It’s not much of a surprise to us, that the Additive Manufacturing & Rapid Prototyping (AMRP) industry is quickly emerging as a high growth sector worth watching. Leaders in the space provide holistic manufacturing solutions that can significantly enhance production efficiency and product speed-to-market. While traditional manufacturing is owned by single-solution providers with slower and more costly processes, quick-turn manufacturers are creating an exciting one-stop-shop model with sophisticated and cohesive technologies. Original equipment manufacturers (OEMs) continually seek to launch innovative next-generation products to avoid being marginalized in the marketplace – the exact pain point that the proprietary technologies of rapid manufacturing are targeting. The integration of AMRP technologies reduces production bottlenecks, an enduring issue for the increasingly antiquated industrial production model. The ability to rapidly service and prototype provides a significant downstream competitive advantage for businesses embracing AMRP capabilities. AMRP has quickly been adopted across major industries including aerospace, healthcare, consumer products, automotive, defense and industrial, among others. This evolution is driving significant growth in the relatively new AMRP industry. Comprised of just over 200 companies, the industry is already approaching $4 billion with a compound annual growth rate of 22.6% from 2010 to 2015. Moreover, analysts are expecting the AMRP industry to reach over $20 billion by 2020 (source: Wholer’s 2014).
END MARKET SHARE –
Industry growth is being fueled by improved technologies, ever expanding applications, increasingly shorter product development cycles and accelerated product launch requirements. Due to the significant advantages offered by AMRP, many industries are weaving rapid solutions into their product development processes. According to Wholer’s, consumer products/electronics lead the way with 20.3% of the global AMRP market share, followed by motor vehicles (19.5%), medical/dental (15.1%) and aerospace (12.0%). AMRP technology is of particular interest within the aerospace, healthcare, automotive and industrial sectors where product development, innovation and time-to-market are critical to success. With advancements in materials and processes, AMRP has afforded players in these sectors the ability to further expand their capacity to develop and manufacture complex products that are extremely light, stable and durable. Goldman Sachs suggests AMRP applications in these sectors could support a $40 billion market over the next 15 to 20 years with upside potential from technological advances.
KEY GROWTH SEGMENTS –
Capstone expects the medical/healthcare and aerospace sectors to lead the growth in AMRP over the next several years. Some highlights of our thesis and observations include the following:
» Medical/Healthcare: As the most rapidly growing downstream area of the industry that accounts for 15.1% of the market, medical firms have quickly employed AMRP services. Available technologies are being utilized to produce a wide range of devices and instruments such as dental implants, custom hearing aids, models of organs and bones for pre-operative evaluations, custom prosthetics and patient specific instrumentation/devices. In addition, 3D printing has recently found its way into the pharmaceutical drug industry. Earlier this month, the FDA approved the first drug manufactured by AMRP processes. SPRITAM®, by Aprecia Pharmaceuticals, is an adjunctive therapy in the treatment of partial onset seizures. The technology is being used to produce a porous formulation that disintegrates with a sip of water. The application of 3D printing in this capacity is a groundbreaking achievement and provides a highly effective solution for patients that have swallowing difficulties and are subject to greater risk.
» Aerospace: Currently accounting for 12% of AMRP market share, the aerospace industry has been a relatively late adopter. This was due to substandard quality of the initial products. However, aerospace has since become a key growth market for AM. With the capabilities to produce high tolerance lightweight and strong components, designers are using AMRP in the production of engine and turbine parts as well as cabin interiors. Robert McEwan, a general manager of Airfoils and Manufacturing Technologies at GE Aviator, stated in in Sierra College’s Additive Manufacturing: Turing Mind into Matter, “In our lifetime, at least 50% of a jet engine will be made by AM.”*
AMRP MANUFACTURING APPLICATIONS Engineers and designers have embraced AMRP technology due to its ability to transform the product development cycle by offering speed, design flexibility, customization capabilities and affordability. This quick-turn, low-cost solution allows for on-the-fly design changes and true part customization enabling engineers to now produce multiple product iterations in the same time it would have historically taken to produce a single model. In addition, AMRP technologies provide a real-time feedback loop helping enhance product characteristics such as manufacturability, fit, form, functionality and material optimization. AM applications in these sectors can support a $40 billion market over the next 15 to 20 years with upside potential from technological advances. Capstone Partners LLC 2 Additive Manufacturing & Rapid Prototyping Q3 2015 With the introduction of interactive cloud-based interfaces and software automation processes, designs can now be submitted, analyzed, modified, quoted and approved for manufacturing concurrently on the web.
