3D Printing: The “Disruption” which didn’t really disrupt
It feels like decades ago but actually it is only 4 years ago when 3D printing was supposed to disrupt each and everyone.
Googling around, it is quite easy to find articles like this one in Forbes from October 2013:
We are a few years away from a printed economy – an economy in which 3D printing will have a major role in manufacturing. Up to now, 3D printing has been most useful in creating prototypes. But from the automotive to the electronics and toy industries, 3D printers will increasingly produce critical parts and finished products. What are some industries 3D printing will disrupt? Here’s our list of seven.
Automotive: 3D printing will manufacture vehicle parts and even whole cars. High-end, specialty cars that have relatively small production runs will particularly benefit. Bentley is one company that has already demonstrated the feasibility of using 3D printing for small, complex parts. Motorcyclists and bikers will also be able to order their own customized helmets that are printed to fit their individual head size and structure.
As these examples indicate, 3D printing will transform the way manufacturing is done today. Moreover, it has the potential for helping to meet the needs of people throughout the world. Poor people in the developing world will find that clean drinking water, low-cost energy sources, and other basic human needs will be met at much lower costs through 3D printing. In this sense, it can serve important civic purposes as well as be an engine of economic development.
3D printing will bring a revolution the details of which are only now beginning to emerge.
Or this study from Deloitte from 2012 and many many more. Optimism was great and projected growth rates even stronger. From the Deloitte study:
As the Consumer Electronics Association noted, “Sales of 3D printers will approach $5 billion in 2017, up from $1.7 billion in 2011, as demand expands for everything from consumer applications to markets such as automotive, aerospace, industrial and healthcare.”
Stock prices of 3D printing stocks became “the thing”. This is the stock price of 3D Printing which went up 7 fold from late 2011 to beginning of 2014:
or German company Voxeljet which went public in late 2013 at 13 USD and went up to ~70 USD a share within 3 weeks, valuing the company at more than 1 bn USD with sales of roughly 10 mn USD (and no profits, of course).
Interestingly, this IPO marked more or less the peak of the 3D printing hype.
Voxljet is trading now at 3,50 USD per share, a fraction of the IPO price and 3D Printing shares lost almost 90% from their peak in January 2014.
So what happened ?
Well, disruption just didn’t happen, at least not as quickly as many “experts” back then expected. Here are annual sales and net profit numbers of 3D and Voxeljet:
It is really interesting that the peak of the hype also marked the profit peak for 3D. Plus, the -655 mn loss figure is not a typo. Voxeljet managed at least to double sales but at a current net margin of -50%, this growth did not create a lot of value.
I found this interesting article from end of last year which tries to explain the lack of disruption and the issues of pioneer 3D company MakerBot.
The short story is that the initial growth was fueled by freaks and early adopters, but that they did not succeed in the mass markets mainly because of flaws and general inconvenience to use the products.
Interestingly enough, there were also a lot of very critical articles back then like this one, but of course not many people like negative opinions. I found the one comment on this article quite telling:
Nick, anything you say now is irrelevant to the future. It’s easy to say that they’re overhyped now, but 3D printers will get easier to make, more compact and more affordable as time goes on. You sound like every person that ever talked about a new technology. It always starts out this way, but then grows into something bigger. Think outside the box.
It is funny, but people who predict great things in the future are liked usually much more than the guy who says it will not work that way from his own experience.
Lessons to be learned
In my opinion, this provides a very good lesson that not everything which is marketed as the next great disruption and grows quickly actually becomes one. Plus the issue that going from the initial freaks and early adopters to the mass market is not easy.
Without going through all current hypes, I think that specifically Electric Cars and Autonomous Driving to me look quite similar.
Both are technologies which are not new, are currently hyped massively and grow quickly. For instance not unlike MakerBot, Tesla owners currently are mostly early adopters and freaks which can live well with the many flaws such as limited range etc. It really needs to be seen if the mass market product is really so good that “normal” customers will adopt Electric vehicles as quickly as currently thought.
The same goes for autonomous driving. As far as I know, the experience compared to driving a car yourself is still far from optimal. For instance current system tend to brake without obvious reasons. Many people think that those problems will be easily solved but I am not so sure if and how quickly this will actually happen.
Looking back it seems to be much easier to disrupt in the “Virtual space” like media, music etc. than in the real physical space. But let’s see, maybe we even get flying cars soon ?
For investing, this means that on the one hand you clearly should not follow every hype. On the other hand this also opens potential opportunities. This is what Ray Dalio said:
“To win at stocks or entrepreneurship, you must bet against the consensus and be right.”
So consensus is clearly that traditional car companies are losers and Tesla/Uber etc will kill them relatively shortly. Betting against this looks interesting. But I am not there yet….