The Landscape of Additive Manufacturing

Transcription

John Baliotti
646-840-3218
[email protected]
Kristen Owen, CFA
[email protected]
215-665-6213
Manufacturing Technology &
Distribution
September 26, 2014
Is There a Limit to Imagination?
The Landscape of Additive Manufacturing
INVESTMENT CONCLUSION:
The adoption of additive manufacturing processes and techniques should continue at a geometric rather than linear rate,
since both advances in technology and user expertise will push each other at a compound rate. There has never been one
piece of equipment that has created a wholesale replacement of existing tools and capacity, and we do not expect that will
happen with the adoption of additive technologies. We view these technologies along with software and reverse engineering
tools as complements to produce parts in new ways, and to create parts that were never before physically or economically
feasible.
KEY POINTS:
• We expect rapid prototyping to sustain high core growth rates, given the value recognized of the dramatic speed to
market opportunity. We anticipate this growth will come from service bureaus and manufacturing OEMs incorporating
additive manufacturing to accelerate product development for their customers, in almost every market vertical from
aerospace to medical to consumer goods.
• Collectively we see this trend benefiting the six companies we currently follow: ARCW, DDD, MTLS, PRLB, SSYS,
XONE, which run the spectrum from in-house use and rapid prototyping services to additive systems and materials for
service bureaus and OEMs to produce prototype and production parts at an accelerated pace.
• Despite the rapid adoption rates of additive manufacturing, we do not forecast subtractive processes being replaced
en masse. What should be expected, is additive technologies will increasingly be placed alongside current traditional
manufacturing equipment to complement them, not replace them, since features such as aerospace quality threads or
tight dimensional tolerances cannot be achieved through the additive process alone.
• We expect additive systems will continue to gain greater acceptance as more experience is gained by designers and
manufacturers and the technologies advance. This break from traditional design/manufacturing practices will take time
to infiltrate production lines, but the benefits are undeniable and that will foster innovation and adoption.
• We also anticipate greater mergers and acquisitions as well as joint ventures within the additive manufacturing space
driven by the greater adoption of additive manufacturing technologies that we anticipate. OEMs will need to offer
customers a full suite of products to produce polymer and metal parts as well as design tools (CAD, Scanners) to design
and reverse engineer parts. In the short-term, we see the market as large enough for more focused companies to thrive,
but longer-term we expect to see more combinations of technologies and services under fewer roofs.
• Overall, based on our forecasts, we estimate that by 2019, the total addressable market for additive manufacturing
equipment, services and related products could surpass $23 bil globally, and that by 2024 the market could expand to
just under $38 bil with nearly a third of that coming from industrial applications (See Figure 25).
• Industrial applications and services, such as those provided by service bureaus represent a substantial portion of the
market opportunity and this is consistent with the recent M&A trends in the industry. End markets served within this
segment include Automotive, Aerospace, Consumer Goods and general Machine Shop services.
Equity Research
Industry Report
Research Analyst Certifications and Important Disclosures
are on pages 50 - 51 of this report
INVESTMENT THESIS.....................................................................................................................................................3
INDUSTRY BACKGROUND .............................................................................................................................................4
WHAT IS ADDITIVE MANUFACTURING? .....................................................................................................................4
ADDITIVE VS. SUBTRACTIVE MANUFACTURING.........................................................................................................5
CASE STUDIES ............................................................................................................................................................. 11
SUMMARY OF OTHER CASE STUDIES ....................................................................................................................... 13
COMMON ADDITIVE MANUFACTURING PROCESSES ................................................................................................. 15
MATERIALS ................................................................................................................................................................. 18
PLASTICS/POLYMERS ............................................................................................................................................... 18
DIGITAL MATERIALS ............................................................................................................................................... 19
METALS ................................................................................................................................................................... 19
OTHER COMMONLY USED MATERIALS .................................................................................................................... 20
SYSTEMS MANUFACTURERS (OEMS) ........................................................................................................................ 22
RELATED SOFTWARE.................................................................................................................................................. 24
REVERSE ENGINEERING TOOLS & 3D SCANNING .................................................................................................... 27
ROLE OF SERVICE BUREAUS ...................................................................................................................................... 28
ADOPTION CYCLE ....................................................................................................................................................... 31
END USERS .................................................................................................................................................................. 33
HEALTHCARE ........................................................................................................................................................... 33
AEROSPACE ............................................................................................................................................................. 35
AUTOMOTIVE ........................................................................................................................................................... 35
CONSUMERS............................................................................................................................................................. 35
ADDRESSABLE MARKETS ........................................................................................................................................... 36
INNOVATION ................................................................................................................................................................ 38
HIGH SPEED SINTERING (HSS) ................................................................................................................................ 38
GRAPHENE ............................................................................................................................................................... 38
AEROSWIFT PROJECT ............................................................................................................................................... 38
HYBRID MACHINES .................................................................................................................................................. 39
COVERAGE .................................................................................................................................................................. 40
3D SYSTEM .............................................................................................................................................................. 45
MATERIALISE ........................................................................................................................................................... 46
PROTO LABS ............................................................................................................................................................ 47
STRATASYS .............................................................................................................................................................. 48
EXONE ..................................................................................................................................................................... 49
-2-
INVESTMENT THESIS
The adoption of additive manufacturing processes and techniques should continue at a geometric rather than linear
rate since both advances in technology (systems and materials) and user expertise will push each other at a
compound rate. We view these technologies as complementary to traditional manufacturing processes including
CNC machining, castings, injection molding, etc. A walk through most manufacturing cells reveals a multitude of
equipment and systems working in tandem. There has never been one piece of equipment that has created a
wholesale replacement of existing tools and capacity and we do not expect that will happen even with continued
adoption of additive technologies. We view these technologies as complements and as tools to create parts in new
ways, and also to create parts that were never physically or economically feasible before. This will also lead to fewer
parts in some cases, which can be a cost savings in itself, since one complex part could replace several simpler
designs especially with regard to castings, thus eliminating assembly and inspection time as well as inventory.
We continue to expect rapid prototyping to sustain high core growth rates, given the value recognized in the greater
speed to market opportunity. We anticipate this growth will come from service bureaus and manufacturing OEMs
incorporating additive manufacturing to accelerate product development for their customers, in almost every market
vertical including aerospace, consumer goods, general industrial, medical and transportation. Collectively we see
this trend benefiting the six companies we currently follow: ARCW, DDD, MTLS, PRLB, SSYS, XONE, which run
the spectrum from in-house use and rapid prototyping services to additive systems and materials for service bureaus
and OEMs to produce prototype and production parts at an accelerated pace.
Figure 1
Coverage Performance Revlative to S&P 500, Russell 2000
$140
$3,200
ARCW
SSYS
DDD
XONE
MTLS
^RUT
PRLB
^SPX
$120
$2,725
$100
$2,250
$80
$1,775
$60
$1,300
$40
$825
$20
$350
$-
$(125)
Source: CapIQ
ou
Ticker
Price
LTM Month Range
Fair
Value
Est. Upside
Current
High
Low
Performance
YTD
2013
High
Relative to DJIA
Low
YTD
2013
High
Relative to S&P 500 Index
Low
YTD
2013
High
Low
Additive Manufacturers
ARC Group Worldwide, Inc. ARCW
$18.10
$26
43%
$25.00
$2.47
82.0%
DDD
$49.26
$84
71%
$97.28
$43.35
-47.0% 161.3% -49.4%
Materialise NV MTLS
$11.66
$14
19%
$15.15
$9.85
n/a
n/a
-23.0%
18.4%
n/a
n/a
-22.2%
2.4%
n/a
n/a
-21.9%
Proto Labs, Inc. PRLB
$72.92
$92
27%
$94.23
$58.06
2.4%
80.6%
-22.6%
25.6%
-0.9%
54.1%
-21.8%
9.6%
-5.2%
51.0%
-21.5%
5.4%
$122.81
$142
15%
$138.10
$85.30
-8.8%
68.1%
-11.1%
44.0%
-12.2%
41.6%
-10.2%
28.0%
-16.5%
38.5%
-10.0%
23.8%
$24.92
$50
102%
$70.25
$24.34
2.4%
-62.2%
82.4%
-63.7% -13.6%
-66.4%
79.2%
-63.4% -17.8%
3D Systems Corporation
Stratasys Ltd. SSYS
The ExOne Company XONE
Additive Manufacturer Average
Source: CapIQ, JMS estimates
-58.8% 101.1% -64.5%
-6.0%
As Of:
311.6% -27.6% 633.4%
13.6%
144.5% -33.0% 122.9%
9/25/2014
-3-
78.6%
285.1% -26.8% 617.4%
-50.4% 134.8% -48.5%
-9.4%
-2.3%
119.6% -32.2% 106.9%
74.4%
282.0% -26.5% 613.3%
-54.6% 131.7% -48.3%
-6.5%
-1.8%
-13.7% 116.5% -31.9% 102.7%
INDUSTRY BACKGROUND
Like all publically traded companies, appropriate valuation will be debated. What should not be questioned is an
unprecedented path manufacturing technology has forged that will continue to advance and steadily change the way
products are designed and manufactured. While current technologies for additive manufacturing (AM) may seem
new, the roots date back over 30 years to the original stereolithography technology created by Chuck Hull, CTO and
co-founder of 3D Systems, that is still being used in a much more advanced form. FDM technology dates back 25
years, and is the cornerstone of SSYS’s systems and many consumer platforms. FDM was invented by Scott and
Lisa Crump, co-founders of Stratasys.
According to the Wohlers Report 2014, over the past 26 years the additive manufacturing industry has grown at a
CAGR of over 27%, yet remains at less than a 10% penetration rate. Roughly 60% of all accumulated installed units
are professional systems, while the remaining 40% are personal systems. In 2013 the market size for all products
and services was $3.07 billion on a worldwide basis, reflecting a 5-year CAGR of 26%. Assuming full market
penetration implies an addressable market of over $35 billion. McKinsey Global Institute research suggests that AM
could have an economic impact of $230-$550 billion per year by 20251.
According to IBIS World, products represent about 74% and maintenance and services about 25% of the total OEM
market. Material sales represented about 40% of the OEM market (accounted for in product sales). These numbers
do not include revenue generated through the production of parts by service bureaus. 3D printing and rapid
prototyping service in the U.S. is estimated to be a nearly $500 million market alone with a trailing five year average
annual growth rate of 8.3%2. Growth in services has been outpacing products since 2005, according to data
compiled in Wohlers Report 2013, but except for the recession of 2009, both segments have shown strong double
digit growth rates. In 2012 (latest data available) final part production accounted for 28.3% of the then total $2.2
billion market.
The most commonly known additive manufacturing technology is 3D printing, because of the multitude of articles
written and the interaction consumers can have with this technology (Cube, MakerBot, etc.). In general, 3D printing
describes a process where parts are created by either dispensing material in successive thin layers from a print head
or solidifying thin layers of lose material (solid or liquid) using light, lasers or a binding agent.
WHAT IS ADDITIVE MANUFACTURING?
PROFESSIONAL PRODUCTION SYSTEMS
When discussing our investment thesis surrounding the positively disruptive nature of additive manufacturing, we
focus on the capabilities and technologies involving professional and production systems. Since DDD founder
Chuck Hull invented SLS over 30 years ago, AM machines have matured from rapid prototyping using a single
(often plastic) material to advanced systems capable of multi-materials including metals, for end use parts that often
match or exceed the quality of a part manufactured using traditional methods. Analogous to their two-dimensional
counterparts, professional production systems are similar to a centralized copy machine in that they are capable of
high quality, increased functionality, and greater quantity than the personal home printer and come with a higher
price point.
The distinguishing characteristics between a consumer grade machine and professional grade differ among the
various OEMs and there are shades of grey among the technologies and capabilities. Below (Figure 2), we have
summarized the characteristics provided by Stratasys as noted in its white paper: 3D Printers vs. 3D Production
Systems: 10 Distinguishing Factors to Help You Select a System.
1
2
McKinsey Global Institute, Disruptive technologies: Advances that will transform life, business and the global economy, May 201
IBIS World estimates
-4-
Figure 2
3D Printers vs. Professional Systems
Characteristic
3D Printers
Professional
Price:
$10-000-$50,0000
$50,000+
Capacity/Build Envelope:
< 10"x10"x10"
> 1'x1'x1'
Materials Available:
1-2
8+
Speed:
Depends (N/A)
Depends (N/A)
Ease of Use:
Occasional User
Trained Operator
User Options:
Minimal
Substantial
Accuracy:
Acceptable to Good
Good to Excellent
Facilities: Office-like Environment Lab or Shop Environment
Centralized Operations: Distributed (per machine)
Centralized
Overhead:
Minimal
Moderate to High
Source: Stra tas ys Whi te Pa per: 3D Printers vs. 3D Production Systems
CONSUMER GRADE (PERSONAL) 3D PRINTERS
It is important to point out that the term Consumer is a misnomer in this space, since we know of engineering
departments that have a number of these units for prototyping as well as for tooling for manufacturing. The
Consumer market is not defined by the end user, but rather, by price point that reflects system capabilities. In
general Consumer grade printers describe systems in the sub-$5,000 price range. Users range from home use to
engineers at Lockheed and NASA and dental labs. Hobbyists are obviously included in this segment, but do not
necessarily represent the greatest proportion of Consumer end users.
Despite rapid adoption of
additive manufacturing,
it will complement not
replace subtractive
processes
Consumer grade (Personal) 3D printers have created a lot of excitement and stock price
volatility. While we do not envision a 3D printer in every home just yet, it is critical to the
professional adoption of additive manufacturing that more current and future manufacturing
and design engineers become exposed to AM technology and this category is ideally suited to
provide it.
In many circumstances, what can be produced using additive techniques is only limited by a product/manufacturing
engineer’s imagination. Engineers need to learn to think differently, which takes exposure and experience. All
grades of 3D printing and the multitude of other additive manufacturing technologies will provide that. Please refer
to our CONSUMERS discussion for an in-depth discussion of the Consumer segment.
ADDITIVE VS. SUBTRACTIVE MANUFACTURING
Additive manufacturing encompasses more than 3D printing, which we cover later. The basic premise is that a part
is built up through fusing successive layers of material rather than machining away unwanted material until the
finished part is complete. The later is known as a subtractive manufacturing and is considered more traditional
manufacturing. Most manufacturing that investors have been exposed to, especially commodity high volume
production parts, are made from a subtractive process.
Subtractive manufacturing processes (milling, drilling, cutting, grinding, etc.) result in a high percentage of the
original part being turned to scrap. Castings, forgings, raw feed stock of various materials are machined to a net final
form. From that stage they can be welded, assembled with other parts and fastened as part of larger assemblies such
as engines, transportation equipment and machines.
-5-
Figure 3
Additive
Subtractive
There are benefits to both subtractive and additive manufacturing, but the biggest benefits of the subtractive processspeed, repeatable accuracy, and cost- we believe will narrow over time as additive technologies continue advancing.
