Interview with IDTechEx’s Senior Analyst Sona Dadhania: Macro Outlook on 3D Printing for 2024 and the Complex Financial Environment


It can often seem like there’s very little upside to trying to make sense of the trajectory of the global business environment, especially in the 2020s. One of the biggest challenges involved lies in the simple fact that the macroeconomic conditions currently prevailing across the globe are themselves so difficult in every sense of the word.

They’re difficult to experience, difficult (and frequently, unpleasant) to observe and keep track of, and even if you work at keeping track of those conditions, they are — above all — difficult to come away from with a satisfying interpretation. In turn, this leads most to shy away from even trying to follow the emergence of a “big picture.”

When that happens, the difficulties involved tend to combine, and the overarching challenge becomes something of a self-fulfilling prophecy: since people begin to generally avoid all attempts to form views of the grand scheme of things, the exercise itself starts to seem entirely impossible, and counterproductive, and so forth. The problem with that is that no industry exists in a vacuum, and this is particularly true about any industry comprising the manufacturing sector.

Image courtesy of New York Fed and Bureau of Labor Statistics

Manufacturing is one of the core sectors that strongly influences, and is influenced by, the worldwide macroeconomic progression. Despite its challenges, undertaking the task of consistently understanding the global economic story can be invaluable to additive manufacturing (AM) businesses for strategizing their operations.

In an effort to navigate complex facets of the additive manufacturing (AM) industry, I turned to Sona Dadhania, a senior technology analyst at consultancy IDTechEx. I sought her assistance in understanding the current status of mergers & acquisitions (M&As), and the likelihood of investment influx into the industry. Her insights elucidate the seemingly chaotic state of these matters in 2023, especially when viewed within the broader economic context:

“In the broader economy, M&As have decreased as economic uncertainty around inflation and interest rates has led to more caution in deal-making. Moreover, securing financing for prospective buyers has become harder and costlier. M&As in other industries, including the AM industry, are unlikely to rebound until this economic uncertainty settles to some degree. Meanwhile, the few existing deals will need to underscore strategic value and expansion prospects to justify pursuit in such macroeconomic conditions.”

Image courtesy: Divergent Technologies’ Czinger Vehicles

Along those lines, it is perhaps unsurprising that the largest AM financing rounds in 2023 went to companies whose operations revolve around advanced manufacturing techniques including AM, but otherwise function like contract manufacturers rather than as original equipment manufacturers (OEMs). AM industry stakeholders are clearly being cautious in general about investments that they still view as too risky.

Nonetheless, the investments those stakeholders are still making seem driven by an overall effort towards supply chain stabilization, a motivation also driven by the economic uncertainty related to persistent inflation, high interest rates, etc.:

“The vast majority of companies that received the biggest funding rounds in 2023 do not adhere to the traditional 3D printer OEM business model, where a company sells printers with their proprietary printing technology to end users,” Dadhania noted. “Instead, three of the biggest funding rounds in 2023 were awarded to companies that are fundamentally end-users themselves: Divergent Technologies, Lightforce Orthodontics, and Zeda. While each of them undoubtedly possesses their own intellectual property and innovations supporting their business, none are primarily focused on pioneering new or incremental innovations in 3D printing technology. Rather, their focus is on using AM to address specific verticals: automotive, dental, and aerospace/medicine, respectively. This indicates a broader shift in the industry towards focusing more on applications rather than on 3D printers. It also signifies a change in investor focus, who, in a more cautious macroeconomic environment, are less inclined to invest in just any new technology; they are seeking to invest more in startups with a clear path to revenue generation and profitability. AM startups concentrated on using AM to provide specific products to particular verticals are likely more attractive for financing from this perspective.”

