first group, transitioning to another industry will be either very difficult or impossible.
And why would a company want to do this? Because business not doing well. Because it has 3D printers, provides 3D printing services and discovers that it is unprofitable. It wants to change this - use the existing machinery to produce completely new things. Enter the new market.
But that is no longer possible... Not under the current brand.
Example 1: For over a decade, Materialise has been executing phenomenal projects in the area of combining 3D printing and fashion, yet no one perceives Materialise as a fashion company.
Example 2: For several years, Materialise has been producing eyewear frames, but they do so as a contract manufacturer for other brands. Any attempt to create their own eyewear brand as Materialise would end in failure.
Example 3: For several years, Stratasys has been trying to implement full-color PolyJet technology in the fashion industry ("Fashion3D technology") and automotive interior finishes, but with little success.
In each of the above cases, the market perceives these companies as "industrial companies from the additive manufacturing sector," so they are either ignored or rejected by the target markets.
There are, of course, more examples. Let me give a fourth one—my own.
Example 4: GREENFILL3D tried to enter the advertising stand market with its proprietary system of stands made from a material based on wheat bran, sourced from pasta production leftovers. Instead, from the very beginning, the market expected only two things from us: selling eco-friendly 3D printing materials and providing 3D printing services. The advertising market did not perceive us as a manufacturer of advertising applications, but as a 3D printing company that could be contracted to do 3D printing. Nothing above that.
2.
II Market Law - a successful company in the 3D printing industry will always be smaller and less profitable than a successful company in another industrial sector.
Let’s start with understanding what 3D printing has to offer?
3D printing has three advantages and three disadvantages compared to any other manufacturing method:
✓ is the fastest
✓ is the cheapest
✓ allows the greatest geometric freedom
✗ has the poorest accuracy and finishing quality
✗ becomes problematic as part size increases
✗ not profitable for mass production
Advantages and disadvantages interact and cancel each other out. This determines the usefulness and suitability of 3D printing for producing a given application.
Now that we know this, let’s try to answer the question: when does a company buy a 3D printer, and why?
When they want to produce a part quickly and cheaply
The part is highly specific and difficult to produce due to its shape
Quality isn’t the top priority
The part is not very large
They don’t need many of them.
To summarize: fast, cheap, and unique—regardless of quality, small size, and produced in one or just a few pieces.
Would a company spend $100 billion on producing such things? Of course not…
Would a company spend $1 billion on producing such things? Of course not…
Would a company spend $100 million on producing such things? Of course not…
Would a company spend $1 million on producing such things? Only if there’s absolutely no alternative and the part is extremely necessary.
Would a company spend $100,000 on producing such things? Only if these needs occur frequently.
Would a company spend $10,000 on producing such things? Yes, but first, let’s look for cheaper options.
Would a company spend $1,000 on producing such things? Now you’re talking!
No one will ever spend more on 3D printers than on other production systems—not until 3D printers can genuinely replace them. But even then, it won’t happen overnight—why replace a working technology with a new one? Only if it’s really cheaper. Again, it comes down to money…
3D printer manufacturers are the producers of the cheapest available options. Even if a particular machine costs "millions of dollars," the alternative solution would cost more. So, it’s still the cheaper option.
A manufacturer of the cheapest things will never be able to compete with a manufacturer of expensive things. And certainly not when their products are used to make things that are “fast, cheap, and unique—regardless of quality, small size, and produced in one or just a few pieces.”
3.
III Market Law – 3D printing market value and 3D printing company value are not correlated.
I’m not sure there’s anything to prove here… The current valuation of most publicly traded companies speaks for itself. If we compare the chart of their value over the last 3-5 years with the chart of the 3D printing market's value, we’ll see something inexplicable.
How is it that market leaders are losing value while the market is growing? Because there's a shift happening in the background—new leaders are replacing the old ones. This has happened before. And before that too. And you know what? It’s going to keep happening. Every 5 years, there’s a reshuffling. Leaders become followers.
Theoretically, the group of the oldest companies—the additive manufacturing forefathers—remain in their established positions. But look at them… There are fewer and fewer. EnvisionTEC and ExOne have been absorbed into Desktop Metal, which will soon be absorbed into Nano Dimension.
The Big Fundamentals. How many are left?
When you look at the chart of the 3D printing market value and see it rising, that reflects nothing but the truth. But the value of individual companies has nothing to do with it. Some grow, some shrink, others die.
The conclusion
According to the Second Law, a company in the AM industry will never achieve market success beyond a certain level "reserved" for companies in this market. Sooner or later, it will hit a glass ceiling, beyond which further growth will either be impossible or will require significant changes in the scope of its operations.
According to the Third Law, the strategy of "waiting out" a downturn or expecting "better times" is misguided. Market growth is certain, but it does not necessarily lead to an increase in the company's value. This may happen, but it is not guaranteed. Moreover, history shows that the pressure from newly emerging companies in the market is so high that every 5-10 years, there is a major reshuffling in the hierarchy.
Simultaneously, according to the First Law, the attempt to restart, that is, shifting the company's operations from the "3D" sector to another sector, carries a high probability of failure.
All of this together does not mean that achieving success in the 3D printing industry is impossible—it is possible, but with certain expectations and more realistic goals. At this moment, the additive manufacturing sector still has many limitations that effectively hinder "infinitely high growth."
The Solution
When creating a new company operating in the field of additive manufacturing, it is reasonable to design it so that 3D printing is only a part of its offering—complementary to other manufacturing techniques, machines, materials, etc.
The successes of companies like Protolabs, Xometry, or Authentise clearly show that diversifying the offering across various manufacturing techniques guarantees profitability.
If the goal is to achieve "infinitely high growth," confining oneself to the 3D printing bubble is not a good strategy.
The final statement
3D printing as a technology is alive.
Customers for 3D printers are alive and there will be more of them.
The 3D printing industry as a whole is alive, is growing and will continue to grow. Individual companies?—it depends on the moment. Like in quantum mechanics...
This article was originally published in two parts on 3DPrint.com on August 27, 2024 and on August 28, 2024.
1st law really resonated with me!