3D Printing is Changing the World
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Make no mistake. This technology will change the world as we know it. Very rarely does an investor have an opportunity to get in on the ground floor. I know, I know. Sounds like a snake-oil salesman. However, this technology is becoming integrated into the very fabric of manufacturing. The invasion has already begun. It will also provide a vehicle for the next generation of entrepreneurs.
Don’t believe it? There have been any number of news items about 3D printing. In an article in The Atlantic, Hugh Evans, a VP at T. Rowe Price (who covers venture capital as a view into the future) exclaims 3D printing is right up there as one of the most exciting innovations I've seen in 20 years. The Economist proclaims Three-dimensional printing from digital designs will transform manufacturing. Chris Anderson, widely known for The Long Tail theory, states in a Wired article that he believes that 3D printing will be the next industrial revolution, and that 3D printing will compete with mass manufacturing in many areas. The Smithsonian is creating 3D printed models of some its 137 million items collection. 3D printed glasses are Fashion Week's hottest accessory. 3-D printer with nano-precision sets world record. Print your own car (or bicycle).
But what is 3D Printing?
3D printing, also known as additive manufacturing or rapid prototyping, is a process for fabricating a physical object from a computer design. The object can be designed from scratch using computer-aided design (CAD) software, or an existing digital design can be used. The 3D printer then applies thin layers of plastic, metal, resin or powder, based on the design and forms a perfect replica of the object in amazing detail. It can be used for applications as simple as solid plastic toys, or as complex as chain mail or a grandfather clock.
This technology was previously used to create prototypes. As the technology has evolved, it has found uses by a variety of industries including jewelry, footwear, industrial design, architecture, engineering and construction, automotive, aerospace, dental industry, education, geographic information systems, civil engineering, and many others. It is being embraced by the medical device industry to create the next generation of implants, transplants, home testing devices, surgical components, hearing aids, artificial bones, and prostheses.
Most recently, there have been four players in the 3D printing arena. 3D Systems Corp. (NYSE: DDD) has been there since the beginning. Established in 1986 by Charles Hull, 3D created the concept of stereolithography (SLA) as a method and apparatus for making solid objects by laying liquid materials on top of each other, that are cured with different technologies. 3D Systems has focused on bringing 3D printing to consumers.
Stratasys (NASDAQ: SSYS) uses proprietary fused deposition modeling (FDM), which involves melting or softening material to produce the layers and has focused on high-end printers. Privately held Israeli company Objet was the only company to possess multi-material 3D printing capability, as well as an established worldwide network of agents and resellers. They were in the process of filing for an IPO and abandoned those plans in April when they reached an agreement to merge with Stratasys. Z Corporation boasted the fastest and most affordable color 3D printing. Z Corp was acquired by 3D Systems in January.
Consolidation in the industry will likely continue. 3D Systems has just announced a public offering of an additional 3.7 million shares. Their announced purpose? To finance future acquisitions was top on the list.
As the next chapter of this story has not yet been written, how can an investor know which of these 3D powerhouses to choose? Each focuses on a different segment of the industry. Each provides both higher and lower end printers. Each has been swallowing up smaller competition in an attempt to be the industry leader. What’s an investor to do?
I would submit that an argument can be made for owning both in a balanced portfolio. While this technology has been around for decades, it is only recently that it has entered the hyper-growth phase we see today. This is not The Highlander, where there can be only one. There is room for more than one winner in this emerging industry.
Look at the rivalry between Coke and Pepsi over the years. Both have near fanatical followings among their consumers. Both signed multi-million dollar deals with pop stars. With all the posturing and claiming victory, both have for years maintained their core following. Investors, however did not have to choose one over the other. Those that invested in both in early 1990 have seen returns of nearly 700% for Coke and over 600% for Pepsi. Those that invested in both Coke and Pepsi many years ago are not concerned with who won the cola wars - the investors did.
3D printing is an opportunity for investors to catch two companies at the beginning of an industry that may well change the world.
A final word from The Economist:
The written word became the printed word with the invention of movable-type printing by Johannes Gutenberg in the 15th century. Printing presses became like mass-production machines, highly efficient at printing lots of copies of the same thing but not individual documents. The inkjet printer made that a lot easier, cheaper and more personal. Inkjet devices now perform a multitude of printing roles, from books on demand to labels and photographs, even though traditional presses still roll for large runs of books, newspapers and so on.
Perhaps the most exciting aspect of additive manufacturing is that it lowers the cost of entry into the business of making things. Instead of finding the money to set up a factory or asking a mass-producer at home (or in another country) to make something for you, 3D printers will offer a cheaper, less risky route to the market.
Don’t miss out on the next printing press.
Danny Vena owns shares of Stratasys. The Motley Fool owns shares of 3D Systems and has the following options: short AUG 2012 $30.00 calls on 3D Systems. Motley Fool newsletter services recommend 3D Systems and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.