Despite the rapid adoption rates of additive manufacturing, we do not forecast subtractive processes being replaced
en masse. What should be expected is that additive technologies will increasingly be placed alongside current
traditional manufacturing equipment to complement them, not replace them, since features such as aerospace quality
threads or tight dimensional tolerances +/- 0.001” or less cannot be achieved through the additive process alone.
Figure 4
CONFORMAL COOLING CHANNELS
Another area that should be exploited is the advancement in
mold design that additive manufacturing affords. When liquid
materials such as polymers and metals are poured into pattern
molds, water or other coolants are passed through cooling
channels as the mold sits, in order to control the rate the part is
brought down to ambient temperature. Mold designers can
now incorporate conforming cooling channels in their pattern
designs. The channels are called conformal since they can be
designed to mirror (conform) the exact shape of a part along
the entire surface (See Figure 4).
Due to traditional manufacturing constraints, cooling channels
are typically created by intersecting straight drilled holes and using plugs to control the flow of coolant. However,
this is a very limited and relatively crude process, since many parts have varying geometry, such as curved surfaces,
and even with many holes drilled, optimal cooling is not achievable. Conformal cooling channels can be created
during the mold design. Through software optimizing tools, ideal cooling channels can provide precise cooling rates
across an entire part. This not only speeds cycle time and lowers cost, but can create material properties not
previously achievable. Conforming cooling can be used for both the injection molding industry for the tooling to
reduce cycle time as well as the castings industry.
-6-
CASTING
While generating little fan fare or headlines, one of the greatest sources of opportunity for AM, in our view, is to
support the $120+ billion global castings market. The current basic casting process begins with part drawings, either
physical drawings or CAD (Computer Aided Design) in 2D or 3D. Physical patterns representing the desired part
are made, typically out of wood, and placed in a mold or core box (cores necessary if internal geometry is involved).
Casting sand mixed with a binder is packed around the patterns to form the mold package. The halves of the mold
(cope and drag) are separated and the pattern is removed. The mold is then reassembled with the core (if applicable)
ready to accept the poured metal. Once cooled, the casting is removed from the mold to complete the process.
A more advanced method is to print the mold and core (if necessary) with a 3D sand
printer, which eliminates the need for physical patterns, since the pattern is a digital 3D
CAD file. Patternless cores and molds for castings could be the most revolutionary step
taken in the over 5,000-year history of the oldest form of manufacturing known.
Competitive pressure, margin pressure and speed to market can all be addressed by
delivering faster, more complicated parts at a lower cost, simultaneously around the world. We believe this not only
reduces casting variability by foundry, but improves pricing to the customer.
Patternless molds could
be the most revolutionary
step take in the 5,000
year history of castings
Foundries that incorporate this technology can turn around more complex castings faster and cheaper since they will
reduce their own cycle time, but also improve quality. It is estimated that the pattern-making step alone accounts for
about 70% of the total production time for a casting. Foundries can pass some of the savings to customers to drive
price advantage while also improving margins. In our view, the early adopters will have significant advantage over
followers. We believe this technology can revitalize foundry demand for those who adopt, and drive those who
ignore it out of business. This could also help smaller foundries improve competitiveness as throughput can be
increased within the same foundry footprint. Aside from printing the cores and molds using AM, the remaining
processes of a foundry are relatively unchanged.
While about 80-90% of castings worldwide are cast using furan/silica sand to create the mold, there is a trend to use
other inorganic combinations to reduce volatile organic compounds (VOCs) during the pour and to handle other
metal alloys. When molten metal comes in contact with the traditional organic mold compound, it releases VOCs.
ExOne is working on a number of alternatives to furan/silica sand for customers wanting alternatives that are more
environmentally compatible. However, because of the difference in physical properties, the alternative mold
compounds need to be hand packed instead of automated with machines and in some cases the curing process is
achieved through an industrial microwave oven.
This makes a 3D printed mold even more economical, since the molds can still be printed with alternate materials.
Most recently, ExOne has added phenolic and sodium silicate to its binder portfolio. The sodium silicate binder
offers a more environmentally friendly process, reducing fumes and gases during the pour. The phenolic binder
combined with ceramic sand allows for higher strength molds and cores to withstand higher heat alloys. This blend
also reduces expansion of the molds and cores thereby improving the quality of the casting.
It is estimated that with traditional casting methods it can take 18-20 weeks to create a finished mold for a new part,
versus about 5 days using additive manufacturing systems. Manufacturers can also print several molds
simultaneously in one print job depending on the size of the mold and printer used, which is not currently possible
with the traditional pattern to mold process. In one example, which we detail below in Figure 5, ExOne was able to
produce a large complex casting with cores in just 36 hours versus what would take 3-5 months traditionally.
-7-
Figure 5
Traditional Casting Process: ~18 Weeks
Create Drawing by Hand or CAD
Send Pattern Out for Creation
Receive Pattern; Create Mold
Pour Metal into Mold to Produce
Part
Process with an ExOne Printer (Patternless): 5 Days
Use 3D CAD to Design Mold
Print Mold
Pour Metal into Mold to Produce
Part
DIMENSIONAL TOLERANCING
While additive manufacturing technologies continue to improve and have become more refined, dimensional
accuracy and repeatability in part production still need to improve. For some applications, tight tolerances (ie: +/0.001”) may not be necessary, but many features of aerospace parts are held to those exacting standards and in some
cases tighter. Tolerance defines how much the nominal feature dimension can vary so that fit and function are not
affected beyond design considerations. For example, if a shaft is to mate with a bearing race there needs to be
tolerances assigned to the outside diameter of the shaft and inside diameter of the race, so in the total population of
parts produced, both parts mate to design specifications. Without proper tolerancing you run the risk of improper fit
of mating surfaces such as the bearing inside diameter being smaller than the outside surface of the shaft.
This is one example of why
traditional manufacturing
equipment will remain in
demand
In its infancy, additive manufacturing was used primarily for prototypes, where tight
dimensional accuracy is less critical. As the technologies have advanced and become more
widely adopted, additive manufacturing is being used increasingly for functional production
parts as well as prototypes.
For those parts requiring fine feature details, some additive technologies are better than others. For example,
Stratasys conducted a study of three random parts from separate, previously conducted fused deposition modeling
(FDM) repeatability studies to determine the stability, accuracy and repeatability of FDM. The parts from the
previous studies had been “haphazardly” stored for over a year when Stratasys reevaluated them. The results
revealed that the parts were virtually unchanged with no warping and dimensions that fell within the tolerances of
the original studies, concluding that FDM meets to accuracy, repeatability and stability demands of traditional
manufacturing3. With the range of additive technologies available currently, often there is a tradeoff between speed
and accuracy, a challenge that, given our conversations with management and customers, is at the forefront for
systems manufacturers’ R&D efforts.
For plastic or metal parts requiring tight dimensional tolerances, it is still best to use subtractive methods such as
with a CNC machine to achieve consistent, precise results. For example, aerospace quality threads for a bolt or hole,
or even general industrial applications requiring dimensional accuracy for strength are best achieved on a CNC or
other milling machine rather than attempted to be produced during the additive process. This is one example of why
3
Stratasys White Paper: The Accuracy Myth, Bonnie Meyer
-8-
traditional manufacturing equipment will continue to be in demand and work in concert with newer manufacturing
methods like AM. It will be years, if ever, before an AM system can produce features like an aerospace quality
thread with repeatable tight tolerances, especially for critical applications, in our view.
TOOLING, FIXTURES AND JIGS
Figure 6
Although a seemingly small part of the manufacturing process, one of
the g reatest opportunities identified for additive manufacturing is the
production of tooling such as fixtures and jigs. Similar to the way an
egg carton holds an egg in place, these are the component pieces that
hold a part, or guide machining. Jigs and fixtures provide the same
benefit. We have seen this application in the medical industry, where
AM technologies are used to print custom surgical guides which
provide surgeons with a higher degree of precision at a fraction of the
cost it would take to produce the guide using traditional methods, if
even possible.
Source: The Plastic Works
The less obvious benefit, however, has been realized by many companies on the manufacturing floor after they
purchase the machine for other uses. In our discussions with several service bureaus, we have uncovered a number
of examples where the company bought an AM machine to enhance their rapid prototyping capabilities, but then
found ways to benefit from the technologies within their own production operations. Most often this has been by
producing jigs and fixtures used throughout the manufacturing process in an effort to improve quality and decrease
cycle time.
Often, the reduction in
production time by having
the tooling resulted in cost
savings equal or exceeding
the initial machine cost
The common theme we have heard from service bureaus using AM to print their own jigs and
fixtures has been that before they owned the machine, the cost-benefit tradeoff for producing
the tooling was not favorable in many cases; it took too much time to make the tool and often
it was just easier to continue to operate without. Once the machine was purchased however,
the tradeoff became much more favorable as the time to create the tool declined dramatically
and the benefits were realized almost immediately.
Additionally, companies have found opportunities to benefit from AM in workplace organization. One service
bureau with over 150 injection molding machines required two tools every time they changed over each machine; a
nozzle and a knock out rod. These tools were typically laid loosely in the workspace and on average, took workers
17 minutes to locate. Using their newly acquired FDM machine, the company printed custom nozzle holders and
knock out rod holders for each injection molding machine so that the tools they needed would be in exactly the same
place for each machine every time they were needed. This saved the company 17 minutes per changeover for each
of the 150 machines and resulted in cost savings estimated at $21,150 per year on these two parts alone.
Printed Tooling, Fixtures and Jigs
Jig
Check Fixture
-9-
Drill Tool
PART REDUCTION
Due to the increased difficulty in controlling consistent material properties of larger, more
complex parts, larger assemblies of smaller castings are used to construct final products, either by
welding or fastening them together. This not only increases the weight of the final product, but
also the cost to produce it, since additional manufacturing and assembly time as well as
inspections are required. By combining patternless molds with conformal cooling channels,
material properties can be controlled over larger more complex castings, eliminating the need for
We expect AM will
continue to gain greater
acceptance as more
experience is gained by
manufacturers
welds or fasteners.
More complex parts can also be created through direct printing of the part whether plastic, polymer, or metal. Either
process will simplify the Bill of Materials, reducing part numbers, inventory, the volume of spares, and associated
inspection costs for the assemblies or welds. All of these benefits are magnified when including the complexities of
global logistics.
DIRECT PART PRODUCTION
Designs can be optimized
for strength and weight
and take on completely
organic shapes
Additive manufacturing not only reduces manufacturing scrap by introducing only slightly
more material than is ultimately needed, but it can offer significant weight savings with greater
strength. Through advances in 3D CAD (Computer Aided Design) coupled with advanced
FEA (Finite Element Analysis – See our RELATED SOFTWARE section), designs can be
optimized for strength and weight and take on completely organic shapes.
Additive manufacturing also provides the ability to build in interior support structures, to increase strength with a
minimal weight penalty, which is virtually impossible, if not prohibitively expensive, using traditional methods. Ask
yourself why the interior support structure of a leaf isn’t solid or uniform or why when you drive over a bridge the
structure isn’t one block of material? Just these few examples illustrate that additive manufacturing offers options to
make parts differently, and make parts that are impossible to create any other way.
Figure 7
Traditional Part Production on CNC Machine (Subtractive)
Create Drawing by Hand or CAD
Machine Away Metal to Produce Part
Post Process Part – 5.78 lbs.
Process with Printer
Use 3D CAD to Design Mold
Print Part
- 10 -
Post Process Part - 4.57 lbs
COMPLEX GEOMETRIES
Just taking forms created by nature, including skeletal structures and trees, illustrates the efficient combination of
weight vs. strength. Tree limbs are thinner at their tips than where they connect to the trunk through natural strength
to weight optimization. Human and animal limbs are similarly thicker and stronger at their connecting joint than at
the end of the limb. Both are examples where nature accounted for the change in strength required due to the change
in loading from end to end. Under the surface of a leaf is a complex lattice structure that is formed to give the leaf
the proper strength and flexibility with optimized weight required.
Additive technologies are
only going to get more
sophisticated at higher
speeds and lower costs
Applying these principles through traditional manufacturing is impossible in some cases, and
otherwise prohibitively expensive. A phrase that is often used to describe the advantages of
additive manufacturing is “complexity is free”. Meaning, additive technologies are not
constrained by increasing part complexity and the cost is the same (all else being equal).
Additive processes are virtually agnostic to part/shape complexity and can create varying geometry (tree
limbs/leaves/skeletal structures) across a whole part at the same cost/speed/consistency as a uniformed geometry
(straight bar of steel). The systems do not know that what they are making is any more complex than a simple solid
cube. As a result, we expect additive systems will continue to gain greater acceptance as more experience is gained
by designers and manufacturers and the technologies advance.
This break from traditional design/manufacturing practices will take time to infiltrate production lines, but the
benefits are undeniable and that will foster innovation and adoption. Not only can geometry vary across a section,
but material properties can as well. It will take time for enough experience to be gained in order to apply this
attribute, but it offers very exciting opportunities and illustrates that, for now, the primary limitation is creativity,
which always evolves.
One thing is clear about additive technologies: They are not going away and they are only going to get more
sophisticated at higher speeds and lower costs. Along with further advancements in materials, we expect all current
headwinds to broader and deeper adoption are surmountable. When thinking about additive manufacturing, it is
worth thinking back to the early experiences with personal and business computers. What
seemed cutting edge 25 years ago for a desktop computer costing over $10,000 is now on
For now, the primary
someone’s wrist for less than $100. There is now more computing and communications
limitation is creativity,
power in a single device that fits in palm of your hand than existed less than 10 years ago
which always evolves
with multiple devices.
CASE STUDIES
While over longer periods of time aspects of AM will replace traditional manufacturing, in the more medium term
we would look to see further penetration of technology alongside traditional manufacturing. There are a variety of
reasons for this, including speed, accuracy, repeatability, cost, and materials. Long-term we still expect traditional
manufacturing to work alongside additive technologies, but we expect all of those headwinds to abate and
penetration of additive technology to accelerate. A simple walk through a manufacturing plant will illustrate the
multitude of technologies that work in concert and complement one another. There is no one machine or one
technology that can manufacture a complete assembly of parts and we believe that will continue to be the case.
Currently, the greatest acceptance for production parts through additive manufacturing are in the medical, dental,
aerospace, and defense end-markets. These are not only relatively high priced markets for products, but ones from
which most product technology advancements are developed. Production levels are relatively low, quality control is
extremely high, weight, reliability, safety, and durability are all highly valued, so customers generally pay more for
products in these end-markets, which provides incubating markets for additive manufacturing to grow.
