There is little doubt that the large 3D printer manufacturing companies have been struggling as of late. With shares of Stratasys (NASDAQ:SSYS) and 3D Systems (NYSE:DDD) down substantially since the start of last year, one has to ask, “What went wrong?” Is the stronger US dollar to blame for the majority of the revenue and guidance misses we have been seeing from both large 3D printer manufacturers as of late, or is there another underlying cause playing out here which may cause both companies to revise their strategies moving forward?
3DPrint.com was able to get hold of Rick Twiggs, a man who, despite his youth, has quite the insight into the industry. Twiggs was introduced to the technology while working on a project for a diabetic pump which he says will revolutionize traditional pumps as well as a new cancer therapy.
“I was using technology from the Bill and Melinda Gates Foundation to create the pump and when the time came I had to actually prototype it and that took some time to put together,” Twiggs told 3DPrint.com. “In 2012 I decided that the best way to prototype it was to make it myself and that entered me into the world of 3D Printing. When I saw the steam that 3D Printing was generating I knew that I had to bring the technology to my home state, Louisiana.”
So Twiggs decided to open the very first 3D printing service bureau in the state of Louisiana. Since that time, 10 new 3D print bureaus have opened in the state and competition is becoming fierce. After a disagreement with his business partner Twiggs decided to part ways and pursue his own consulting company, Unchained Thought. In this time, however, he was able to gather invaluable insight into the industry, where it may be headed, and what may need to change from a business standpoint for both small and large companies to survive. This includes companies like Stratasys and 3D Systems as well.
“The decline of sales by Stratasys and 3D Systems is directly tied to early entry assimilation in large companies,” Twiggs explained. “Many companies have purchased millions of dollars in machines to use in house and will not be purchasing any more machines for a while. There is also a trend in the stagnation of 3D Print Bureaus which I believe many businesses are realizing is very similar to, if not identical to the traditional printer industry back in its hayday.”
If you are old enough you will recall the days in which 2D printing began to emerge as a breakthrough technology within the business space. Large corporations would outsource their paper printing to companies such as Kwik Copies, Kinkos, TRM, etc. At that time it was not economically feasible for them to invest large sums of cash into a machine themselves. Eventually though, prices began to come down and companies realized it was cheaper to purchase the machines themselves rather than outsource the work to these printing services.
“These purchases would drive the price further down for other companies to enter into the fold and eventually personal printers would become talked about,” explained Twiggs. “Before that large nexus, however, paper print bureaus (quick printing services) started popping up from Office Depot, to FedEx Kinkos to Staples, etc. These would help to fill the needs of [the general population] who could not afford [printing services] or did not want to have a printer in [their] home. Eventually, the consumer market would explode and now nearly everyone has a home printer. This has led to the powerful decline in Print Bureaus which existed out of necessity for a few decades.”
Twiggs now feels that the same is about to happen within the 3D printing space, with the only difference this time being the pace at which these transitions occur. Instead of taking multiple years to unfold, it will happen much more rapidly, and already may be starting to occur. There is another negative variable in the equation this time around–additive manufacturing networks, which are large-scale 3D printing hubs. An additive manufacturing hub is to eBay as localized 3D print bureaus are to individuals local auction houses. Hubs such as Red Eye, Solid Concepts (Stratasys owned), Shapeways, and in some sense 3D Hubs will cannibalize the market, likely causing the small local 3D print bureaus to lose business as they are already becoming obsolete to some extent.
“Why would anyone Google local print bureaus when they can use 3D Hubs and Shapeways,” asked Twiggs. “The necessity to have a printer in house is looking less and less attractive (for commercial owners, residential is another story).”
So, what does this have to do with the lack of sales reported by Stratasys and 3D Systems as of late? Simply put, if 500 3D print bureaus are in the United States, each with 2-4 machines, which require upgrades every 4-5 years, that’s a decent flow of demand for those manufacturing these printers. On the other hand, if only a few major additive manufacturing hubs take over, each with perhaps 40-60 machines, but with the ability to handle the same supply as all of these individual localized bureaus combined, then demand for these local print bureaus suddenly will dry up.
It’s not all bad news though. In fact, if manufacturers play their cards right, Twiggs believes that there may be a tremendous opportunity for growth.
“Simply put, 3D Printing is disrupting its own market,” he explains. “In fact, it is disrupting it so badly that I believe we will see an increase in consumer 3D printers being bought and a very violent decline in local Print Bureaus that struggle to pay off the original cost of the machines (which is around 100K+ for an industrial printer), paying for rent/lease, electricity, water, advertising, marketing, website presence, etc.”
Gradually, but much quicker than within the 2D printing space, consumer printers will take over according to Twiggs. This will warrant drastic shifts within the business models of both Stratasys and 3D Systems moving forward. There will continue to be demand for industrial grade printers, and until the technology behind consumer targeted machines narrows the gap with the industrial market, specific projects will require such machines, but ultimately the tide is changing and so too will the strategies of the larger players within the industry.
“3D Systems and Stratasys will both have to evolve and enter heavily on the consumer market,” Twiggs suggests. “I believe we will see a few more spikes in profits over the coming months, but the overall sales should falter as many large corporations already have printers of their own and do not want to currently add anything new. The end result is a complete transition from focusing on large expensive machines to early entry. Stratasys has done this successfully so far with assimilation of MakerBot, but poor marketing strategy and poor merger acquisition has really hurt their sales. 3D Systems needs to follow on board, perhaps with a purchase of a desktop SLA printer or the creation of their own desktop SLA printer which does not cost an arm and a leg.”
Regardless of what ultimately takes place, there is no doubt that the coming years will be incredibly interesting for the entire industry as the multi-billion dollar company HP plans an entrance into the industrial 3D printing space in the latter part of 2016. Let’s hear your thoughts on Twiggs’ ideas on the industry. Discuss in the Declining 3D Printing Profits forum thread on 3DPB.com.