Who will industrialise additive manufacturing? Who will own the value chain? Part 1

Oerlikon, Siemens, GE, HP. Global giants, but WHO will industrialise additive manufacturing? Who will own the value chain?

There can be no doubt that 2016 was the biggest year for Additive Manufacturing in it’s 30+ year history. You could say that it was the year that Additive Manufacturing came of age.

The Global Powerhouses are in and that shines a light on the technology and provides validity and credibility to the advances made by early visionaries like Stratasys, 3D Systems and EOS. As revolutionary and innovative as they were, the true test of long term viability came when, in 2016, the big boys arrived, and to use a playground analogy, took the ball from the smaller children who were playing, and started a new game.

The new game is being played with high stakes. By investing almost $1.3bn to acquire Concept Laser and Arcam late in the year, GE signalled their intent. GE were not the only major industrial company to step out onto the pitch though. Oerlikon and Siemens also made moves of their own to stake their claim in this rapidly developing market.

It has long been anticipated that leading industrial companies will jump into additive, but in 2016 it really happened. The question now is, ‘Who will own the value chain?’

Up until last year additive manufacturing had been dominated by hardware development with a ‘push’ focus. By that I mean new technology had been developed and then ‘pushed’ out to users with applications being sought and developed to meet the capability of that technology, as a means to sell machines, and importantly other consumables like materials and service. Last year the game changed and that started when HP launched Multi-Jet Fusion, as an open platform.

Companies like Stratasys and 3D Systems, who make up to two thirds of revenue through consumables, suddenly find themselves faced with a paradigm shift in the industry. The emergence of Chemical/Material companies such as BASF, Covestro and Henkel as critical new players in the market signalled a shift in the value chain.

The need for ever complex and more integrated solutions from design to production started to raise the importance of Software Companies and the role software would play in the evolution of digital production.

In this post we hope to open up debate on the positions taken by the some of the new players and who is positioned well to take the most from the evolutionary market of AM?

For the past two years the industry has been waiting for the launch of Multi-Jet Fusion Technology from HP. The investment by HP into 3D Printing marked the initial shift of big business into the field, not discounting the earlier acquisition of Morris Technologies by GE in 2012. The launch of MJF by HP at Rapid in 2016 was the first big statement from a Fortune 500 company that Additive Manufacturing was a technology for the future and the big boys were now coming to play. Despite the hype surrounding HP and the fantastic marketing, this was probably one of the less fundamental developments in the industry. Yes a new technology that is faster, with better user economics is good, but questions still remain about the bigger role HP will play in the industry?

HP did change the game though, by announcing an open platform for materials and seeking partners such as Lehman & Voss, Henkel and others. As outlined above this shifted the potential value chain opening the door for the large chemical companies to take a stake in the growing and potentially highly lucrative AM Market. However with only a single hardware technology in a market that is shifting towards integrated production solutions, HP might need to add to their portfolio if they are to have the kind of impact the World has come to expect of this impressive business.

In August Siemens acquired a 75% stake in UK based Materials Solutions. The acquisition, compared to those that came later was relatively small, but it did secure Siemens world leading expertise in materials and AM processes. Importantly though it is the Siemens Digital Factory that I believe is the real game changer. Having slowly pieced together through development and acquisition, Siemens Digital Factory, now has a suite of technologies that seamlessly integrate hardware, software and technology based services. While there are competing software technologies from companies like Dassault Systems and Autodesk, Siemens have the most advanced and integrated capability. Combined with their knowledge of hardware and recent acquisition of Materials Solutions they have the perfect combination of expertise to drive full industrialisation of additive manufacturing and other digital production technologies.

Oerlikon, well known as a leading global technology Group with a diverse segmented offering, made a big play in AM by acquiring citim GmbH in November. The acquisition was “an important step to become a global powerhouse in surface solutions and advanced materials.” By combining their knowledge in engineering of industrial components and materials, with expertise in the area of additive manufacturing production services acquired with citim, Oerlikon is positioned to play a significant part in the industrialisation of additive manufacturing, offering an integrated end-to-end service concept. Critical to success of this strategy will be the application of unique material offerings that could differentiate Oerlikon from other service providers such as Arconic.

When GE makes an investment very rarely is it a bad one, but even the most fervent supporters of AM still questioned the magnitude of the fees paid for the acquisition of Concept Laser and Arcam. With a multiple on revenue of close to 10x and EBIT of almost 100x to most observers it seemed GE had paid a lot of money for the two companies. So what did GE know that others didn’t?

Firstly as a major adopter of the technology themselves and having understood fully the competitive advantage they could gain over rivals through AM production, they simply needed to protect their supply of machines. Ally this to the fact that the margin saving alone on 1000 machines over 10 years equated to almost 50% of the price paid and suddenly the deal starts to stack up commercially as well.

Importantly though what GE understand, and why I believe they are the best positioned to take the greatest value in the AM value chain, is that integrated solutions that provide digital production capability combined with advanced materials development, will be critical to creating competitive advantage in the future manufacturing world. GE Additive now has almost every weapon in the arsenal to truly unleash the potential of AM. With deep exposure in industries including Oil & Gas, Medical, Automotive, Energy and Aerospace, GE are set to accelerate away from their competition and truly change the face of production.

So what next for GE and the others outlined? What will be the big news of 2017?