- 11 -
GENERAL ELECTRIC
A strong affirmation of the long-term prospects for additive manufacturing is General Electric’s (GE- NR) purchase
of Morris Technologies in November 2012. GE sees tremendous prospects for its aerospace unit to significantly
reduce the weight of its engines through additive manufacturing. While currently a theoretical number, according to
the August 2012 edition of Additive Manufacturing, GE engineers estimate that it is possible to reduce the weight of
a 6,000 pound engine by 1,000 pounds (roughly 17%).
One of the issues GE faced was, given its production demands, the additive capacity it
estimated needing would require most of the direct metal laser sintering (DMLS) capacity in
North America, hence the acquisition of Morris Technologies, a leading additive
manufacturing service bureau in Cincinnati, OH. Another reason for the acquisition was for
both vertical (aerospace) and equipment (EOS) expertise. Inexperienced operators will not
achieve the same benefits as users versed in both the end-market applications and how the machine performs and
operates under certain parameters. In the case of aerospace, medical, and defense end-markets, facilities require
certification, which Morris also brought to GE in one efficient transaction.
Both factors are positive
for AM OEMs for their
equipment and materials
Based on discussions we have had with various industry participants and announcements since its acquisition of
Morris of further investments by GE, it is clear the company plans to leverage AM across as many of its industrial
end-markets as possible. GE announced this July that it is investing $50 million for 10 additional AM systems at its
current 300,000 square foot Auburn, AL facility to mass produce its LEAP fuel nozzles. These investments put
pressure on its competition to level the playing field as well as for suppliers to include AM capabilities if they are to
continue to support GE’s manufacturing efforts. Both factors are positive for AM OEMs for their equipment and
materials.
FORD MOTOR COMPANY
In a recent article in Additive Manufacturing magazine, Ford Motor Company (F - not rated) discussed its
expanding use of rapid prototyping technologies. (See our Rapid Prototyping Will Remain A Secular Growth Driver
note) Ford is casting operable prototype engine parts in days versus months with no tooling. The first 100 EcoBoost
engines were prototyped using patternless sand mold printing (XONE) and were lab tested for
up to 1,000 hours simulating 100,000 road miles, so the term prototyping has a broad
Ford’s use for operable
definition. Ford credited the flexibility of this technology to allow a variety of designs to be
prototype engines will
tested, producing better vehicles than through traditional prototyping methods. Similar to
force competition to
GE’s adoption of AM, Ford’s incorporation of AM for operable prototype engines will force
reduce design cycles and
its competition to similarly reduce their design cycle and leverage AM technologies, which is
leverage AM technologies
positive for AM OEMs.
SPX CORPORATION
We have also seen the impact on traditional manufacturers within our own coverage (Traditional Manufacturer
Leverages Additive Manufacturing). Recently, the February 2014 edition of Additive Manufacturing featured SPX
Corp (SPW – BUY), who contracted a foundry to create a new pattern for a 500 lbs. pump impeller used in one of
its pumps. The original casting relied on a traditional wood pattern. In order to improve the design with shorter lead
time, the company created a 3D CAD model of the part. From the CAD file, a new pattern was printed using
Stereolithography (SLA). The result was an accurate pattern that required significantly less machining and finishing
at equal cost and in half the time as it would have taken traditional manufacturing techniques. In addition, the pattern
could now be store digitally, reducing the cost of storing, maintaining and retrieving the wood pattern (See example
in Figure 8).
- 12 -
Figure 8
Source: The ExOne Company
SUMMARY OF OTHER CASE STUDIES
Case 1:
Customer Need: Graduate students at the University of Pittsburgh needed to produce a casting
mold used for a tissue engineering application that incorporates complex conformal cooling
channels for a reasonable cost.
Solution: Using an ExOne metal printer, the customer met the design criteria by printing the
molds in 6 workdays for $105. The alternative would require both milling the molds and drilling
the cooling channels (not conformal) which would take 5-10 workdays and cost $300.
Case 2:
Customer Need: Invisible Hand, LLC (ToughWare Prosthetics) needed to produce complex
prosthetic hand components using alternatives to investment castings and finish machining at a
cost effective price.
Solution: Using an ExOne metal printer, the customer was able to produce finished parts, using a
stainless steel/bronze matrix in 2-3 weeks at a cost of $25-$150 each. The alternative method
required both investment casting and finish machining that takes 2-8 weeks at a cost of $250$1,000 each.
Case 3:
Customer Need: Boeing was looking at ways to reduce cycle times, build tools more quickly and
in some cases, eliminate the need for tooling and other post-processing steps altogether. The
process would be used for parts on prototype aircrafts and vehicles, as well as limited-production
parts.
Solution: Boeing invested in a 3D Systems SLS machine for its flexibility, material variety,
potential use in research and increasing potential with metal materials, using the machine to build
more than 400 parts in the span of five months. The cost savings associated with eliminating man-
- 13 -
hours, tooling costs, unnecessary rework and post-processing resulted in the machine paying for
itself in less than a year.
Case 4:
Customer Need: A motorcycle accident left a patient with severe facial injuries resulting in a
sunken left cheek and eye socket, and impaired vision in his left eye.
Solution: Surgeons and researchers at CARTIS (Centre for Applied Reconstructive Technologies
in Surgery) used surgical guides and bespoke implants printed from Renishaw and LayerWise.
CARTIS streamlined the entire process by using 3D Systems Geomagic Freeform 3D design and
sculpting software. The new process not only improved the outcome of the surgery but it also
made it more comfortable for the patient.
Case 5:
Customer Need: Jaguar Land Rover wanted to make a functioning prototype using flexible and
rigid materials.
Solution: The product development team invested in an Objet Conex500 PolyJet printer capable
of producing rigid and flexible materials with different mechanical and physical properties; the
new process helped reduce the development cycle. What started as printing a complete fascia air
vent, became over 2,500 printed parts using the resin-based rapid prototyping technology.
Case 6:
Customer Need: Physicians at Cincinnati Children's Hospital had been working with a teenage
patient who was born with a heart tumor, frequently causing an irregular heartbeat. Throughout his
childhood, he underwent a number of procedures to regulate his heartbeat, including four open
heart surgeries and implanting a pacemaker.
Solution: Collaborating with The Heart Institute and Materialise’s HeartPrint service, the
physicians used the patient’s CT data to create an accurate physical model of patient’s heart,
which allowed them the ability to assess the surgical options, simulate the procedure preoperatively and determine that invasive surgery was unnecessary.
Case 7:
Customer Need: Surgeons needed planning and guide design services for treatment of poorlyhealed double radius fracture, which left the patient unable to rotate his forearm.
Solution: Using Materialise’s surgical planning services and guide design, physicians were able to
print a custom guide to properly position the bone for full arm functionality. Using the preplanning services and surgical guide decreased the surgery time from 3 hours to just 45 minutes.
Case 8:
Customer Need: Mechanical engineers at BlueRobotics had ambitions of exploring the ocean
using an autonomous solar “boat”, but were in need of an affordable underwater thruster that could
withstand the corrosion from the seawater, and last longer than the standard 50 hours of operation
for a traditional unit.
Solution: BlueRobotics designed and stress-tested its prototype, which had been made using
stereolithography–built parts. The engineers then turned to Proto Labs for CNC machining of
components and low-volume production tooling, then finally injection molding of end use
components
Case 9:
Customer Need: Guitar and amplifier manufacturer, Fender had been outsourcing their new
product development rapid prototyping needs to a service bureau for years, but found that while
- 14 -
rapid prototyping was significantly faster than traditional prototyping, outsourcing often meant it
took 2-3 weeks to receive a part, slowing down projects
Solution: Soliciting the advice of their service bureau, Fender chose to bring their prototyping
needs in-house by purchasing their own dedicated Stratasys Objet Eden350V polyjet printer which
allowed them to accelerate their time to market for new products and product enhancements
Case 10:
Customer Need: A baby was born with a rare, life-threatening disorder that threatened his ability
to breathe, even with the help of a ventilator.
Solution: Physicians at the University of Michigan printed a biodegradable splint that was
implanted into each of the baby’s two bronchi, with the hope that natural tissue will form around
the mold such that over time, as the splint dissolves, the child will have a fully functioning airway.
These are just some of the many examples we have found of established manufacturers recognizing the benefits of
AM coupled with traditional manufacturing capabilities. If viewed from a high elevation, the aggregate picture
illustrates the positively disruptive yet complementary nature of these technologies, particularly within the largescale manufacturing space.
COMMON ADDITIVE MANUFACTURING PROCESSES
FUSED DEPOSITION MODELING (FDM)
FDM is a build process that is similar to a hot glue gun. The print head deposits heated thermoplastic material layer
by layer according to the 3D CAD design. The output typically has visible layer lines and as a result, this process
lends itself to concept modeling, pre-prototyping, prototyping, fixtures and end-use parts. This is the method of
additive manufacturing with which most consumers are familiar.
Figure 9: FDM Process
Source: http://www.3dmaterialtechnologies.com/3d-printing.html
STEREOLITHOGRAPHY (SLA)
The SLA build process is similar to that of DMLS (below) except that instead of a laser being applied to sinter
together metal powder particles, a laser is used to solidify liquid resin layer by layer into a final component. The UV
laser is focused on a platform immersed in a tank filled with liquid resin. The resin is sensitive to UV light, so when
the laser traces the cross section of the design on the platform, the resin hardens. Once the build is complete, the part
is cleared of any excess resin and cured in a UV oven to harden. Once cured, support structures required in the build
process are removed. This form of additive manufacturing produces a superior degree of accuracy, surface finish
and precision and is often used to create casting patterns for injection moldings or to produce functional prototype
parts early in the design process.
- 15 -
Figure 10: SLA Process
SLA was invented by 3D Systems founder Chuck Hull in 1986. Unlike SLS (below), SLA does require support
structures in the build process for certain features.
SELECTIVE LASER SINTERING (SLS)
SLS is similar in nature to SLA and DMLS (below) in which a laser is used to fuse powdered material into the
desired shape. Materials used in SLS typically include plastics, polymers, ceramics, and glass. As each layer of
powdered material is solidified, the print bed is lowered, allowing for the continued buildup of the part. Because the
product is built within the powder bed, the SLS build process does not require support structures that are often
needed in other AM processes, such as FDM. This also serves to minimize waste, since the uncured power can be
blended with new material and reused. This process is typically used in place of traditional injection molding for
prototypes and small-run production parts.
DIRECT METAL LASER SINTERING (DMLS)
Direct Metal Laser Sintering is a metal fabrication process that is similar to selective laser sintering (SLS) in that
data from a 3D CAD (computer-aided design) model is “sliced” into thin layers and built up one layer at a time by
directly applying a focused laser to a thin layer of metal powder, distributed on the print bed by a roller or scraper,
melting the material and fusing it together in the shape of the part. The advantage is a fully functional component
capable of features that are not manufacturable using traditional machining techniques, such as internal features and
complex geometries. For complex parts, this process can takes significantly less time than traditional machining
techniques with nominal material waste. Also, depending on the part geometry and system used, support structures
can be avoided with this process and the loose surrounding metal powder can be reused for subsequent part
production.
Figure 11 : DMLS Process
- 16 -
BINDER JET
Binder jetting is a process in which a liquid (binder) is deposited from a print head onto a bed of powdered material
(plastic, sand or metal). The binder works as an adhesive, joining together the particles of powder layer by layer
similar to SLS or DMLS. As we previously described, binder jetting can be used with a variety of materials, but we
view the metal and sand powder binder jetting as being the most disruptive to traditional manufacturing techniques.
MULTIJET PRINTING (MJP)
MJP is a rapid prototyping process similar to FDM in that the print head deposits material one layer at a time. The
difference, however, is that rather than using heat to soften the material, MJP uses piezo print head technology,
which uses piezo crystals and small electrical charges to release tiny droplets of material, almost like spray paint.
This results in an end product that has high resolution and rivals the precision of SLA components. This technology
is useful for photocurable plastic resins or casting wax materials, making its uses in consumer, medical, dental,
jewelry and aerospace applications endless.
LASER CLADDING
Laser cladding involves the fusing together of dissimilar metal materials. Similar to DMLS, the build process
involves powdered metals being fused together by a direct energy source, typically in the form of a laser. This
process is typically used in place of traditional welding methods such as TIG (tungsten inert gas) for repairs because
of the localized heat input which reduces the potential for distortion. Laser cladding is extremely useful when
working with materials that are difficult to weld, such as high temperature nickel-based alloys and carbon steels.
Due to the small “melt pool”, the process enables complex geometries, restorative buildups and a part that is
produced near-net shape. This process is commonly used for repairs, as well as applying corrosion-resistent
protective coatings4. For an exmple of laser cladding, see our HYBRID MACHINES section.
SHEET LAMINATION
Sheet lamination is a process in which sheets of materials are bonded together to form an object. The sheets can be
coated with an adhesive, which would result in a plywood-like finished part, or may be thin sheets of metal or foil
that melt together to form metal parts.
HYBRID TECHNOLOGIES
A new and compelling advancement in manufacturing is the recent introduction of hybrid machines. This basically
describes any combination of additive and subtractive processes in one cell. Some machines use laser cladding
(other additive technologies will be introduced) in various additive stages with subtractive machining to produce
surfaces, internal or complex features, and dimensional precision not achievable by either additive or subtractive
alone. This would be most useful when additive steps are required in between needed machining, since swapping the
part from an additive to subtractive machine for this would be grossly inefficient. We discuss this technology further
in our HYBRID MACHINES section.
4
http://www.sulzer.com/en/Products-and-Services/Coating-Equipment/Laser-Cladding
- 17 -
MATERIALS
As we discussed above, each additive manufacturing technology is conducive to specific materials. With the
continued development of manufacturing processes, machine manufacturers and users are rapidly developing new
materials to meet the wide range of applications for additive manufacturing.
Figure 12
Material Families and Additive Manufacturing Processes
Material
extrusion
Polymers, polymer blends
Composites
Metals
Graded/hybrid metals
Ceramics
Investment casting patterns
Sand molds and cures
Paper
X
X
Vat Photopolymerization
Sheet
lamination
Powder bed
fusion
X
X
X
X
Material jetting
Binder jetting
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Directed
energy
deposition
X
X
X
X
X
X
Source: Wohlers Report 2012
In order to appreciate the range and capabilities of the variety of materials available within additive manufacturing,
we believe that it is most helpful to consider some examples.
PLASTICS/POLYMERS
PLASTIC (ABS)
When NASA contracted Lockheed Martin’s Advanced Technology Center (ATC) to build the James Webb Space
Telescope, ATC enlisted the help of their MakerBot Replicator 2 printer. Using the Replicator 2, which builds using
thermoplastic ABS or PLA filament, engineers printed fully-functional plastic prototypes that could be used for part
development and testing while the metal parts were being cryogenically tested for their ultimate launch into space.
The applications for plastics in 3D printing are virtually limitless and the permutations of plastics, polymers and
composites are endless as more and more end users find ways to integrate additive manufacturing into their product
design and development.