As a result, designs can be approved and quoted within minutes and with same day product shipping. Moreover, as material qualities and dimensional accuracies improve, companies are using AMRP technology in a range of applications including direct part production (19.2%), functional modeling (18.4%), patterns for prototype tooling (12.2%) and fit & assembly (12.1%), as illustrated below. Despite improvements in technology, AMRP capabilities do not entirely meet the product developers’ and engineers’ requirements for dimensional accuracy, material properties and cosmetics. As a result, several larger competitors in the sector offer quick-turn manufacturing solutions utilizing CNC machining, injection molding and stamping capabilities. Examples of companies embracing this holistic solution include Proto Labs, Arc Group Worldwide and Stratasys.
COMPETITION AND DIFFERENTIATION –
The industry remains nascent but its rapid growth over the last five years has attracted robust investment activity in an attempt to capture the relatively untapped and expansive market opportunity. Currently, there is a low market share concentration relative to traditional manufacturing with two dominant market participants: 3D Systems and Stratasys. Engineers can now produce multiple product iterations in the same time it would have historically taken to produce a single model.
This dynamic has already started to change as more companies enter the marketplace. New entrants tend to cater to niche industry segments with differentiated specialization. This trend has taken root in areas such as the automotive and aerospace end markets. Gaining footholds in niche markets allows companies to secure demand and command premium pricing as many of their clients represent the early adopters.
BARRIERS TO ENTRY –
On the surface, there are moderate barriers to entry in the industry with capital equipment accounting for the vast majority of initial startup costs, namely 3D printers and CNC injection machines. Many smaller firms are forced to source their printing equipment from external manufacturers. Beyond capital equipment, raw materials represent the next significant component of a firm’s cost structure but are not very much of a factor. Because there are a small number of refined material suppliers, players in the industry experience the same price fluctuations for raw materials, such as thermoplastics or nylon. However, the competitive barriers lie much more in advanced capabilities. Sophisticated and integrated solutions, such as automated quotation, engineering systems and front-end web client interfaces separate the market leaders from the remaining fragmented pack.
KEY SUCCESS FACTORS –
Companies in the industry compete on features, not price, and this may provide the highest opportunity for emerging firms. The majority of rapid manufacturing providers primarily focus on in-house tooling and production. However, there are some companies that have been able to generate above-market profitability from offering superior services, including advanced mold making, CNC machining and personal customer service. Having an integrated operation is vital, as the largest firms in the industry have prospered from maintenance and services revenue following the initial product sale. Apart from offering a wide range of services and technologies, rapid manufacturers have potential to separate themselves by offering customization capabilities. Nearly all companies provide quick “in-and-out” mass services with little accommodation for things like design, color and structure that differ from built-in molds. Because of this, the consumer sector is almost entirely untapped and has significant growth potential. Finally, rapid manufacturers and quick-turn prototype companies compete on speed, quality and proficiency in producing complex parts. Solutions such as short-run prototyping, low volume injection molding and modernized high speed CNC machining reduce processing time. With interactive quoting and customer service, something not all rapid manufacturers have, the process can be accelerated. Quick-turn producers who can promise design-to-delivery in less than two weeks tend to have much more success.
M&A AND INVESTMENT ACTIVITY –
A wide variety of businesses have been acquired in the AMRP industry over the last few years. The healthy deal flow is a reflection of the industry’s growth and attractiveness, as well as companies in the space that continue to vie for market share through acquired technologies, new geographic markets and customers. We expect to see a growth in the number of transactions as the industry continues to accelerate and investors look to participate. Major companies like 3D Systems and Stratasys have been eager to grow their companies through numerous strategic acquisitions. While, there has also been an influx of more strategic players in the marketplace. Additionally, private equity players have become more aggressive, attracted by the growing industry prospects.
Rapid Prototyping Services-
Interested in rapid prototyping services or low volume manufacturing for your invention or innovation? Email us at [email protected] to get your rapid prototyping project going. Thank you.
Our team of experts are ready to help you.