Thus, even in cases where investors are taking a risk on new technologies, it is notable that, again, those technologies tend to form the basis for manufacturing service providers rather than a basis for selling 3D printers:

“That said,” Dadhania added, “it’s not that new AM technologies are not receiving large funding rounds. In 2023, two of the top five biggest funding rounds went to companies developing new print technologies: Seurat Technologies and Fabric8Labs, both specializing in metal 3D printing. However, what’s notable is that neither of these companies are following the traditional printer OEM business model. Instead of selling printers equipped with their metal 3D printing technology, both are planning to use them in their own manufacturing facilities to produce final parts for customers. The major benefit of this business model is that it removes the capital and operational expenses required for customers to invest in new manufacturing technologies, theoretically lowering the barrier to adoption. Investors likely find this model attractive for the same reasons mentioned earlier, which is that such a business model may offer a quicker, clearer path to revenue generation and profitability compared to traditional printer OEMs.”

Even though the most-watched hypothetical M&A deals from 2023 didn’t pan out, the expectation remains that M&As will inevitably pick back up. And, in November 2023, two significant purchases did go through: Nexa3D acquired Essentium, and BigRep acquired HAGE3D. (Shortly after the latter was announced, BigRep announced a SPAC deal to go public on the Frankfurt Stock Exchange.)

The successful mergers in the industry indicate, to a degree, the truth of a common assertion from insiders within the AM industry — the marketplace is simply “too fragmented.” Dadhania further elaborated on this point, suggesting that while this is true in relation to the OEM space, mergers and acquisitions aren’t the sole solution for dealing with this issue:

“Various unique printing technologies exist, with differing applications for each one, and there are hundreds, or possibly thousands of printer OEMs in the AM industry. Many of these printer OEMs can’t showcase significant, noticeable differences that set them apart from the extensive competition within 3D printing. Therefore, when the term “too fragmented” is used to describe the industry, I believe it refers to this overabundance of OEMs that regularly lack vital distinguishing factors. For first-time users, this can be quite confusing—for instance, how does one select from 50+ companies that provide laser powder bed fusion printers?

To lessen the confusion for new users and make it easier to enter into AM, having fewer OEMs with overlapping functions would likely be beneficial. But M&As aren’t the only means of achieving this. Considering the money required to maintain a manufacturing equipment business, it wouldn’t be surprising if many printer OEMs simply couldn’t get enough business to stay operational. This will naturally occur as the sector matures, gradually reducing the fragmentary aspect. Nevertheless, M&As which leverage synergies between companies are crucial to easing fragmentation in this industry.”

Other elements that should guide the consolidation of the hardware market are the growth trajectories of all industry areas outside of hardware. That is to say, as materials portfolios and software platforms standardize, it will become clearer which machines are most compatible with the feedstock and software markets in their more developed state. Dadhania wrapped up by accentuating that an effective exploration of the AM industry’s dynamics will depend increasingly on giving equal attention to each segment of the overall industry.

“There’s no doubt that materials will play an increasingly central role in driving the AM market; in fact, IDTechEx predicts that the revenue generated from materials sales will surpass that of printer sales within this decade. This is as users find applications that increase their printer utilization and, subsequently, material consumption. Many surveys have also indicated that a small or unsuitable materials portfolio is a key barrier to adoption in AM. Therefore, there is definitely room for innovation and expansion in this area to fuel AM’s growth. Software will also act as an important driver, as the right software can lower the barrier to adoption for end-users and enable them to maximize the potential and productivity of AM.”

And, to reiterate a final time, how critical it is to keep track of the big picture, the dynamics of the materials and software markets can be expected to be particularly affected by the macro outlook. Public policy issues related to international markets for critical minerals are already directly impacting the shape of the metal powders space, and AI and cybersecurity will continue to center the focus of firms on the software side of the AM industry.

So, pay attention to all business news, not just AM news; pay attention to what the Fed is doing, pay attention to supply chains. It’s overwhelming, but if you can wrap your head around microstructures and lasers and rocket engines, you can understand the global business environment — even in the 2020s.

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Original source


“Why did the 3D printer go to therapy? Because it had too many layers of unresolved issues!”

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