NYLON
Figure 13
When Nike debuted its Vapor Laser Talon football cleat at the 2013
Super Bowl, it featured an ultra-light plate printed on an SLS machine. In
order to meet the performance specifications, including optimal traction,
flexibility and light weight, the company used a proprietary nylon
material. Printed nylon parts can be made to be either flexible, like the
plate used on the cleat, or rigid and strong, such as when it is used to
make snap-fit panels and protective components. Nylon is also frequently
used in aerospace, automotive and other consumer goods.
- 18 -
COMPOSITES
Figure 14
The U.S. Army is using its own composite material to create human skull replicas in
order to study how explosive blasts affect the inside and outside of the skull. In the
past, this study was performed using skulls from cadavers. The issue with these donor
skulls was that they often did not share the same skull properties of a 20-30 year old
soldier. Researchers have resolved this issue by taking CT scans of real humans and
3D printing replica skulls using a composite material (See Figure 14), which will
better simulate what exactly happens in an explosion. The research and information
gathered from these replicas will hopefully result in safer military helmets, shells, and
other protective gear5.
Source: 3dprint.com
DIGITAL MATERIALS
One of the unique advancements we have seen in the space is the development of digital materials. SSYS has been
introducing digital materials, which create custom polymers and matrix structures to achieve specific characteristics
(See out 9/9/14 note). We expect other companies to take advantage of the additive process to create not only
custom polymers, which can be adjusted at each layer creating endless part material
properties of strength and flexibility versus weight. We also expect plastics and polymers
Hybrid material and matrix
will be blended with metals, ceramics and other materials to meet unique operating
structures will lead to new
design options for
parameters not achievable through subtractive methods alone. While now aimed at
production only achievable
prototyping, we feel these hybrid material and matrix structures will lead to new material
through AM technology
options for production only achievable through AM technology.
METALS
Additive manufacturing using metal materials is one of the greatest opportunities for adoption, in our opinion.
According to Wohlers Report 2014, 348 3D metal printers were sold in 2013; a +75.8% increase over 2012, in
which 198 machines were sold (See Figure 15). We recently met with an industry contact, who estimated that within
the aerospace industry alone, there is demand for several hundred systems to produce metal parts (RAPID
Conference Illustrates Growing Demand). The following list of metal produced parts is not exhaustive and more
metals and applications are continuing to be developed for additive processes. Many of the OEM’s systems are
capable of producing parts in a variety of metals. Given the rapidly changing portfolios it is best to refer to each
company’s website for an updated list.
Figure 15: Metal AM Machines
TITANIUM
Recently, UK-based Renishaw collaborated with Empire Cycles,
a leading British bicycle design and manufacturing company to
create a printed titanium bicycle frame. The frame, printed in
titanium alloy sections and then bonded together was 33%
lighter than the frame built using traditional methods out of
aluminum alloy. The resulting frame was extremely strong,
featured hollow structures, and was corrosion resistant.
5
3dprint.com: U.S. Army to 3D Print Synthetic Human Skulls in Order to Create Better Protective Gear For Soldiers, Whitney Hipolite
- 19 -
COBALT-CHROME
One of the most widely publicized projects involving AM is GE’s use of printed fuel nozzles on its LEAP engine.
The fuel nozzles are printed using a cobalt-chromium alloy due to its lightweight, strength, durability and corrosion
resistance. The new nozzle, made from a single part, is 25% lighter and as much as 5x more durable that the current
nozzle which contains 20 different parts. Each engine contains 19 such nozzles, dramatically reducing the engine’s
weight. The LEAP engine is expected to enter service in 2016 and has already become GE Aviation’s bestselling
engine, with more than 6,000 confirmed orders valued at approximately $78 bil 6.
STAINLESS STEEL
English Racing worked with Metal Technology Inc. (MTI - Private) to 3D print a stainless steel pulley for a
Mitsubishi Evo, one of English Racing’s high performance sports cars. The Evo was exceeding tolerable oil pressure
limits at high RPMs and causing significant damage to the car’s engine. English Racing asked MTI to create a
pulley with a larger diameter that would turn slower thus lowering oil pressure. MTI was able to print out the part in
5 hours, and have the Evo on the track and testing within three days. The Evo entered the Pikes Peak ½ mile topspeed event and placed first in the Sedan Class, also setting a new course record for the fastest 4-door vehicle7.
TUNGSTEN
In collaboration with Ghent University, LayerWise (3D Systems) produced a tungsten collimator specimen that was
created to fit into MRI scanners. Tungsten collimators are used to narrow or focus the light source in an MRI for
optimal imaging, similar to a gun sight or binoculars. The complexity of these objects makes the production process
very labor intensive and expensive. However, LayerWise was able to easily additively manufacture these complex
parts in just 26 hours using pure tungsten8.
BONDED TUNGSTEN
A joint program between ExOne and rp+m led to the creation of bonded tungsten with radiation shielding properties
suited for medical and aerospace applications. ExOne’s binder jetting technology for additively producing metal
parts is ideally suited for alloy development such as this, since the process provides the ability infiltrate the base
metal with a second metal in complex shaped parts and the print speed is fast.
OTHER COMMONLY USED MATERIALS
SAND
An early adopter of additive manufacturing, Ford Motor Company has been experimenting with SLA, SLS and
FDM since the late 1980’s. As we previously mentioned (Rapid Prototyping Will Remain a Secular Growth Driver),
the most well-known example is Ford’s use of binder jetting to print the sand cores and molds for its four-cylinder
EcoBoost engine for the Ford Fusion. Ford has also used printed sand molds in its Mustang, Fusion Hybrid,
Explorer and F-150 models. When using sand, binder jetting technology fuses the sand particles together with a
binder, and unlike traditional sand molds, does not require physical patterns (typically wood) to create the mold
package. Once printed, cured and assembled, metal is poured into the mold using traditional methods, reducing
cycle time and enabling complex shapes and cooling solutions that are not possible using traditional methods for
creating cores and molds. A variety of sands and binders (organic and inorganic) can be used in any end market
where castings are used.
6
GE Reports: http://www.gereports.com/post/74545196348/joined-at-the-hip-where-the-3-d-printed-jet-engine
3D Systems: Metal Technology, Inc. and English Racing Push the Envelope with Direct Metal Printing from 3D Systems webinar
8
LayerWise: LayerWise AM produces tungsten multi-pinhole collimators for MRI scanners
7
- 20 -
Figure 16
CERAMIC
Sabin Design Lab, in collaboration with Cornell University and Jenny
Sabin Studio has 3D printed a series of ceramic interlocking bricks that
are not only lightweight but also require no mortar (Figure 16). Each
brick is lighter and uses fewer raw materials than a conventional solid
brick The bricks feature dovetail joints, similar to those used in
woodworking, and can be designed to mimic organic shapes and curves
and previously difficult to erect geometries9.
Source: Nanowerk.com
GLASS
LUXeXceL used its patented Printoptical Technology to create the world’s first fully 3D printed prescription glasses
for the King of The Netherlands. This is the first time 3D printing was used to produce both the frame of the glasses
as well as the lenses. This patented technology is also being used by optics designers to create prototypes for LED
lights10.
BIOMATERIALS
While it may sound like science fiction, companies like Organovo (ONVO – NR) are leading the way for printing
functional human tissue using the same additive technologies used in industrial manufacturing. Similar to using
powdered particles to build up a shape, Organovo fabricates 3D tissues that mimic the cellular composition and
spatial architecture of native human tissue. In addition, this method of tissue generation eliminates the need for
structural “scaffolding” or support structures, a commonly cited benefit of other additive manufacturing processes.
While still in experimental phases for each, Organovo has successfully printed human liver tissue, bone, blood
vessels, skeletal muscle, and cardiac tissue.
Based on conversations we have had with medical experts, we can expect continued
acceptance of biocompatible materials, such as implants, vascular grafts and scaffolds. The
next phase will be use of biologic materials such as regenerating a patient’s own cartilage.
The longer-term prospect is for actual functional biologic materials such as printing a
kidney or liver. While developments in this area will create anxiety and debate, there are
some academic benefits that should be considered. First, using the patient’s own stem cells
to grow functional biologic materials for that patient reduces the rejection of the implant. It should therefore require
fewer drugs normally taken to prevent rejection. It would also increase the number of treated patients, since the
procedure doesn’t require a donor and the associated criteria that may prevent a patient from even being a candidate
for the treatment.
The longer-term prospect
is for actual functional
biological materials such
as printing a kidney or
liver
9
http://www.nanowerk.com/news2/gadget/newsid=36719.php
http://www.luxexcel.com/news/dutch-royal-eyewear/
10
- 21 -
Figure 17: Commonly Used Material Samples
SYSTEMS MANUFACTURERS (OEMS)
Systems manufacturers garner the greatest attention in the additive manufacturing space, likely due to the fact that
this area of the industry has the largest number of publicly traded companies. However, as we will discuss in our
ADDRESSABLE MARKETS section, these OEMs represent only a small percentage of the addressable market for
additive manufacturing. The following provides a brief description of the primary OEMs including the range of
technologies provided by the manufacturer. Please see our initiation reports and follow on research for the following
OEMs that we cover for greater detail of platforms, materials, services and recent developments.
3D SYSTEMS
3D Systems (DDD - BUY) provides 3D printing-based design-to-manufacturing solutions in the US, Germany, the
Asia-Pacific, and other European countries. The company sells a range of industrial and consumer 3D printers that
print in plastic, metal, ceramic, nylon, polystyrene or glass composite materials. In addition, the company offers an
array of complementary devices (haptic, scanning), software, services, and materials that aim to serve the
automotive, aerospace, computer, electronic, defense, education, consumer, energy, original equipment
- 22 -
manufacturer (OEM), and healthcare industries. Technologies available include FDM, SLA, MultiJet, ColorJet,
SLS, DMLS and Cast Urethane. (See our initiation report, 5/9/13)
ARCAM
Arcam (ARCM - NR) is a Sweden based company that provides additive manufacturing solutions for the production
of metal components. Arcam offers additive manufacturing machines primarily used for the industrial production of
orthopedic implants as well as metal parts for the aerospace industry. Technology includes Electronic Beam Melting
(EBM), a method similar to DMLS, but offers trade-offs of part production speed versus surface finish.
ENVISIONTEC
EnvisionTec GmbH (private) develops, manufactures, and sells rapid prototyping and rapid manufacturing
equipment in North America and internationally. The company offers computer aided modeling devices, hardware,
software, and materials. Its products are used in toys and animation, industrial, design, micro medical, and biotechnology applications. The company was founded in 2002 and is headquartered in Gladbeck, Germany. It has
sales, services, and training centers in the United Kingdom and the United States. Technologies include proprietary
digital Light Processing Projectors in a process similar to SLA; 3SP™ (Scan, Spin and Selectively Photocure), also
similar to SLA technology; and 3D-Bioplotting, which is a material extrusion method.
EOS
EOS GmbH (private) designs and manufactures e-Manufacturing solutions for industrial component designing and
manufacturing. It offers systems and equipment solutions for plastic, metal, and sand manufacturing; materials and
material management solutions. EOS serves customers primarily in the aerospace, automotive, industrial, lifestyle
products, medical, tooling, and rapid prototyping markets. Technology includes SLS, DMLS, and double laser
sintering used to manufacture sand cores and molds.
EXONE
The ExOne Company (XONE - BUY) manufactures and sells 3D printing machines and printing products in the
Americas, Europe and Asia. These machines enable designers, engineers and foundry supporting businesses to
design and produce industrial prototypes and production parts in both conventional and exotic materials. Parts can
either be created from castings made from the sand mold packages their machines produce, or direct metal parts can
be printed. It also offers associated materials for consumables and replacement parts; and other services, such as preprint services, training, and technical support. The company markets its products to industrial customers in the
aerospace, automotive, heavy equipment, energy/oil/gas, and other industries. ExOne was founded in 2005 and is
headquartered in North Huntingdon, Pennsylvania. Technology includes binder jetting specifically designed for
building with sand, metal and glass materials. (See our initiation report, 10/8/13)
MCOR
Mcor Technologies Ltd. (private) is a manufacturer full-color and eco-friendly 3D printers. Mcor’s technology is
based on sheet lamination with plain A4 office paper as its build material creating durable, stable, prototype models.
Mcor was established in 2004 and is based in Dunleer, Ireland with offices in the UK and the Americas.
RENISHAW
Renishaw plc (LSE:RSW - NR) designs, manufactures, and sells industrial metrology products, additive
manufacturing products, and encoder products in industrial and medical end markets. Its products are used in a range
of applications including machine tool automation, additive manufacturing, gauging, spectroscopy, machine
calibration, large-scale surveying and medical applications such as CAD/CAM dentistry, tools for neurosurgical
- 23 -
applications and other medical procedures. Renishaw is headquartered in the UK and its additive manufacturing
technology includes SLS, DMLS, as well as vacuum and nylon casting and industrial metrology equipment.
SLM SOLUTIONS
SLM Solutions GmbH (AM3D – NR) produces additive manufacturing production systems as well as vacuum and
metal casting machines. SLM provides solutions for the aerospace, energy, healthcare and automotive industries.
The company is based in Lübeck, Germany. Technology includes SLS and DMLS.
STRATASYS
Stratasys Ltd. (SSYS - BUY) provides additive manufacturing solutions for the creation of parts used in the process
of designing and manufacturing products and for the direct manufacture of end parts. The company sells a wide
range of systems for rapid prototyping, from desktop MakerBot systems to larger professional and production
systems for direct digital manufacturing. It also develops, manufactures, and sells materials for use with its systems;
and provides production services to its customers through its RedEye business. Its solutions can be used in endmarket including architecture, automotive, aerospace and defense, electronics, medical, footwear, toys, educational
institutions, government, entertainment, apparel, heavy equipment, and manufacturing industries. Stratasys was
founded in 1989 and is headquarters in Eden Prairie, Minnesota and Rehovot, Israel. Technologies include PolyJet,
FDM and Wax Deposition Modeling (WDM) which is a process similar to FDM but using wax instead of polymers.
(See our initiation report, 5/9/13)
VOXELJET
Voxeljet AG (VJET - NR) provides 3D printers and on-demand parts services to industrial and commercial
customers. The company operates in two segments, Systems, and Services. The Systems segment focuses on the
production, development, and sale of 3D printers, materials, proprietary chemical binding agents, maintenance
contracts, and spares. The Service segment prints on-demand parts for its customers, as well as creates parts, casting
cores and molds, and models. Voxeljet serves a variety of end-markets including automotive, aerospace,
entertainment, art and architecture, engineering, and consumer products through its direct sales force and a network
of sales agents in Europe, the Middle East, Africa, the Asia Pacific, and the Americas. The company was founded in
1999 and is headquartered in Friedberg, Germany. Voxeljet’s technology employs binder jetting.
