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Copy that! Investing in 3D printing

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For more than 20 years, US-based investment adviser Trent Capital Management has invested its clients’ money in smart technology companies. Mainly in mobile phone companies. As of now, the company has a new investment policy: 3D printing.

“It’s the first thing we’ve seen come along that is going to be as universally disruptive as the cellular telephone industry,” says Trent Capital Management partner Jim Folds, who is advising the company’s family office clients among others that the technology’s time is about to come.

“It’s going to change a lot about how things are done – not tomorrow, but it’s on the way. Just like in cellular and other technologies there will be companies that fall by the wayside, but hopefully we’ll be adept at staying away from those and finding technologies that will prosper.” Trent Capital Management has allocated an initial $3.1 million (€2.3 million) to its 3D-Plus fund.

In 2012, the global market for 3D printing was worth $2.2 billion, according to a report released by PwC in June. By 2017 it is set to be worth $6 billion. This year, shipments of printers under $100,000 are set to reach 98,000 – roughly double what it was last year.

First developed in the mid-1980s, the technology involves a process of laying down layers of material, bit by bit, until an object is formed. It is also known as “additive manufacture”.

A 3D printer carries out this task under computer control, meaning that the printer is a form of robot, able to reconstruct objects from data that has been input on site or via electronic means. This allows instructions to be emailed to the printer, or downloaded from the internet.

The availability and versatility of 3D printers has increased dramatically in the past three years, while the price has dropped sharply. They are likely to become widely used in households and businesses in the coming decade. This will enable individuals and companies to avoid many of the current costs of manufacture, transport and retail for common products, disrupting the supply chain for many industries but opening many profitable avenues for forward-looking entrepreneurs and investors.

According to PwC’s report 3D printing and the new shape of industrial manufacturing, several industries are set to be disrupted by the technology. Logistics is one example – if the manufacturing process is decentralised from factories to homes, freight transportation volumes could reduce significantly. Even if it is just used for replacement parts, the movement and storage of products is likely to be impacted.

At the top level, the wealthiest investment funds such as Silicon Valley venture capital firm Andreessen Horowitz, with more than $4 billion under management, is investing in 3D printing technologies alongside drone technologies, Bitcoin and enterprise infrastructure companies. Excitement is also buzzing on crowdfunding platform Kickstarter, where, for example, more than 10,000 small investors have invested $3.4 million in US-based start-up M3D – “the first truly consumer 3D printer”.

Stratasys and 3D Systems are market leaders, according to Steve Roberts, whose product and industrial design company Fripp is based in Sheffield, in the north of England. His brand Picsima has helped to develop a means of 3D printing silicone, which may have numerous revolutionary applications in healthcare, including wound care to prosthetics, cases for smart devices and even sex toys. Pending the outcome of licensing and patent discussions, he believes his product could have a profound impact on the medical sector.

“Most 3D printing uses materials that allow you to print something like a prototype, rather than using ‘real world’ materials,” says Roberts. “There are two current exceptions: metal, where you can use a nickel-cobalt alloy or titanium, for things like Formula One cars, other motorsport, or aerospace. In each case you may only need a limited number of a certain item. The other area is medical grade silicon, which we’ve discovered how to print.” However, according to PwC there is a growing list of “inks” such as polymers, ceramics and glass.

Frédérique Carrier, director of the portfolio advisory group at RBC Wealth Management, says as materials begin to support automotive technology or products like dental implants, it will become more investible. Carrier says the current value of the 3D printing market accounts for 0.02% of the $10.5 trillion manufacturing sector, but if it reached just 1% it would become a $100 billion industry. “There is eye-watering potential,” she says.

For consumers, Roberts argues that most people are as yet unprepared for the advent of 3D technology. “Many people are creative in 2D, but it’s a massive leap to go into 3D. For the full benefits, you need a 3D brain, which takes years of training,” he says. “It’s going to come, but not for the next five to seven years.”

Among the prime applications of the technology will be 3D scanning devices, already on the market for under $1,000 from companies such as Fuel 3D. This company offers a hand-held 3D scanning tool, meaning that you can copy the form of any small item, then send this information to a 3D printing shop, and order it from them. “So if something small and non-functional breaks on your fridge, for example,” says Roberts, “you could replace it in this way rather than ordering a new part from the manufacturer.”

According to PwC, manufacturers may end up selling barcodes for replacement parts that can then be taken to a local 3D printing centre for creation. However, there is potential for such computer-aided design (CAD) files to be hacked and copied, creating similar battles for manufacturers as those faced by the entertainment industry over the past decade with music and movie piracy. “So if you copy your Hermione doll from Harry Potter and send it to your friend, have you infringed copyright law?” Roberts says.

Information technology research and advisory firm Gartner predicts that annual intellectual property losses resulting from 3D printing could reach $100 billion globally by 2018. It says as a result businesses will find it increasingly difficult to monetise their inventions, while intellectual property thieves will have reduced product development costs and will be able to sell counterfeit goods at a discount.

Roberts believes that, in the medium term, the most popular entry point for domestic customers to 3D printing will be the Fuse Deposition Model (FDM) technology, where you have a string of plastic tubing which melts when it comes close to a nozzle and then is deposited in layers, rather like icing a cake (see Printing techniques, p31). “People are developing all kinds of new materials for this technology,” says Roberts. “There is a rubber-like material which can be used for mobile-phone cases, another with wood-like properties. There are many new filaments.”

