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Additive Manufacturing Meets the Financial
Markets
The Challenge for the Lasers & Photonics Sector:
Value Creation Opportunities In Additive
Lasers & Photonics Marketplace Seminar February
9, 2015 John Dexheimer
Why Additive Matters
“Eli Whitney’s standardized interchangeable parts came in the 1800s,
Henry Ford and the assembly line in 1910s,
Taylor and time and motion studies in the 1920s and 1930s,
Taiichi Ono and lean manufacturing in the 1950s.
You have those things happen every few decades that really change the way
we think about manufacturing.
~ That’s what I think additive manufacturing could be; not just a tool, but
part of a new way to think about manufacturing itself that’s sometimes
called distributed manufacturing “
~Mark Bunger, Lux Research
Manufacturing Above & Beyond Current Methods i.e.--Uber
The Big Vision: “Uber-izing” Manufacturing
Silicon Valley Business Models re-engage with Manufacturing
Convergence of 2 KEY Technologies – Computing costs & Fiber Laser
performance to create new paradigms : Source - Penn State CIMP/America Makes
With a helping hand
from Uncle Sam and
DOD
The Investor Question : What New Massively Valuable Companies will be Created?
An Array of Applications Directions: Patents & Open Source Design; Captive & Distributed Production
Patent examples
Bego – dental to EOS, SLM, Renishaw
Fuel Nozzles –Delavan/Goodrich/United
Tech; GE
Open Source examples
GE Design challenge
Bracket winner from Indonesia, no US
design in top 8
Small Market Today or “A Thousand Points of Light”?
A proliferation of new opportunities
Consumer and Industrial products
Geographic fragmentation and distinct opportunity growth
New services enablement
Very much aligned with distributed software/internet services
Morgan Stanley
forecasts $20B
in 2020
Investors – Big Markets, New Paradigms
and Momentum
3D printing could be worth $550 billion a year by 2025---
McKinsey Global Research.
“And it is going to alter the whole business of manufacturing”
Additive can and is taking a slice of several segments
Fabricated metals (machining, casting, welding, forging, stamping) is a $2 trillion
annual industry; $340 billion in US
Machine tool equipment is ~$70 billion annual
Welding is a $34 billion annual service business with ~$5 billion of
equipment sales
Heat treatment is a $70 billion global business with ~$5 billion annual
equipment sales
Plastic injection molded parts consumes ~$280 billion annually
(implies +$1 trillion end parts) with injection machinery ~$37 billion @
~80-90K machines per year
Data sources are publicly available industry specific reports, market analysis
Where Are Current Pockets of Entry?Small Volumes, Prototyping, Customization & Quick Delivery
2014 ORC report
Fuels the flow of capital
into the sector
The Medical Sector is Embracing
Source: Johnson & Johnson,
presentation at CIMP 10-14
And YES,
bio-printing
of cells uses lasers
Patents
3D Printing for the Photonics Industry
SPIE Prism Finalists
3D printed polymer optics
–LuXeXcel
Femtoprint – 3D glass
devices-sensors
How do Public Markets Define Additive-3D Today?
“Bellweathers” - Stratasys and 3D Systems – each approaching $1
billon in revenue; now diversified product & services
30-35% forward growth; Operating Income of ~20%; 7X MV on 1-22
Revenue mix includes “recurring” materials/consumables and
services/outsourcing
Higher profit margins on recurring mix than systems
Protolabs & Materialise –software design/operations management &
manufacturing service bureaus
Proto is $250M revenue with 30% operating income; 6X MV on 1-22
Materialise is $100M revenue; 4.5X MV on 1-22
“Niche-er” players, either US and EU listed
Arcam, ExOne, Voxeljet, SLM Solutions, Sigma Labs, Makism 3D,
Organovo, Alphaform, Graphene 3D
Combined revenue of ~$210M with MV of $1.8B : 9X MV
Down from year ago, but emerging is alive and well
Tremendous Run in Market Value
and Substantial Capital Flows in the Sector
The ETF Index of STOXX for 3D printing dramatically outperformed the S&P
S&P 500 growth over same 3 year period
Fragmentation: Many Segments Exist in Which to
Participate & Excel
Source: Roland Berger
Growing Venture Capital Flows Into the SectorCovering a wide range of applications and parts of the eco-system
Shapeways
Formlabs
Sols Systems
3D Hub
CGTrader
LuXeXcel
Ion Core
Pirate3D
Sculpteo
Nanoscribe
Structured Polymers
Normal
Lithoz
Persimmon Technologies
Solidica
OxSyBio
Fusion Implants
Symbionex
Markforged
A small sample of firms
MXD3D
New Matter
Other Machines
Matterport
Geomagic
Print-to-Peer
Makerbot
GrabCad
Nanosteel
A Long Gestation to Get Stock Traction
- with High Volatility as Typical
At the peaks, both Stratasys & 3D
had market caps over $9 billion –each more than IPG, COHR, NEWP and
RSTI combined peaks of the past 5 years
3D - An Example of Non-Linear Evolution
Recent very active M&A, accelerating in 2013-
14, to fill product offering and expand
geographic footprint while taking advantage of
capital flows
Recent acquisitions include Layerwise metal
DMLS, Medical Modeling, Xerox Wilsonville
integration/materials labs and 3D CAD firm
Cimatron
Public for 20 years-1995 IPO;
Started selling product in 1988 and CIBA relation of
$30M investment;
Bought patents for $9M in 1990, bought EOS
business unit in 1997
In August 1999, Flattish revenue at ~$90M for 3
years, GM of 31-36%; operating losses
Stock price at $1.50/sh. (For $50M total MV)
What Are Relevant Public Benchmarks
for the Additive - 3D Sector?