RELATED SOFTWARE
While there has been significant coverage on additive manufacturing machines in the media, less is said about the
software. The additive manufacturing process starts with a 3D model that is typically designed in CAD (Computer
Aided Design) software. The CAD model is saved as an STL (Stereolithography) file, the most commonly used file
format for additive manufacturing, and imported into slicing software that generates a set of commands for the
additive manufacturing process (commonly a 3D printer) to follow. Those commands are imported into the
machine’s host software where it can process and execute each layer.
A truly optimized part
design cannot have
feature restrictions
Software is also used to fill in gaps, generate support structures, add texture, hollow out
parts, and thin out walls. These fixes/edits make the model watertight and optimizes the
amount of material used which saves money and time.
The medical field is also using software to convert 3D scans (MRI, CT and X-ray) into 3D CAD designs for patientspecific casts, molds, surgical guides, implants, and orthotics. This also allows surgical teams to better plan
procedures, reducing operating room time, which increases efficiency as well as time under anesthesia. Materialise
(MTLS-BUY) is among the leading developers and providers of this software.
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FINITE ELEMENT ANALYSIS (FEA)
Finite Element Analysis (FEA) describes software tools that simulate actual operating
conditions on parts or systems and analyze the resulting stresses on the design. FEA
software is used in conjunction with 3D CAD models. FEA is applicable to both new
product designs as well as existing product redesign. FEA is used to verify that a
proposed design will be able to perform to operating specifications prior to
manufacturing or construction.
Figure 18
For an existing structure, FEA can be used to determine design modifications required
in the event of a structural failure11. While FEA is often used with traditional
manufacturing processes, its full capabilities are only realized through incorporation of
additive manufacturing applications. A truly optimized part design cannot have feature
restrictions. The only fixed requirements should be for attachment (mounting holes,
dimensions to mounting locations, etc.) and operating criteria (loads, environmental,
operating envelope, etc.). All other aspects of the design should be left to the iterations
of the FEA and the 3D CAD software. This will be an evolutionary process given the
embedded base of traditional manufacturing equipment and engineers and designers
trained to work within those limitations.
OPTIMIZING
There is no longer a
limitation on converting
digital designs to a
physical part; the only
limitation is a heavyhanded designer
Part optimization describes the iterative steps that occur between design analysis (ie:
FEA) and design feature creation (ie: 3D CAD), resulting in a part optimized for weight
relative to strength and operational longevity. Several optimization software tools
integrate FEA or similar software into the package providing an efficient feedback loop
in the component development cycle. While the concept of part optimization is not new,
software that takes analysis results and digitally optimizes the design dramatically
reduces the cycle time for part design.
What has also changed is the ability to fully leverage part optimization results. There is no longer a limitation on
converting the digital design to a physical part. Optimized parts that results in completely organic features such as
variable shaped internal lattice structures (inside of a leaf) can be made. We feel the evolution of manufacturing
technology (additive and subtractive combined) is allowing for the full leverage of optimizing software to the point
that the only limitation on design is a heavy handed designer. Designers need to stay focused on intent and
relinquish much of the design input that was once considered important.
PRODUCT LIFECYCLE MANAGEMENT (PLM)
Product Lifecycle Management (PLM) automates and organizes the entire manufacturing process from research and
design to validation and manufacturing. The system connects each step of the manufacturing process by centralizing
all project data in one broadly accessible location. This allows each department to not only have access to up-to-date
designs, quotes, and statuses but also allows them to easily adapt to customer change requests.
11
Virginia Tech Material Science and Engineering; http://www.sv.vt.edu/classes/MSE2094_NoteBook/97ClassProj/num/widas/history.html
- 25 -
SOFTWARE PROVIDERS
AUTODESK
Autodesk, Inc (ADSK- NR) is a global design software and service company, offering several professional software
solutions for 3D design and engineering. The company licenses or sells its products to customers in the architecture,
engineering, construction, manufacturing, digital media, and consumer industries through both direct and a reseller
sales network. Autodesk was founded in 1982 and is headquarters in San Rafael, California.
ANSYS
ANSYS (ANSS- NR) provides FEA and simulation software, providing designers and engineers the ability to
validate and refine designs. The software is used to simulate how designs will behave in the real-world, which
reduces the design cycle time and allows for part optimization. Virtually all end-markets where analysis is done to a
part design can leverage this platform including aerospace, automotive, electronics, energy, materials and chemical
processing, consumer and medical.
DASSAULT SYSTÈMES
Dassault Systèmes SA (DASTY, DSY - NR) provides 3D software applications and services for engineering,
design, optimization, simulation and data management. Dassault serves the aerospace, defense, transportation,
marine and general manufacturing end markets. The company was founded in 1981 and is headquartered in France.
MATERIALISE
Materialise (MTLS - BUY), founded in 1990 and headquartered in Leuven, Belgium, provides additive
manufacturing software (Magics, Streamics, Mimics, 3-Matic) and 3D printing services in Europe, the Americas,
and Asia. Magics is used to repair and optimize computer-aided design formats and Streamics is used to centralize
and coordinate additive manufacturing logistics across an entire plant floor. The software is sold to additive
manufacturing OEMs, service bureaus, as well as manufacturers in automotive, aerospace, consumer goods and
medical industries.
For medical applications, Mimics is used to translate medical scan data (CT, MRI, 2D and 3D X-Ray) into a 3D file
format. 3-Matic allows the operator to manipulate and change the model for analysis and printing. The medical
segment also sells 3D printed patient-specific medical implants from models generated on its software or other
platforms.
Technology exists today
where an individual
could be scanned and the
entire anatomy could be
digitally stored
Technology is available today where an individual could be scanned and the entire skeletal and
soft tissue structure cataloged and stored. This has tremendous opportunities for soft-tissue
medical procedures, but also for implants arising from either degenerative developments or
injury. Imagine a soldier being scanned before deployment. In the unfortunate case where the
soldier is injured, an implant could be immediately printed. A perfect ergonomic match to
return the individual to a more normal if not complete restoration of life functions. (See our
initiation report, 7/21/14)
NETFABB
Netfabb (FIT GmbH, private) is a provider of additive manufacturing software for design optimization, automatic
microstructure creation, quoting, build setup, file review/repair, and quality control. The software aims to reduce
production costs and increase efficiency through the use of additive manufacturing software for designers, service
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bureaus and a variety of end-market customers, including several AM OEMs. Netfabb was founded in 2009 and is
based in Parsberg, Germany.
WITHIN LAB
Within Lab (private) is an engineering design optimization software and consulting company based out of the UK.
The software inputs part or system operating parameters such as loads and forces and environmental conditions to
create an optimized component design. Within utilizes variable density lattice microstructure structure and organic
surface designs to meet design criteria leveraging complete design freedom, since parts are designed for AM.
REVERSE ENGINEERING TOOLS & 3D SCANNING
Reverse engineering tools include technologies such as 3D scanning, CT scan, X-Rays and MRIs. 3D scanning
technology has existed for many years, but until recently was out of reach for many manufacturers due to cost and
technology limitations. 3D scanning technology and software have improved dramatically over the past few years
resulting in a wider addressable market. Scanning can be used in a number of processes including quality inspection
of parts, process verification, and geometric dimensioning and tolerancing (GD&T) verification.
A growing market for this technology is the digital capture of part features from actual
production parts. This allows for older components, designed before 3D CAD, to be scanned
What used to take days to
so that fully parametric 3D CAD models can be quickly created. It also allows for damaged
convert 2D drawings of a
part into a 3D CAD
parts to be brought into the digital format for analysis. What used to take days to convert 2D
model can now be done
drawings of a part into a 3D CAD model can now be done in several hours. The scanning of
in hours
an actual part can be completed in minutes. With the nominal fully parametric model
imported into a 3D CAD program, dimensions and tolerances can be added as well as design
optimization (FEA) can refine the part.
3D SCANNER PROVIDERS
CREAMFORM
Creaform (AME - BUY) develops, manufactures and sells 3D portable measurement technologies and specializes in
3D engineering services. Creaform offers 3D scanning, reverse engineering, quality control, product development
and numerical simulation such as FEA and computational fluid dynamics (CFD) technologies. Its products are used
in a variety of industries including automotive, aerospace, consumer products, medical and general manufacturing.
The company’s headquarters are in Québec and they have operations in the U.S., Canada, France, Germany, China,
Japan and India. Creaform is a unit of AMETEK’s Ultra Precision Technologies division.
FARO TECHNOLOGIES
FARO Technologies, Inc. (FARO - NR) designs and manufactures 3D dimensional measurement and imaging
systems for a wide range of global industries including aerospace, general manufacturing, non-residential
construction, and forensics. The company sells its products through direct sales and distributors. The company was
founded in 1981 and is headquartered in Lake Mary, Florida.
NIKON METROLOGY
Nikon Metrology (Nikon Corporation, TSE: 7731 - NR) is a provider of optical instrumentation and metrology
solutions for applications ranging from electronics to aircraft. Products include optical coordinate measuring
- 27 -
machines (CMMs), 3D laser scanning, X-ray and CT inspection systems, CNC video measuring systems,
microscopes and large-scale metrology systems. Nikon Metrology is a subsidiary of Japan-based Nikon Corporation.
ROLE OF SERVICE BUREAUS
Over the past year, we have seen increased M&A activity within the additive manufacturing space related to systems
manufacturers, traditional manufacturers and prototyping companies acquiring private service bureaus. A service
bureau is similar to a machine shop, with the additional capability of producing parts and prototypes additively.
Most manufacturers do not have all of the equipment needed to produce parts on-site, or design teams to produce
prototype parts prior to production. Not only could that be cost-prohibitive, but also capacity-straining. A service
bureau provides the third-party outsourcing often needed for prototyping or short-run variable production runs in a
more cost-effective way.
Service bureaus with both
additive and subtractive
technologies provide the
greatest flexibility and
most unbiased solutions
to a design
There are also a number of hybrid models where traditional manufacturers have added
additive technologies alongside traditional manufacturing equipment such as CNC and
injection molding machines. In some cases the AM systems are geared to producing faster
prototype parts for customers, both current and prospective. The AM systems give the
company the ability to make custom jigs and fixtures and tooling for their traditional
manufacturing processes to reduce cycle time. They also give the companies the flexibility to
design parts more optimally and to leverage advanced software and materials to create new
markets through innovative design solutions.
What we have found in talking to and working with service bureaus is they provide the most cost effective riskless
introduction for many manufacturing customers to the range of AM technologies. Service bureaus with both additive
and subtractive technologies provide the greatest flexibility for customers and the most unbiased manufacturing
solutions to a design. A manufacturer may bid out a project to a number of traditional machine shops and service
bureaus. In many cases, especially for complex designs, the service bureaus secure the contracts because they were
able to deliver a functional prototype in a matter of days versus weeks.
Many service bureaus point out that speed, and accuracy to the customer’s design requirements were critical to
winning a contract; cost was not a factor. For customers, it is about speed to market and beating the competition
with the next innovation. We feel this is especially true in the current economy, where consumers are more diligent
with their purchasing decisions and loyal to innovation. Missing the next auto cycle, for example, because the OEM
tried to save money on the prototyping will likely be a hauntingly bad decision.
From an adoption standpoint, service bureaus provide a gateway to experiment with AM
capabilities without the prohibitive upfront capital commitment. A service bureau may
complete an initial project that awards them a series of other projects. The volume of
business being outsourced may reach an economic tipping point where the decision is
made to bring that specific technology in-house, but this will not necessarily be a universal
decision. In addition to the capacity service bureaus provide, there is also machine
expertise, vertical expertise, and in some cases facility certification, especially for
aerospace, medical, defense and firearms. None of these attributes are quickly replicated. Also, some customers may
elect to focus on a core competency of part and system design, and continue to outsource all facets of prototyping
and manufacturing to remain focused and nimble.
In addition to the
capacity service bureaus
provide, there is also
machine expertise,
vertical expertise and
often facility certification
For OEMs that also have a service bureau business, greater customer demand of a certain technology can lead to
machine and consumable sales. While the OEMs welcome the migration from service to system and material
customer, it is not likely that a complete migration will occur. Customers of both stand-alone service bureaus and
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OEMs with a service business will still outsource less frequently used additive technologies based on economic
tipping points.
More recently, we have some selective vertical integration of OEM systems manufacturers with service bureaus.
Some want the ability to attract customers at lower volumes of demand, so they can develop that relationship
through potential machine sales. Others are also acquiring vertical expertise such as in aerospace or medical along
with certified facilities, so they can be paid to learn more about what software, systems and materials are ideally
suited for growth in those markets as they increase and modify their portfolios in subsequent periods.
KEY PLAYERS
ARC GROUP WORLDWIDE
ARC Group Worldwide (ARCW - BUY) is a global diversified manufacturer specializing in metal injection
molding. Through its subsidiaries, the company manufactures and distributes precision components, specialty
hermetic seals, flanges and wireless equipment. With operations in the U.S. and Europe, ARCW leverages the
capabilities within each unit in an effort to consolidate its customers’ supply chain, providing them a complete
plastic and metals fabrication service, while emphasizing a shortened time to market. End markets include
Automotive, Aerospace and Defense, Medical Device, Oil and Gas, and General Industrials.
ARCW aims to further grow its revenues and profits by leveraging the complementary technologies of its Precision
Components segment and its newly established 3DMT business. By incorporating rapid prototyping with traditional
manufacturing techniques, specifically injection molding, ARCW can be more of a single source for engineering,
rapid prototyping, short run production, specialized tooling and high volume production. As we have seen with other
service bureaus and foundries, there is a measurable advantage in both time and cost that can be achieved by
complementing traditional manufacturing processes with AM technologies. We have seen this lead to these
companies winning more contracts and increasing growth opportunities. (See our initiation report, 8/14/14)
MATERIALISE
Materialise provides online 3D printing services as well as rapid prototyping services for clients in the automotive,
art, architecture, consumer goods, industrial goods, and aerospace market. The company offers a wide range of
printing technologies including: Stereolithography (SLA), Fused Deposition Modeling (FDM), Laser Sintering,
PolyJet, and Vacuum Casting. Through its RapidFit+ platform, the company provides the automotive market with
customized, highly precise, and in some cases, patent-protected measurement and fixturing tools. MTLS also offers
a Design & Engineering team to help create an optimal 3D printable design as well as 24/7 online quoting and
ordering service called Materialise OnSite. Through i.Materialise, MTLS offers consumer 3D printing services.
MTLS’s proprietary software platforms, enables and enhances the functionality of 3D printers and of 3D printing
operations, have become a market standard for professional 3D printing, with a current installed base of more than
8,000 licenses. MTLS also introduced commercial 3D modeling services based on CT, MRI, as well as 2D and 3D
X-Ray image data, enabling surgeons to analyze and plan complex surgeries by using anatomically accurate, 3Dprinted replicas. In the healthcare sector, Materialise’s technology was directly responsible for the design and
manufacture of over 146,000 customized, patient-specific medical devices during 2013.