Roberts does not believe that the technology will replace traditional injection moulding manufacture, because of economies of scale and time to market, but it will “disrupt the supply chain for delivering consumer toys and spare parts. I think it will mainly remain in the realm of specialist B2B applications such as motorsport, aerospace and custom medical implants.” The opportunity for customisation covers a wide span – a Hong Kong Toys “R” Us store, for example, now offers customised rubber ducks.

The possibilities will only increase as the number of inks rises. Last year, for example, US start-up Modern Meadow revealed it planned to develop a 3D bioprinter to produce meat for human consumption. A printed human liver could become a reality in 2014, according to biotech firm Organovo, which believes that it could be used in drug companies’ clinical trials, helping to bring down the cost of drug development (though not for human transplants, quite yet). This news certainly excited UK-based Oxford Capital, which manages funds on behalf of family offices among other investment groups. It included 3D printing for healthcare on its top six hot predictions for 2014, alongside impact investing, space travel and Google Glass.

Healthcare is certainly a highly promising area of development. At the Copenhagen offices and laboratories of Widex, one of the world’s largest manufacturers of hearing aids, moulds from patients’ ears are used to construct earpieces. Rather than depending on the traditional mould and cast system, Widex had devised a way to harness 3D printing to create a more accurate model of the human ear, making the hearing aid more comfortable and precisely engineered to the individual. Many different medical implants and other items, such as splints and prosthetics, may be manufactured using 3D-printing technology. Lithium-ion micro batteries smaller than a grain of sand have also been produced, with potential applications in medicine and communications.

Currently 3D printing is useful for rapid prototyping and low volume, making it popular with designers aiming to attract investors for a product, or selling into manufacturers – who may revert to conventional production processes, once they’ve approved the prototype. The process also simplifies designs, meaning some products can be printed with significantly fewer parts. General Electric, for example, has created a design for fuel nozzles that can be created in one part when using a 3D printer, compared to 20 when using traditional manufacturing processes – something it believes has the potential to produce cost-savings of up to 75%.

Although the US has registered more patents in 3D printing technology than any other region or country, Europe, where governments are investing heavily in research and development, is fast approaching parity with the US in terms of market value. Similar government investment in Asia means the region is also a rising contender on the 3D printing stage. According to Alan Meckler, chief executive of Mediabistro, there will be anywhere between six and 10 IPOs of 3D printing companies in Asia in the coming years, as the technology begins to resemble the growth of the internet. “It sparks the creative juices of entrepreneurs,” said Meckler.

New materials such as polymers, metals, sand, ceramics and living tissue will spur this growth. Additionally, the prospect of very large size printing opens the possibility of house construction, among other things. Just recently, the Institute for Advanced Architecture of Catalonia unveiled small 3D-printing drones capable of building a house – much more practical than earlier gantry-style systems that needed to be larger than the structure they were creating.

3D printing also has potential applications for social good, providing opportunities for those who want social as well as financial returns from their investment. Designs for Hope used 3D printing technology from market leader Stratasys to develop a device which generates and stores electricity from bicycle pedalling, a potential breakthrough for the estimated 1.3 billion people who lack access to electricity. A Ugandan orphanage was one of the first places to benefit, according to the company founder Chris Bond. “The beautiful thing is they’re using their bikes anyway. It’s free energy.” In the US, creating functioning prototypes of personal solar energy devices has helped Peppermint Energy to save $250,000 in tooling costs, allowing for rapid modifications and improvements to their technology, as they try to popularise it in emerging economies.

A major industry shake-up is likely in the next five years, as global industrial giants such as HP, Fujitsu, Microsoft, Amazon and stationary suppliers such as Staples become more involved in the sector. This could lead to a prolonged bout of merger and acquisitions activity, as the giants swallow the minnows. Carrier says: “It is unclear who will be the winners or losers: it’s like Google versus Yahoo! a few years ago. Some potential valuations are quite high.”

“If a family office can get into a technology early and back a winner, the returns on their investment could be substantial,” argues Roberts. “But they need to take a long-term view. Don’t expect dividends in the first five years or so – 3D stock is moving from a bull to a bear market right now.” 

Printing techniques
Not all 3D printers are the same, and each technology has its advantages and drawbacks. Printing speed, cost and choice of inks available generally determine which printer a consumer might like to purchase. Outlined below are the main technologies currently in use.

Binder jetting: Used to print with sand, powders or metal. Layers of material and a binder are used to fuse layers of material together. Commonly used for sand castings. Layers are less noticeable than many other techniques and it can be used on an architectural scale.

Stereolithography: One of the oldest forms of 3D printing. An ultraviolet beam hardens liquid resin, bonding each successive layer.

Fused Deposition Modeling (FDM): Thermoplastic material is melted through a nozzle to create layers, each bonded to the previous one. Often used for rapid prototyping.

Selective Laser Sintering (SLS): A laser fuses powered materials, such as nylon, titanium, aluminum, polystyrene and glass, layer by layer to create a solid mass. Useful for very complex designs.

Selective Laser Melting (SLM): Similar to SLS, but the powder is melted rather than fused. Useful for lightweight materials with thin walls and lattice-type structures, such as orthopaedic implants.

Electron Beam Melting (EBM): Similar to SLS, but uses an electron beam rather than a laser to fuse materials. Makes products of great strength and commonly used with titanium alloys for the medical implant market.

Laminated Object Manufacturing (LOM): Laminates of materials such as metal, plastics or paper are bonded and then cut into shapes. Can be used for large parts.

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