Median MV/Revenue of ~7.5x for group of 10 firms
low of 4.5x, high of +100x
Other Sector Benchmarks: “Eco-System” Comparisons
Laser firms:
IPG ~4.5x; RSTI, NEWP, COHR ~ 1.2-1.7x
Manufacturing Inspection systems:
Cognex ~6.8x; Renishaw ~5x
CAD for mechanical design :
Autodesk, Ansys, PTC, DASTY: Avg. ~7x
Major sophisticated metals parts firms:
Precision Castparts, Bodycote ~3x
Semiconductor Capital Equipment: Might this be a good analogy?
AMAT, ASML, KLA, LAM: avg. ~5X
Data as of 1-23-15, John Dexheimer;
consolidation of various analyst estimates
and available data on yahoo finance
The End of the Additive Stock Market Run….
…. or Just a Re-Grouping?
Feb.3, 2015 : Shares of Stratasys Ltd. plunged 28 percent Tuesday
a surprise $100 million “goodwill impairment charge”
“new phase of increased investment in its business” because more manufacturers are adopting 3-D printing into their factories.
“The investment plan is designed to implement broad product development and infrastructure which would support annual revenues of $3 billion in 2020,”
“raise its capital expenditures for 2015 to a range of $160 million to $200 million from about $50 million in 2014.”
“The industrial side of the market is the sweet side.”
Where is the Play for the Photonics Community?
For laser sales into systems
Metals
Other Materials
For applications
Optics, Scanners and other parts
For metrology & inspection systems
Photonics has a Role Throughout the Processes
3D Scan
90% of all manufactured parts
contain some metalAmerican Foundry Society, Voxeljet
Patents : A Historical Snapshot
Source: EOS published paper 2004
An evolving area of processes, methods, applications and materials
Patents - “a tortuous marketing path” SLM was initially developed in 1995 at the Fraunhofer Institute for Laser
Technology (ILT) in Aachen, Germany (the basic ILT SLM patent DE 19649865). 2000 F&S and MCP HEK GmbH entered into a partnership, from which MCP ultimately
took over commercialization rights.
2002, Trumpf and EOS sign a cooperative patent cross-license agreement.
2006, MCP HEK is first company to process aluminum and titanium powders in SLM
2008, EOS/Trumpf announced a patent license agreement with MCP, extending non-exclusive rights to certain EOS and Trumpf laser-sintering patents. but the agreement didn’t extend to North America.
2008 (immediately following EOS/Trumps – MCP agreement) 3D Systems and MCP announce a partnership initiative to distribute the MCP Realizer in the USA.
2008 -mid, EOS filed the patent infringement lawsuit against MCP.
2008 - late, a portion of MCP spins off the MTT Technologies Group.
2009 EOS/Trumpf reissue the MCP agreement (now as MTT), and cancelled the lawsuit
2010, MTT Technologies Group (Germany) and MTT Technologies LTD (UK), separate commercially.
2010, MTT LTD, sold Reinshaw PLC their line of SLM machinery.
2011 MTT Group reforms as a private company under the label of SLM Solutions GmbH
Goal:
increase thru-put,
decrease parts costs
“if before 3D printing
manufacturers used 100
watt lasers, during last
quarter we already
shipped many lasers with
power up to 10 kilowatt
for manufacturing of large
metal parts.” ~IPG Q3-13
investor call
“we have developed
and started to ship in
volume powder
cladding systems for
turbine blade repair.