The company believes that its commitment to enabling 3D printing technologies has significantly supported and
accelerated the acceptance and proliferation of additive. In its 3D printing service centers, including what is believed
to be the world’s largest single-site additive manufacturing service center in Leuven, Belgium, MTLS printed more
than 500,000 medical devices, prototypes, production parts, and consumer products during 2013. (See our initiation
report, 7/21/14)
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MORRIS TECHNOLOGIES
Morris Technologies (GE - NR) is the in-house service bureau for GE, and combines traditional manufacturing
capabilities such as CNC machining, injection molding and castings with additive manufacturing processes,
specifically DMLS, and SLS. Prior to being acquired, Morris supplied prototypes and end use parts to GE’s
Aviation, Power Systems and Global Research Center as well as a variety of other customers.
PROTO LABS
Proto Labs (PRLB - BUY) combines three different manufacturing prototyping service capabilities; FineLine
Additive Manufacturing, Firstcut CNC Machining, and Protomold Injection Molding. Within FineLine, the service
bureau has technology including SLA, SLS and Direct Metal Laser Sintering (DMLS). FineLine provides these
technologies through a variety of different machine manufacturers, including 3D Systems, and Concept Laser. With
the additional capabilities offered by Firstcut and Protomold, Protolabs incorporates both traditional and additive
manufacturing techniques to meet their customers’ needs.
Coinciding with the addition of FineLine Prototyping, PRLB is launching a new Additive Manufacturing (AM)
Service. This complements PRLBs' existing prototyping capabilities and bridges the technology gap between its
CNC business (Firstcut), which offers rapid prototyping for smaller volumes of high precision parts, and its injection
molding business (Protomold) which provides higher volume runs of more complex parts. We expect over time a
more focused customer interface will allow PRLB to increase value to customers by recommending the method of
part production that leverages its software and manufacturing expertise and allows designers to focus on design not
on production method. (See our initiation report, 5/9/13)
QUICKPARTS
Quickparts, the service bureau component of 3D Systems (DDD), is a manufacturing service company that provides
customers with an online e-commerce system to procure low and high-volume custom manufactured parts. Using
the company’s QuickQuote® System, users upload their 3D CAD geometry and the QuickQuote analysis engine
evaluates the part geometry, the required materials, lead time and quantity and provides instant quotes for the
production part. Capabilities include rapid prototyping, injection molding and investment casting patterns using
SLA, SLS, ColorJet Printing, MultiJet Printing, Plastic Jet Printing, cast urethane molding, CNC machining, plaster
mold casting and metal casting technologies.
REDEYE
RedEye is the service bureau division of Stratasys (SSYS), providing rapid prototyping and digital manufacturing to
companies around the world. Technologies include PolyJet, cast urethane molding, injection molding, and one of the
largest Fused Deposition Modeling (FDM) 3D printer capacities in the world. Stratasys recently acquired two
service bureaus, Solid Concepts and Harvest Technologies. These acquisitions will nearly double SSYS's service
business to roughly $140 mil.
Solid Concepts, is based in California with capacity of more than 80 additive manufacturing machines and a variety
of traditional complementary manufacturing technologies such as tooling and molding, CNC and cast urethane
systems over its 6 locations. Texas-based Harvest Technologies has been in the additive manufacturing business for
nearly 20 years and was the first AM in North America to achieve AS9100/ISO9001 certification. Harvest has over
30 SLA, laser sintering and FDM machines.
SHAPEWAYS
Shapeways provides 3D printing services to its online “community” through which users upload, share, create and
sell their designs. The company caters to a primarily consumer customer base. The large online community allows
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designers/customers to have access to a variety of industrial 3D printing technology, capable of printing models in a
variety of materials.
ADOPTION CYCLE
Each year, Gartner releases a special report of emerging technologies, which includes its proprietary hype cycle for
the most significant technologies spanning its research areas. The below chart (Figure 19) depicts the stages through
which a technology is either adopted or becomes obsolete prior to adoption. Each technology is plotted over time
and against the level of expectations for that technology. Within the additive manufacturing space, there were four
technologies that were included in the most recently hype cycle, published in August, 2014.
Figure 19
Gartner Hype Cycle of Emerging Technologies
Source: Gartner August, 2014
3D BIOPRINTING – Innovation Trigger
As we address in our END USERS discussion, advances in the medical field using 3D printing are accelerating at a
rapid pace. Within the context of the hype cycle, bioprinting is emerging from a point of first-generation products,
high price, lots of customization needed and moving into a phase where early adopters investigate the technology.
Despite its early placement along the hype cycle, the time to adoption is a mere 5-10 years, aided by the
advancements in other 3D printing technologies.
CONSUMER 3D PRINTING – Rounding the Peak of Inflated Expectations
In this context, Consumer 3D printing is defined by the end-user, rather than our previously stated sub-$5,000 price
point. What we see at this stage in the cycle is that expectations of the technology are at their peak, beyond early
adopters and moving quickly into the phase where negative press begins. We have certainly seen this in the
mainstream media as several articles have been written questioning the validity of 3D printing in the consumer
- 31 -
space. Gartner also forecasts that “consumers’ budgets will constrain purchases through 2015” and that “a
compelling consumer application will surface by 2016, driving growth. 12”
ENTERPRISE 3D PRINTING – Moving into the Slope of Enlightenment
Where we believe to be the most substantial, disruptive change is within this segment of the technology. Here
defined as Enterprise 3D printing, this encompasses prototyping, production and industrial applications. At this
phase second generation products are rolling out, complemented by some services, and the adoption rate is moving
into a phase where methodologies and best practices are developing. This plateau eventually leads to a period of
high-growth adoption (20-30% of potential audience has adopted the innovation).
3D SCANNERS – Slope of Enlightenment
We believe 3D scanning technology is one of the most underestimated technologies and has the potential to
significantly increase the widespread adoption of additive manufacturing. Just a year ago, 3D scanning was
approaching the peak of inflated expectations with the expectation that adoption would be reached in 5-10 years.
Over that one year period, 3D scanning has surpassed consumer and enterprise 3D printing to now be at the point of
nearly full adoption.
Figure 20 isolates the hype cycles for just the 3D printing technologies. Consistent with our thesis, industrial
printing is just reaching the transition between the innovation trigger and the peak of inflated expectations and is
expected to reach the plateau of productivity within 5-10 years.
Figure 20
Gartner Hype Cycle for 3D Printing
Source: Gartner August, 2014
While we do not take this tool as indicative of stock performance, it is important to understand where we are in the
adoption of these technologies and the potential they have to shape a variety of industries.
12
Gartner, 3D Printing: The Hype, Reality and Opportunities- Today, October, 2013
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END USERS
End users of additive manufacturing and related technology span a variety of industries from industrial
manufacturing to fashion and design, and notably healthcare and dentistry, as we will discuss further. The earlier
discussed case studies are a representation of the various companies that have adopted or used additive
manufacturing. More broadly, companies include leading names from aerospace and defense, architecture,
automotive, commercial products, consumer goods, biotech, medical, dental, consumer electronics and computing
industries.
HEALTHCARE
Among the end users to adopt additive manufacturing technologies from an early stage is the healthcare industry.
According to Terry Wohlers’ research, 28% of all money spent on 3D printing in 2012 was used to manufacture
industrial parts with the greatest percent of that money being spent in the medical and dental industries 13.
Applications within the field are similar to those in the manufacturing space, including rapid prototyping for product
development; pattern making for metal casting and the manufacture of tools, primarily in the dental sector.
Beyond traditional applications, 3D printing is being used to create medical devices and implants for hip and knee
implants, custom hearing aids, orthotic inserts, implants and patient specific prosthetics. Developments have also
been made in the printing production of biomedical material such as skin, bones, tissue and human organs.
The advantages are even
greater when the
physician can customize
instruments and implants
based on the patient’s
own image data
According to Phil Reeves, author of 3D Printing & Additive Manufacturing in the Medical
and Healthcare Marketplace, the uses for additive manufacturing within the healthcare
industry are virtually limitless. However, not all applications represent potential for growth
and market saturation. The greatest areas for opportunity and market saturation, Reeves
asserts, are in the areas of digital dentistry and the adoption of AM by eyewear
manufacturers.
As of 2013, the medical field has invested an estimated $131.8 million in 3D printing machines, a number expected
to grow to $306 million within five years and $555.7 million within ten years. This represents approximate annual
revenue derived from machine sales alone of $24 million in 2014 to $56 million in 2020. Potential for material sales
is up to 10x machine sales within 10 years14.
As medical procedures have become increasingly complex, there has been a trend in the industry to both customize
patient care and minimize invasive surgery. For many medical applications, the quality of plastic or medical devices
manufactured using AM can match or exceed the quality compared to traditional methods. The reduced cost of
complexity inherent in AM allows medical device companies to design a new generation of devices that include
increased functionalities. The advantages are even greater when the physician can customize instruments and
implants based on the patient’s own image data.
We recently visited one the leading surgical simulation labs in the country to see how they are using AM to improve
surgical simulation to train surgeons, and to plan and practice procedures before actually going into the operating
room (see our 6/20/14 Note: User Visits Validate Industry-Wide Capacity Increases). The surgeon with whom we
met specializes in pediatrics, which creates an additional layer of complexity to a surgical procedure.
13
http://www.forbes.com/sites/rakeshsharma/2013/12/31/an-interesting-and-frightening-situation-terry-wohlers-assessment-of-the-year-in-3dprinting/
14
3D Printing & Additive Manufacturing in the Medical and Healthcare Marketplace, Phil Reeves, 3D Printing Industry
- 33 -
The hospital uses a combination of technologies from DDD and SSYS as well as specifically designed medical
software (Mimics and 3-matic) by MTLS to produce models of actual patient abnormalities from CT and MRI scan
data. In one example they 3D printed models of a child’s rib cage and skeletal structure to surround the soft tissue
they were going to operate on to simulate the real issues surgeons will face during a procedure.
This simulation has allowed surgeons to investigate unforeseen issues, which results in improved outcomes, reduced
operating room time, and time the patient is under anesthesia, which is a major concern for children in terms of
developmental issues. As has been the conclusion with many AM users we have met, the hospital is looking into
new ways to leverage AM technology and they need more printers and systems to accomplish this. Another area
under investigation is helping patients who suffer from congenital heart disease. With expected advancements in 3matic software, surgeons will be better able to segment tissue to identify internal organs, tumors, and other
abnormalities, which can be difficult to analyze with current technologies.
According to Reeves, the AM companies positioned to benefit most from this expanding revenue opportunity are
those with a competitive advantage in specific materials. Within the polymeric material space, EnvisionTec,
Stratasys and 3D Systems are currently well positioned because of its resin-based system expertise. Within the
metallic applications, Arcam, EOS, Renishaw and Phenix (subsidiary of 3D Systems) are uniquely positioned to
benefit from its expertise in bespoke surgical implants and dental implants, both areas seen to drive revenue growth
over the next 10 years, as depicted in Figure 21, below.
Figure 21
Application
Hearing and
audibility aids
Orthopaedic
implants
Dental aligners
and cosmetics
Prosthetics &
rehabilitation
Orthotic foot
ware
Indirect dental
crowns
Direct dental
crowns
Stone models
Opthalmic &
vision
Trauma &
surgical devices
Neonatal
modelling
Birth
Control
Raw Material
Material
Revenue
Potential
Process
Hardware
Revenue
Potential
Lead Vendor
Resin
Very Low
Polymer jet / cure
Low
Envisiontec
Titanium
Low
Metallic ebeam /
laser
Low
Arcam
Resin
Medium
Polymer jet / cure
Very High
3D Systems
Nylon
Very Low
Laser sintering
Very Low
Unclear
Nylon
Low
Laser sintering
Low
3D Systems
Resin
Low
Polymer jet / cure
Very Low
Envisiontec
Cobalt Chrome
Low
Metallic laser
Very High
EOS
Resin
Very High
Polymer jet / cure
Very High
Stratasys
Nylon
Medium
Laser sintering
Low
EOS
3D Systems
None
Titanium
Low
Metallic ebeam /
laser
Medium
EOS
Arcam /
Renishaw / SLM
Concept Laser /
Realizer
Resin
Very Low
Polymer jet / cure
Low
Stratasys
None
None
Nylon
Very Low
Laser sintering
Very Low
None
None
EOS / 3D
Systems
Source: Econol ys t
- 34 -
Adopted Vendor
Potential
Vendors
Stratasys / 3D
DWS
Systems
EOS / Renishaw / Concept Laser /
SLM
Realizer
Envisiontec /
DWS / EOS
Stratasys
EOS / 3D
Voxeljet
Systems
Unclear
Stratasys / 3D
Systems
3D Systems /
Renishaw
3D Systems /
Envisiontec
EOS / Voxeljet
DWS
Concept Laser /
Realizer
DWS
AEROSPACE
Additive manufacturing technologies are used in a number of applications to meet the engineering demand within
the aerospace industry from design and engineering to production and post-processing. AM offers the benefit of
design freedom, as well as stronger, lighter, and more durable components in many cases, which is critical within
the aerospace industry. We have seen increased demand for 3D printing within this end market due to its ability to
create more complex parts that eliminate a high number of smaller parts to be assembled, and to create spare parts
for legacy systems where many replacement parts no longer exist.
The number of case studies found for applications in Aerospace are endless and range from
GE’s jet fuel nozzle (as we discussed); to Bell Helicopter using FDM to build polycarbonate
wiring conduits for its heavy-lift “tilt-rotor” hybrid (airplane/helicopter) aircraft; to NASA
using 3D scanning and reverse engineering software to recreate the obsolete F-1 engine,
originally used in the Apollo Program between 1967-1973, without the use of an accurate
blueprint15. AM technologies have helped alleviate many of the obstacles brought on using
only traditional manufacturing techniques faced by aerospace engineers.
We have seen increased
demand for 3D printing
in aerospace due to its
ability to create more
complex parts
AUTOMOTIVE
The automotive industry was one of the earliest adopters of AM technologies, using rapid prototyping for concept
design and testing. Now AM is being used to manufacture end use parts, improve safety and fuel efficiency and
create more durable and in some cases, more attractive vehicles. According to some industry experts, most concept
cars contain as many as 100 parts manufactured using SLA technology alone 16. OEMs and parts manufacturers in
the auto industry have used 3D laser scanning and inspection software to optimize rubber hoses which feed air into
the engine, coolant into the radiator and fluids to the breaks; FDM to create rapid prototypes for tire treads; and
manufacturing custom, one of a kind metal components to control oil pressure in high-performance cars. We believe
that the automotive industry’s use of AM is one of the greatest drivers propelling adoption of these technologies.
While mostly used for prototyping today, we envision a time when AM systems will be robust enough to produce
production auto parts.
