There has been much talk about the coming 3D printing revolution and how it is going to bring about as big a change as the industrial revolution. This future, people proclaim, involves 3D printing taking on traditional manufacturing processes. I intend to show that these claims are quite outlandish and belong more to science fiction than to the world of fact. This is not to say that 3D printing is not an exciting technology with a big future and potential investing opportunities, let's just not get too carried away.
There are a number of companies involved in 3D printing, some of the largest being: 3D Systems (DDD), Exone (XONE), Stratasys (SSYS), and Organovo Holdings (ONVO); these firms range in market cap from $400 million to over $5 billion. In addition to these pure play 3D printing firms, a couple of larger firms are also investigating 3D printing, including HP (HPQ) and 3M (MMM); there is currently a lot of commercial interest in 3D printing.
The production line
The production line is the engine of modern industry, an extremely efficient process that can churn out thousands of completed products per hour. A famous, yet simple example to demonstrate its efficiency is the production of a humble pin. It was shown how such a simple item could be broken down into a number of discrete tasks, with an individual specializing in each area, and in so doing production was increased dramatically; many times over that of a skilled individual producing the entire product. Since this time, the production line has only become more efficient and streamlined; virtually any product you imagine can be churned out at immense speeds.
Now, many people have suggested that 3D printing can take over a significant percentage of this capacity, this is unlikely for a number of reasons:
The production line creates a fully packaged product ready to be loaded onto a truck and ship, a 3D printer cannot do this, the printing process would need an additional step of removing it from the printer, packaging it, then shipping -- adding cost and time.
3D printing is slow, it's basically a big box that after a period of time prints out a product which can take from hours to days, how is this supposed to compete with a production line churning out thousands of products per hour? Some people would suggest that you could just stack a number of 3D printers next to each other to match the capacity, this adds cost (3D printers are not cheap); logistical problems (power and space requirement); and complexity - trying to feed all these machines with raw materials and collect the finished product would not be an efficient process.
Strength: 3D printing uses a layering process, this is not as strong as traditionally manufactured products, you may be able to print out something that looks the same as the product you want, but in reality it will be a poor substitute.
Materials: Typically 3D printers print in plastic, look around you very few of your household products are only made of plastic, they're mad of a combination of materials. 3D printing would not easily be able to surmount this problem due to melting temperatures being, at times, several hundred degrees apart - it would not be able to print both these materials at the same time, again adding additional time and complexity to the process.
Cost: The raw materials for 3D printers are not cheap. Cost is based on size; if you want something big it is expensive, for something smaller it is cheaper, and this doesn't really relate to its complexity or number of parts. There are no economies of scale; producing 10 items the per item cost will be the same as producing one, the exact opposite to the production line which has large economies of scale.
An alternative to overcome the production line process is that there will be many individual 3D printer owners who will use spare capacity to produce products which are then sold through online marketplaces. It sounds plausible, but in reality it is hugely impractical; product owners would not want their production line spread all over the country for anyone with a printer and capacity to sell. This would only take away profits, and would lead to an inferior product. Where would the quality control lie, who would be responsible for a defective product, could you be sure that some printers would not cut corners to save on costs? All of these problems would be a logistical nightmare for any manufacturer to deal with.
While 3D printing is an exciting technology, it is easy to get carried away and imagine that this technology is going to change in the world. The reality is that 3D printing is in no way a challenge to the modern production line and while we can dream of Star Trek-like machines that magically produce a finished product, this is not the reality. If you're making investment decisions with these goals in mind, you should take a careful look at your portfolio.