The customer is one
of the Tier One
industry leaders in
the world.”
~IPG Q3-13
Lasers, Materials, Design and Software Innovation
Drive Additive Manufacturing Scaling
Source: Roland Berger
Photonics Plays a Critical Role in Scaling:Multi-Lasers Processing, Control & Inspection, Designs
50% decrease in parts cost by 2018; 2023 parts cost is 30% of 2013 cost
Roland Berger-DMRC: build speeds increase 4X by 2018 and 8X by 2023 - multi-laser systems a major factor
Powder costs will decrease with capacity add
Source: SLM, CSFB
For the Photonics Community:
Is This a Small or Big Opportunity?
OR
Metals Additive – Triangulation of Market Data
1400 installed based at end of 2012 (Codex/CSFB)
68% powder bed; 12% DLS, 10% each binder or material jetting,
EOS 2014 revenue of EU-177M; gr. of 36%, 540 employees
half of 300 machines sold in 2014 were metal; prior installed base of
1500 units is 40/60 metal
Concept Laser – all metal laser based systems; over 200 installed, 100 sold
in 2014 with 130 target in 2014; 500 employees
SLM – all metal; IPO in 2014; 133 installed based at 12-13; 53 orders in
2014 with majority having multi-lasers; CSFB “sandbag” forecast for 90
units sold in 2016 with most 2-4 lasers in each
Optomec 2014 growth of 100%; 150 customers –both metal and aerosol jet
nanomaterials; 25 new customers in Q4-2014
Other laser based players with market share : Trumpf, Renishaw,
3D/Phenix AND new entry by major machine tools firms like DMG-Mori
and Mazak
Metals Additive –More Data & Observations
40.5% annual growth in metals additive from 2014-2020 (Metal working
Magazine 7-14)
Applying 30-40% to 2014 sales of EOS and Concept implies they would sell
1930 to 3200 systems combined in 2020
If the average system has 2-4 lasers that means 6,000-12,000 lasers
consumed by these 2 alone
And competitors will consume more
Powder metal sales for additive are forecast at $520M in 2019 growing
to $930M in 2023 (SmarTech -2014) ; up from $25M in 2012- Deloitte, Wohlers, CSFB
Implies $3-5 Billion in end parts in 2019
And there is more……By many definitions and examples….
………………………. laser cladding & portions of welding is additive
Metals appears to be a much bigger & strategic market opportunity
than many have projected to date
Machine Tool Firms—Dinosaurs or Players?
$70 billion annual equipment sales
15 global machine tool firms over $1B each in revenue
20 more of $400M-$1B revenue
Many are parts of larger groups
“Done-in-One”
Mazak on its i-400
announced late 2014 :
“always been at the forefront
of multi-tasking in machine
tools and adding metal
deposition capabilities is a
natural extension of this
theme. Hybrid multi-tasking
will provide our customers
world-wide with new
possibilities for their Mazak
machines.”
DMG-MORI – 5-axis milling machine combines laser metal deposition with the
precision of the cutting process enabling additive manufacturing in milling quality.
Uses Metal deposition by powder nozzle - up to 10-times faster than the generation
in the powder bed.
Hybrid Manufacturing Centers –Machine Tool Incumbents are Adopting Additive
Action Items
Get involved !!!
America Makes, CIMP, CCAM, ASTM, ANST
Think about the implications of evolving manufacturing eco-
systems and architectures
Think about new business model opportunities
John Dexheimer
203-952-1049
President –LightWave Advisors, Inc.
Advisory Board - Indo-US MIM TEC http://www.indo-mim.com/corpProfile.html
Yale Entrepreneurial Institute http://yei.yale.edu/
http://www.cimp-3d.org/index.html -
“The Metals Node of America Makes”
Have Vision, BE BOLD!!!
Additive can present a massive opportunity for photonics firm to
contribute to re-working the landscape of manufacturing and
capturing a substantial value created
Can you find a pocket to create hyper-growth and sustained
long term 20-30% Operating Income?
Beyond being just another supplier - that’s not the big part of the value
creation chain
Focused on contributing to transforming customer economics
It likely means reaching outside current eco-systems for collaborators
What models from other sectors may be applicable lessons to the
entrepreneurial innovation and Uber-ization of your firm?
John Dexheimer [email protected]