Figure 22
CONSUMERS
A lot of attention has been paid to the consumer uses of 3D
printing. Personal 3D printers have created a lot of excitement
and stock price volatility. We believe that consumer use of 3D
printing is important in order to increase adoption of the
technology, but this niche market, in our opinion, does not
represent the greatest opportunity and the breadth of use of
additive manufacturing. That said, each of the systems
manufacturers we cover derive a proportion of their revenues
from either the sale of consumer printers or materials and
therefore we cannot ignore the impact that this business
segment will have on their respective growth prospects. From
a secular growth standpoint, we view this segment as vital to
the long-term broad adoption of all AM systems from plastics
to metals. We know of several cases where users started with
15
16
Popular Consumer Print Categories
Other
12%
Gadget
14%
Art/Fashion
8%
Scale model
8%
Household
5%
Hobby/DIY
22%
Prototype
32%
Source: www.3dhubs.com/trends, as reported by users
3D Systems: Reigniting the F-1 Apollo Engine with Geomagic Solutions
3D Systems: Parker Hannifin brings fuel filters to market faster with high-temperature SLA functional prototypes Webcast
- 35 -
a sub-$5,000 printer, but quickly learned the benefits and outgrew its capabilities, leading to the purchase of a
production printer, priced 20x higher from the same OEM.
It is also worth noting that among users polled, the prevailing use of 3D printers is rapid
prototyping, revealing that the term “consumer” may be a misnomer as it relates more to
the price point of the hardware, rather than the demographic of the user.
We view this segment as
vital to the long-term broad
adoption of all AM systems
from plastics to metals
According to data collected about users of consumer 3D printers at www.3Dhubs.com, a crowd source website and
database dedicated to connecting 3D printer owners and those that wish to experiment with the technology, Stratasys
dominates the consumer segment, due in large part to its acquisitions of MakerBot. Since Nov-13, the number of
registered users of Stratasys machines has increased +333%, primarily driven by an increase in MakerBot Replicator
2 and Replicator 2x printers (See Figure 23). The number of 3D Systems’ Cube systems registered increased
+230%. As a reference, registered owners overall increased +339% over the same period. While this is not
necessarily indicative of machines sold over this period, it does support Stratasys’ current position as the industry
leader in the consumer segment. With 12 new consumer products introduced by 3D Systems in January, 2014, we
believe we may see the pendulum swing more in its favor as those devices become available in 2H14.
Figure 23
Consumer Manufacturer Distribution
Machines Registered
2500
2000
Growth:
529%
Growth:
333%
Aug-14
Growth:
297%
1500
Jun-14
May-14
Growth:
219%
1000
Apr-14
Growth:
230%
Feb-14
Jan-14
500
Dec-13
Nov-13
0
Stratasys
RepRap DIY Kit
Ultimaker
3D Systems
Other
Source: www.3dhubs.com/trends, as reported by users
ADDRESSABLE MARKETS
Our method for determining the addressable market size for additive manufacturing involves identifying the primary
industries driving revenue growth such as those discussed previously in the END USERS section of this report. Using
some assumptions about those industries including growth rates and the impact of AM within those industries, we
determine the total market opportunity for the current year and over the next five and ten years. While some of our
estimates may appear overly optimistic and others overly conservative, keep in mind that these forecasts are simply
used to illustrate the potential market impact and the leading determinants of growth.
- 36 -
Figure 24
Based on our analysis, we estimate that the current AM market
opportunity is driven by the segments shown in Figure 24. While
the AM OEMs often take center stage within the market and our
coverage, we believe that the manufacturing of systems represents a
smaller slice of the total revenue opportunity within this industry.
Industrial applications and services, such as those provided by
service bureaus represent a substantial portion of the market
opportunity and this is consistent with the recent M&A trends in
the industry. End markets served within this segment include
Automotive, Aerospace, Consumer Goods and general Machine
Shop services.
AM Market Segmentation, 2014E
Hobbyist/
Model
8%
OEM
8%
Materials
34%
Software
10%
Industrial
31%
Medical
12%
We also estimate that the market opportunity for material
development and sales is a substantial component to the overall
Source: IBIS World, JMS estimates
market opportunity within this space. We view metal materials a
particularly large area of potential expansion over the next ten years, since these materials are more geared to
production of end-use parts, rather than prototyping.
By 2019, the total
addressable market for AM
equipment, services and
related products could
surpass $23 bil globally
Overall, based on our forecasts, we estimate that by 2019, the total addressable market for
additive manufacturing equipment, services and related products could surpass $23 bil
globally, and that by 2024 the market could expand to just under $38 bil with nearly a third
of that coming from industrial applications (See Figure 25). Note that while this may seem
out of reach, the combined ten year CAGR assumed to reach these estimates is a modest
3.9%.
Figure 25
AM Addressable Market Segmentation
$12,000
Industry Revenue
$10,000
$8,000
$6,000
$4,000
$2,000
$0
OEM
Software
Medical
Industrial
Materials
Hobbyist/Model
Total
2014E
$1,432
$1,819
$2,247
$5,858
$6,471
$1,153
$18,979
2019E
$2,969
$2,320
$2,878
$7,307
$6,852
$1,500
$23,826
2024E
$4,569
$3,070
$3,187
$8,217
$7,101
$1,656
$27,799
F10Y CAGR
12.3%
5.4%
3.6%
3.4%
0.9%
3.7%
3.89%
Source: IBIS World, JMS estimates
$mil
- 37 -
INNOVATION
In our observation, the leading trends in additive manufacturing primarily center on creating equipment that has a
larger build envelope, a faster build speed, with more complex materials, all while improving print quality and
repeatability. Recognizing that this list is far from comprehensive, we have included just a few examples of the
variety of innovations driving the industry.
HIGH SPEED SINTERING (HSS)
Researchers from The University of Sheffield and University of Loughborough have created a new AM process
called High Speed Sintering (HSS) that is not only able to produce better and cheaper parts than laser sintering but is
also extremely fast. The HSS process is claimed to be quick and cheap enough that it can even compete with
traditional manufacturing methods in low volume applications. Currently the process is limited to grey nylon but
researchers are looking into expanding the range of materials and functionality.
GRAPHENE
A recent development of a new graphene filament for 3D printers could allow users to print operation-ready devices,
such as batteries, sensors, chips, and flexible custom body armor. The material will enable users to print operational
devices in a one-step, fully computerized process. Graphene is a highly conductive material, more conductive than
copper, made up of a single layer of carbon atoms bonded together in a lattice structure and is considered one of the
strongest and thinnest materials known.
A common application of graphene is the production of a substance known as “bucky
paper” which is compressed carbon nanotubes, or rolled sheets of graphene. According to
American Graphite Technologies, when these sheets of bucky paper are stacked and
compressed, the resulting material is up to 500x stronger than steel, at one-tenth the
weight17. The combination of graphene and additive manufacturing could create parts and
products with strength to weight ratios that were never feasible before. The ability to 3D
print complex parts with this lightweight strong conductive material could potentially result
in cheaper solar cells, lithium-ion batteries that recharge faster, reinforced armor plating, integrated circuits,
transistors that operate at higher frequencies and many other applications.
When sheets of bucky
paper are stacked and
compressed, the resulting
material is up to 500x
stronger than steel at 1/10th
the weight
AEROSWIFT PROJECT
The Council for Scientific and Industrial Research’s (CSIR’s) National Laser Centre (NLC), Airbus, and Aerosud
signed a collaboration agreement in September 2012 to create a “titanium powder-based additive layer
manufacturing for fabrication of large and complex aerospace components.” This massive machine can produce
parts as large as 2 m x 0.6 m and is considered the fastest powder bed AM facility in the world. This large-scale
additive manufacturing machine will significantly reduce manufacturing costs and minimize material waste which in
turn will result in more fuel efficient airplanes. The machine is still in prototype phase and will undergo two years
of testing, evaluation, and process development. If the parts are approved, the machine will then be dissembled and
transferred to an Aerosud facility for aerospace part production. Full scale production is expected to start in 2015.
17
http://americangraphitetechnologies.com/graphene-technology/
- 38 -
HYBRID MACHINES
Companies are now creating hybrid machines that combine additive manufacturing technology with traditional
manufacturing technology. The productions of these hybrid machines drive home the point we made earlier with
regard to AM not replacing traditional manufacturing methods, but rather complimenting it. These companies are
creating hybrid machines in one of two ways; either they are producing a new line of all-in-one machines, or they
are installing adapters to existing traditional equipment such as CNC machines. Companies that are creating these
hybrid machines include: Optomec, Hurco, Lumex, DMG Mori, FABtotum.
Companies are now
creating hybrid machines
that combine AM with
traditional manufacturing
The following exhibit (Figure 26) illustrates a hybrid machine incorporating additive
manufacturing, through laser cladding technology, with a subtractive 5-axis milling
machine. As metal powder is melted and fused into each layer, it becomes welded to the
surface. After cooling, the metal is able to be machined into a finished part. The flexibility
of being able to switch dynamically from building to milling allows for the direct
machining of features of the component that are no longer accessible on the finished part,
as seen in Box 3.
Figure 26
Hybrid Manufacturing Process
Laser Cladding
1. Basic construction of cam ring
Laser Cladding
2. Generation of f lange w/o supporting geometry
Milling
3. Flange drilling
Laser Cladding
4. Cladding the cone
Laser Cladding
5. Construction of connectors
Milling
6. Milling the inner contour
Source: DMG Mori
- 39 -
COVERAGE
M&A
We anticipate greater mergers and acquisitions as well as joint ventures within the additive manufacturing space
driven by the greater adoption of additive manufacturing technologies that we anticipate. Customers are going to
continue to look for a full suite of products to produce polymer and metal parts as well as design tools (CAD,
Scanners) to design and reverse engineer parts. The complete demand can be sourced from multiple OEMs like
today, but if additive OEMs want to capture more of the market and have greater touch points for customers and resellers their portfolios will continue to broaden. In the short-term, we see the market as large enough for more
focused companies to thrive, but longer-term we expect to see more combinations of technologies and services
under fewer roofs.
Figure 27
M&A Deal Flow
ARCW
DDD
PRLB
SSYS
XONE
2008
2009
2010
2011
2012
12
10
8
6
4
2
0
2001
2003
2013
2014
Source: Company reports, CapIQ
COMPS
Figure 28
Industry Comps
2014E
2015E
2016E
Price/Sales
EV/EBITDA
Price/Sales
EV/EBITDA
Price/Sales
ARCW
3.4x
20.0x
2.1x
12.4x
1.7x
7.3x
DDD
7.7x
29.3x
5.9x
21.3x
4.7x
16.6x
MTLS
5.4x
106.5x
4.3x
52.2x
3.8x
38.1x
PRLB
8.8x
22.7x
7.0x
18.2x
5.9x
16.2x
SSYS
8.1x
26.9x
6.1x
21.4x
4.8x
16.7x
XONE
6.6x
NM
4.8x
63.4x
3.4x
10.7x
Average
7.3x
46.3x
5.6x
35.3x
4.5x
19.7x
Source: CapIQ, JMS Estimates
- 40 -
EV/EBITDA
OPERATING METRICS
Figure 29
Source of Revenue, 2013A
Products/Machines
Services
Materials
ARCW
DDD
MTLS
PRLB
SSYS
XONE
0%
20%
40%
60%
80%
100%
Source: Company Reports, JMS Estimates
Figure 30
Annual Revenue 2012A-2015E
$1,200,000
Revenue $000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
2012A
2013A
2014E
2015E
ARCW
30,407
68,486
81,691
126,223
900,022
DDD
353,633
513,400
702,810
MTLS
59,107
68,722
77,314
97,159
PRLB
125,991
163,112
213,506
256,889
SSYS
359,054
484,403
750,658
1,046,966
XONE
28,657
39,480
55,394
72,537
$000
- 41 -
Figure 31
Annual Gross Margin 2012A-2015E
90%
ARCW
DDD
MTLS
PRLB
SSYS
XONE
80%
70%
60%62%
60% 60%
62% 63%
61% 62%
60%
52%
51%
50%
52%
52%
53%
52%
47%
46%
43%
42%
40%
39%
39%
32%
30%
30%
30%
27%
20%
10%
0%
2012A
2013A
2014E
2015E
Figure 32
Annual Operating Margin 2012A-2015E
45%
ARCW
DDD
35%
MTLS
PRLB
SSYS
31%
17%
17%
16%
15%
12%
12% 11%
15%
7%
5%
30%
30%
28%
25%
XONE
6%
4%
3%
0%
-5%
-4%
-1%
-1%
-6%
-15%
-14%
-20%
-25%
-28%
-35%
2012A
2013A
2014E
- 42 -
5%
2015E
Figure 33
Annual R&D as % Sales 2012A-2015E
15%
14.4%
DDD
MTLS
PRLB
SSYS
XONE
13.0%
12.5%
13%
10.9%
11%
11.1%
10.7%
8.5%
7.3%
6.6%
10.5%
10.2%
10.3%
9%
7%
10.8%
10.7%
9.0%
8.6%
7.9%
7.8%
2014E
2015E
7.3%
6.7%
5%
3%
1%
-1%
2012A
2013A
Source: Company Reports, JMS Estimates; ARCW does not report R&D seperately
- 43 -
ARC Group Worldwide
ARC GROUP WORLDWIDE (ARCW)
Key Metrics
COMPANY DESCRIPTION:
Recent Price:
12 Mos Fair Value Estimate:
EPS F2013A:
EPS F2014E:
52 Week High
52 Week Low
Market Cap
10-year Revenue CAGR:
Core Revenue Growth
F2013A:
F2014E:
F2015E:
Headquartered in DeLand, Florida, ARC Group Worldwide, through
its subsidiaries, manufactures and distributes precision components,
specialty hermetic seals, flanges and wireless equipment. The
company operates in 4 reporting segments: Precision Components,
3DMT, Fittings & Flanges and Wireless.
INVESTMENT THESIS:
•
The company operates in four primary segments, Precision
Components (~85% of revenue), Fittings and Flanges (~7% of
revenue), Wireless (~2% of revenue), and 3D Material
Technologies (3DMT) (~5% of revenue).
•
With operations in the U.S. and Europe, ARCW leverages the
capabilities within each unit to consolidate its customers’ supply
chain, providing them a complete plastic and metals fabrication
service, while emphasizing a shortened time to market.
•
ARCW is among a much smaller sub-set of companies
positioned as a full-service provider, present in each phase of
the manufacturing process from design and prototyping to
production and finishing.
