3D printing — also known as additive printing — is a transformative technology that will usher in dramatic change. The disruptive dominance of 3D printing, which is closer than most realize, will be a hallmark of the transition to mankind’s fourth great age, the information age. (The prior three were the stone age, agricultural age, and industrial age.).
This might sound funny, because investor excitement around 3D printing peaked about seven years ago.
You can see it in the share prices of 3D Systems (DDD) and Stratasys (SSYS), two prominent 3D-printing companies. DDD and SSYS topped circa January 2014, and then tumbled as if falling off a mountain.
The first wave of 3D-printing bullishness was far too early, and the initial premise was wrong.
The belief back then was more or less that hundreds of millions of consumers would have a 3D printer in their home — like a Polaroid camera for physical objects — and that the average person would be able to print whatever they wanted from designs pulled off the internet.
That idea didn’t work. Or rather, the economics of it didn’t work. The excitement got too far ahead of the technology, which frequently happens, and the first iteration of the business model was miles off, which also frequently happens. 3D-printing stocks thus got rocked when the enthusiasm bubble popped.
But the 3D-printing concept didn’t go away. Instead, it has spent the past seven years getting incrementally better in the shadows.
3D-printing technology has continued to mature, and make strides away from the spotlight, as factors like the falling cost of computing power and the rise of machine learning and big data make the economics more viable by the day.
In 2021, the realistic outlook for 3D printing as a transformative industry is something like this:
- There will be large 3D-printing manufacturing facilities, on the order of tens of thousands to hundreds of thousands of square feet, built next to equally large distribution centers.
- Some of these facilities will crank out mass volume for industrial purposes — think high quality engine parts — and some will handle retail customer orders in mass volume, with a production catalog of hundreds of thousands, or even millions, of proprietary product designs.
- These 3D printing mega-facilities will be partnered with, or more likely owned by, fulfillment and distribution giants like Amazon or Walmart. They will take the customer’s order online, send it to a 3D-printing facility, and then ship to the customer directly, possibly via drone or automated self-driving vehicle.
That 3D printing future is closer than most realize.
We can say this with confidence partly based on the current state of the industry, partly based on how fast various supportive technologies are advancing (microchips, machine learning, and so on), and partly based on the seven-year time frame between today and the last enthusiasm peak.
For truly transformative technologies, the last mile of development is often far harder than it looks. This can create a kind of mirage years before the technology is truly ready for prime time: It can look like the industry is almost there, but there are still a great many gaps to close and kinks to be worked out.
As such, for a transformative technology, closing the gap between a prototype concept and an actual, viable industry with profitable economics can take a long time.
Sometimes the gap closure can even take decades: Think online grocery delivery as conceived 20 years ago — when the concept was way too early in terms of the surrounding technology ecosystem — versus 2020, when grocery delivery truly began to take off.
This is why investor excitement tends to peak early for a game-changing technology, then slip into a kind of “winter of discontent” that can last for years. The mirage gets everyone excited, but the oasis of profits isn’t real.
If there really is a profit oasis to be reached, though, development of the technology keeps going.
As investors focus on other things, the industry keeps marching forward, collecting small, incremental improvements that amount to significant viability gains each year. And then, at some point, critical mass is achieved as the technology becomes viable at scale. This is when the real promise starts to be fulfilled.
It looks like 3D printing, as a game-changing transformative technology, is following this pattern.
But the 3D-printing revolution could be far larger than most expect, to the extent it will touch almost everything. As mentioned, it could serve as a bridge from the industrial age to the information age.
And in so doing, it will up-end or destroy a great many 20th century assumptions of how business is supposed to work.
To see this clearly, imagine the following scenario:
- A teenager uses a smartphone to order a new pair of Nike shoes. The shoes have a signature design endorsed by the teen’s favorite athlete and have multiple customization options in terms of mix-and-match colors and textures.
- Instead of going to Nike, the shoe order goes to a 3D-printing mega-facility joint-owned by the 3D manufacturer and Amazon. The shoes are printed on the spot, with custom specifications, and shipped within 48 hours. The facility is side-by-side with an Amazon distribution center, and the shoes are delivered by Amazon drone delivery.
- The shoes are priced at just $16. The cost of materials is $7; the cost of the manufacturing process is $2; the cost of physical delivery is $1. The remaining $6 goes to Nike.
The ability to buy a signature-endorsed, mix-and-match customized, high-tech pair of athletic shoes for just $16 sounds impossible by 20th century standards. But with 3D printing and automated delivery, that kind of price drop becomes not only viable, but likely.
Remember that 3D-printing mega-facilities could be producing hundreds of thousands of items per day, using a catalog of stored designs that draw on materials kept in bulk.
And if the delivery process is completed via drone or self-driving transport, the whole thing can be automated from start to finish. Human hands don’t have to be involved unless something goes wrong.
We know Amazon can do well in this scenario, but what about Nike?
It turns out the Nikes of the world could become even more profitable than before. Why? Because nearly all of Nike’s 20th century costs have been stripped out of the equation, leaving pure profit behind.
In the 20th century, running a global apparel company meant the actual creation of physical products.
The making and selling of physical apparel products (e.g., shoes) required factories in far-away countries; shipping and logistics supply chains; physical warehouses to hold inventory; last-mile delivery of product to physical retail stores; the need to resell excess inventories or take write downs on it; and so on.
In the 3D-printing scenario we described, all of that goes away. Every single bit of it. Nike, as a global apparel company, has a business model that goes entirely digital and virtual.
In this 3D-printing world, Nike still designs shoe and apparel products, and runs brilliant and provocative marketing campaigns, and pays big endorsement dollars to top athletes to endorse the latest shoe or windbreaker or whatever it is.
But once the intellectual property, marketing, and branding aspects are complete, Nike’s role is done. It won’t have to deal with the logistical headaches of the physical world.
In our scenario, Nike collects $6 for every pair of shoes sold. That sounds like a small amount, but what was Nike’s total cost? Again, the factories are gone, the warehouses are gone, the ships and vans and trucks are all gone.
Nike’s cost footprint shrinks radically, even as the lower price point makes it easy to greatly expand the audience of people who can afford to buy Nike shoes. At $16 a pair, teens could have ten pairs of shoes if they wanted, or they could buy a new pair every month. Nike could roll out a shoe-of-the-month subscription model if it chose. And the profits would likely be greater than before.
So far, so good. But now think about the industries that disappear, or shrink to almost nothing, in a world like this. While mass-scale 3D printing will be explosively profitable for globally dominant intellectual property owners — masters of design, marketing, and branding like Nike — for physically oriented production and logistics industries, it could be an extinction event.
In a world where the bulk of physical products are 3D printed, you don’t need factories in far-away countries. You don’t need giant container ships crisscrossing oceans. You don’t need dock workers. You don’t need truck drivers. You don’t need physical warehouses — on and on.
And this transformation won’t just happen with, say, shoes or apparel. It will happen with any product where 3D-printing economics can viably apply. That means we are talking about millions of products.
3D printing is interesting to think about because it represents one of the signature moves of the information age — taking the physical and making it virtual.
After all, what could be more physical than a pair of shoes you wear on your feet? And yet, from a business standpoint, the information age can make 90% of the shoe business virtual — right up to the point the shoes are 3D printed from a proprietary design kept on file.
This means more than just “creative destruction” as investors are used to hearing the term. For some companies and industries, it will mean stratospheric profits and expanding margins, as the value of intellectual property skyrockets and the cost of physical production falls toward zero.
Other entities and industries will be looking at a fate comparable to the fax machine or the classified ads business for local newspapers: Total oblivion.