•
•
•
$18.52
$26
$0.24
$0.45
$25.00
$2.47
$276
N/A
125.2%
13.1%
7.1%
ARCW Revenue by End Market
FY14E
Firearms/
Defense
31%
Wireless
3%
Growth strategy is based on enhancing its current portfolio with
core manufacturing advancements supplemented by bolt-on
acquisitions to attract new customers and increase market
share with existing customers
Flanges
6%
Aims to further grow its revenues and profits by leveraging the
complementary technologies of its Precision Components
segment and its newly established 3DMT business
Consumer
13%
By incorporating rapid prototyping with traditional manufacturing
techniques, specifically injection molding, ARCW can be more
of a single source for engineering, rapid prototyping, short run
production, specialized tooling and high volume production
Auto
31%
Medical/
Dental
16%
TRADING & VALUATION
ARCW Price Performance, Absolute & Relative to S&P500
Reverse Merger - Present
Calculated vs. Market Implied Residual
$20,000
25.00
$18
400%
ARCW
Relative to S&P
$16
350%
20.00
$15,000
$14
300%
EVA
200%
$10,000
$10
150%
10.00
$8
$5,000
100%
$6
50%
5.00
0%
$4
$0
-50%
$2
- 44 -
2023E
2022E
2021E
2020E
2019E
2018E
2017E
2016E
2015E
2014E
Soure: Capital IQ
2013
$0
2012
Jul-14
-$5,000
Aug-14
Apr-14
May-14
Jan-14
Mar-14
Dec-13
Nov-13
Sep-13
Jul-13
Aug-13
Apr-13
May-13
Jan-13
Mar-13
Dec-12
Nov-12
Sep-12
-100%
Aug-12
0.00
Share Price
$12
250%
15.00
3D SYSTEM
3D SYSTEMS (DDD)
Key Metrics
Headquartered in Rock Hill, South Carolina, 3D Systems develops,
manufactures and markets 3D printers, print materials and custom
parts
services.
DDD’s
primary
print
engines
include
stereolithography, selective laser sintering, multi-jet modeling,
selective laser melting, plastic jet printers and ProJets.
INVESTMENT THESIS:
•
Pioneer of additive manufacturing (AM or 3D) systems for over
25 years.
•
Completed roughly 20 acquisitions since Jan-12 complimenting
its growth strategy and market share.
•
Additive manufacturing technologies are not one- for-one
replacement of traditional manufacturing methods. Technologies
are complementary.
•
DDD’s printers convert CAD data into physical objects from
engineered plastic, metal, and composite print materials. It
primarily serves manufacturers of automotive, aerospace,
computer, electronic, defense, education, consumer, energy and
healthcare products, as well as OEMs, government agencies,
universities and independent service bureaus.
•
Adoption should occur at geometric rate not linear; advances in
technology and user expertise will push each other at a
compound rate.
•
Despite the last few years of very high growth, driven in part by
the expanded use of rapid prototyping, these technologies are
still in their infancy and we continue to be early in the penetration
and adoption of this technology.
Recent Price:
EPS 2013A:
EPS 2014E:
52 Week High
52 Week Low
Market Cap
Core Revenue Growth
2013A:
2014E:
2015E:
$49.54
$84
$0.85
$0.78
$97.28
$43.35
$5,445
16.7%
29.4%
30.0%
28.1%
DDD Revenue Breakdown by
Geography, 2013A
Asia
Pacific
19%
North
America
55%
Europe
26%
Source: Company Reports
TRADING & VALUATION
DDD Price Performance, Absolute & Relative to S&P500
Last 10 Years
Calculated vs. Market Implied Residual Income
$500,000
100.00
$100
1400%
DDD
$90
Relative to S&P
90.00
1200%
$400,000
$80
80.00
1000%
$70
$300,000
70.00
60.00
800%
50.00
600%
40.00
400%
$60
$200,000
$50
$40
$100,000
30.00
$30
200%
20.00
0%
10.00
$20
$0
$10
- 45 -
2023E
2022E
2021E
2020E
2019E
2018E
2017E
2016E
2015E
2013
2014E
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
Soure: Capital IQ
2001
$0
2000
-$100,000
1999
Aug-14
Aug-13
Aug-12
Aug-11
Aug-10
Aug-09
Aug-08
Aug-07
Aug-06
Aug-05
-200%
Aug-04
0.00
MATERIALISE
MATERIALISE (MTLS)
Key Metrics
Headquartered in Leuven, Belgium, Materialise (MTLS) is a leading
provider of additive manufacturing software and 3D printing services.
The company’s customers are active in a wide variety of industries,
including healthcare, automotive, aerospace, art and design and
consumer products.
INVESTMENT THESIS:
•
•
•
•
MTLS was founded in 1990 and went public on 6/25/14. What
started with a single stereolithography system (SLS) purchased
from 3D Systems (DDD), has grown to include industrial
production, medical applications, and industry-leading additive
manufacturing software and solutions
MTLS’s proprietary software platforms, enables and enhances
the functionality of 3D printers and of 3D printing operations,
have become a market standard for professional 3D printing,
with a current installed base of more than 8,000 licenses
Recent Price:
EPS 2013A:
EPS 2014E:
52 Week High
52 Week Low
Market Cap
Core Revenue Growth
2013A:
2014E:
2015E:
$11.46
$14
€ 0.09
-€ 0.02
$15.15
$9.85
$539
N/A
16.3%
12.5%
25.7%
MTLS Revenue by Segment,
2013A
In the healthcare sector, Materialise’s technology was directly
responsible for the design and manufacture of over 146,000
customized, patient-specific medical devices during 2013
3D
Printing
Software
19.5%
In its 3D printing service centers, including what is believed to be
the world’s largest single-site additive manufacturing service
center in Leuven, Belgium, MTLS printed more than 500,000
medical devices, prototypes, production parts, and consumer
products during 2013.
Industrial
Production
39.5%
Medical
41.0%
TRADING & VALUATION
MTLS Price Performance, Absolute & Relative to S&P500
IPO - Present
$20,000
12.60
$18
14.00
$16
Relative to S&P
12.20
10.00
12.00
8.00
11.80
6.00
11.60
4.00
11.40
2.00
11.20
0.00
$15,000
$14
$12
$10,000
$10
$8
$5,000
$6
$4
$0
- 46 -
2023E
2022E
2021E
2020E
2019E
2018E
2017E
2016E
2015E
2014E
Soure: Capital IQ
2013
$0
2012
Aug-14
Jul-14
Jun-14
$2
-$5,000
Share Price
12.00
EVA
MTLS
12.40
PROTO LABS
PROTO LABS (PRLB)
Key Metrics
Recent Price:
EPS 2013A:
EPS 2014E:
52 Week High
52 Week Low
Market Cap
Core Revenue Growth
2013A:
2014E:
2015E:
Proto Labs, Inc. produces CNC machined and injection molding
plastic parts. The company was founded in 1999 and is
headquartered in maple Plain, Minnesota. It has locations in the
United States, the United Kingdom, Germany, Japan, Italy, France
and Spain.
INVESTMENT THESIS:
•
PRLB has a unique business model that really has no direct line
for line competitor. The closest example of what PRLB does
would be a large contract manufacturer or machine shop.
•
Unique web based rapid quotation software. What historically
takes days/weeks, takes minutes (verified by our own parts
submissions).
•
Started as rapid injection molding production (Protomold) now
includes CNC machining (Firstcut); better price for small
quantities/greater variety of materials, and Fineline additive
manufacturing.
•
High double-digit revenue growth can be driven by installed base
adding new applications and new product developers adopting
the Proto Lab model.
•
More customers will outsource these steps of product
development rather than incur the fixed and variable cost of
keeping it in house.
•
Model is scalable; therefore we expect incremental revenue
growth to be met by lower increments of fixed cost rather than
direct variable cost.
$72.96
$92
$1.47
$1.82
$94.23
$58.06
$1,876
N/A
26.3%
30.8%
25.6%
PRLB Revenue Breakdown by
Product, 2013A
Firstcut
29%
Protomold
71%
TRADING & VALUATION
PRLB Price Performance, Absolute & Relative to S&P500
IPO - Present
$30,000
90.00
$80
120%
PRLB
80.00
$70
Relative to S&P
$25,000
100%
$60
70.00
80%
60.00
50.00
60%
40.00
40%
$20,000
$50
$40
$15,000
30.00
$30
$10,000
20%
$20
20.00
$10
0%
10.00
$5,000
Aug-14
$20,000
$18
$16
$15,000
$14
$10,000
$10
Share Pri
$12
EVA
- 47 -
2015E
2014E
2013
2012
($10)
2011
Soure: Capital IQ
2010
$0
2009
Jun-14
Mar-14
Jan-14
Oct-13
Aug-13
Jun-13
Mar-13
Jan-13
Oct-12
-20%
Aug-12
0.00
$0
STRATASYS
STRATASYS (SSYS)
Key Metrics
Recent Price:
EPS 2013A:
EPS 2014E:
52 Week High
52 Week Low
Market Cap
Core Revenue Growth
2013A:
2014E:
2015E:
Stratasys provides additive manufacturing solutions for the creation
of prototypes and the direct manufacture of end parts. Its AM
systems utilize its patented fused deposition modeling (FDM) and
inkjet-based PolyJet technologies to enable the production of
prototypes, tools used for production and manufactured goods.
INVESTMENT THESIS:
•
Leading developer and manufacturer of additive manufacturing
(AM or 3D) systems.
•
Co-founder developed fused
backbone of SSYS systems.
•
With the acquisitions of Objet and MakerBot, SSYS offers
multiple technologies to broaden customer adoption and
customer breadth.
•
are complementary.
•
technology and user expertise will push each other at compound
rate.
•
While we expect more share price volatility in this market, the
demand for these products will expand faster than in the past in
our estimation.
•
Personal units accelerate awareness/adoption, but contribute to
share price volatility.
deposition
modeling
(FDM);
$124.41
$142
$1.85
$2.25
$138.10
$85.30
$6,150
25.3%
27.5%
30.9%
26.8%
SSYS Revenue Breakdown by
Product, 2013A
Services
14%
Products
86%
TRADING & VALUATION
SSYS Price Performance, Absolute & Relative to S&P500
Last 10 Years
$20,000
140.00
SSYS
Relative to S&P
120.00
2000%
$10,000
1800%
$0
1600%
100.00
1400%
1200%
80.00
$160
$140
$120
-$10,000
-$20,000
$100
-$30,000
1000%
-$60,000
200%
-$70,000
0%
-$80,000
$40
$20
- 48 -
2013
2014E
2012
2011
2010
2009
2008
2007
2006
Soure: Capital IQ
2005
$0
2004
-$90,000
2003
Aug-14
Aug-13
Aug-12
Aug-11
Aug-10
Aug-09
Aug-08
Aug-07
Aug-06
Aug-05
Aug-04
0.00
400%
2002
20.00
$60
-$50,000
2001
600%
40.00
$80
-$40,000
2000
800%
1999
60.00
EXONE
EXONE (XONE)
Key Metrics
Recent Price:
EPS 2013A:
EPS 2014E:
52 Week High
52 Week Low
Market Cap
Core Revenue Growth
2013A:
2014E:
2015E:
The ExOne Company develops, manufactures, and sells 3D printing
machines and printed products to industrial customers in the
Americas, Europe, and Asia. The company’s Max, Print, Flex and
Lab machines allow designers and engineers to produce industrial
prototypes and production parts.
INVESTMENT THESIS:
•
Leader in additive manufacturing (AM or 3D) systems with
diversified end market exposure including Aerospace,
Automotive, and Energy markets.
•
Concentrated product focus with machine sales complimenting
PSC business.
•
are complementary.
•
technology and user expertise will push each other at compound
rate.
•
While we expect more share price volatility in this market, the
demand for these products will expand faster than in the past in
our estimation.
•
Despite recent volatility in financial performance, we still believe
XONE's technology is among the most positively disruptive for
the $120+ billion global casting industry and metal part
production. It's metal printers open opportunities for unique
creation of parts and alloys not possible with other AM or
subtractive technologies
$24.82
$50
-$0.50
-$0.80
$70.25
$24.34
$358
N/A
37.8%
39.4%
30.9%
XONE Revenue Breakdown by
Segment, 2013A
PSC 37%
Machine
63%
TRADING & VALUATION
XONE Price Performance, Absolute & Relative to S&P500
IPO - Present
80.00
160%
XONE
Relative to S&P
140%
70.00
$80,000
$80
$70,000
$70
$60,000
$60
120%
$50,000
$10
$0
Soure: Capital IQ
- 49 -
2023E
2022E
2021E
2020E
2019E
2018E
2017E
2010
$0
2016E
-$10,000
Aug-14
Jun-14
May-14
Mar-14
Feb-14
Dec-13
Nov-13
Sep-13
Aug-13
Jun-13
May-13
Mar-13
-40%
Feb-13
0.00
$20
$10,000
0%
-20%
$30
$20,000
20%
20.00
10.00
$40
$30,000
2015E
30.00
40%
2014E
60%
2013
40.00
$50
$40,000
2012
80%
2011
50.00
EVA
100%
Share Price
60.00
IMPORTANT DISCLOSURES
Research Analyst Certification
I, John Baliotti, the Primarily Responsible Analyst for this research report, hereby certify that all of the views expressed in
this research report accurately reflect my personal views about any and all of the subject securities or issuers. No part of my
compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views I expressed in this research
report.
Janney Montgomery Scott LLC ("Janney") Equity Research Disclosure Legend
Individual disclosures for the companies mentioned in this report can be obtained by accessing our Firm’s Disclosure Site
Disclosure Site
Definition of Ratings
BUY: Janney expects that the subject company will appreciate in value. Additionally, we expect that the subject company will
outperform comparable companies within its sector.
NEUTRAL: Janney believes that the subject company is fairly valued and will perform in line with comparable companies within
its sector. Investors may add to current positions on short-term weakness and sell on strength as the valuations or fundamentals
become more or less attractive.
SELL: Janney expects that the subject company will likely decline in value and will underperform comparable companies within
its sector.
Janney Montgomery Scott Ratings Distribution as of 6/30/14
IB Serv./Past 12 Mos.
Rating
Count
Percent
Count
Percent
BUY [B]
207
53.80
53
25.60
NEUTRAL [N]
176
45.70
28
15.90
2
0.50
0
0.00
SELL [S]
*Percentages of each rating category where Janney has performed Investment Banking services over the
past 12 months.
Other Disclosures
Janney Montgomery Scott LLC, is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a
member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp.
This report is for your information only and is not an offer to sell or a solicitation of an offer to buy the securities or instruments
named or described in this report. Interested parties are advised to contact the entity with which they deal or the entity that provided
this report to them, should they desire further information. The information in this report has been obtained or derived from sources
believed by Janney Montgomery Scott LLC, to be reliable. Janney Montgomery Scott LLC, however, does not represent that
this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Janney
Montgomery Scott LLC at this time and are subject to change without notice.
Investment opinions are based on each stock's 6-12 month return potential. Our ratings are not based on formal price targets,
however, our analysts will discuss fair value and/or target price ranges in research reports. Decisions to buy or sell a stock should
be based on the investor's investment objectives and risk tolerance and should not rely solely on the rating. Investors should read
- 50 -
carefully the entire research report, which provides a more complete discussion of the analyst's views. Supporting information
related to the recommendation, if any, made in the research report is available upon request.
- 51 -

The Landscape of Additive Manufacturing

Transcription

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