3d printing from bytes to atoms

Speaker Series Experts’ views for expert investors

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USA 3D printing: Bytes to atoms

Technology Real technology that is more evolutionary than revolutionary3D printing is at the peak of the hype cycle, but it is a real technologywith real relevance. We cut through all the hoopla and look at the history,current landscape and future. 3D printing drives the evolution inprototyping and manufacturing, but the promise of a revolution for theconsumer remains far off. Industrial 3D printing is increasinglymainstream for prototyping, though uses for manufacturing remain niche.

Origins in rapid prototyping, 3D printing’s industrial roots The term 3D printing is interchangeable with additive manufacturing. The

technology has its origins in stereolithography, which debuted in the late 1980s. Rapid prototyping persists today, while rapid tooling didn’t catch on. Rapid

manufacturing is at a nascent stage of adoption. 3D printing encompasses these three applications.

Less than 1% of industrial firms use 3D printing for manufacturing.

Plethora of materials, but no standardized codex There is a wide variety of materials for use in 3D printing, including thermoplastics,

thermoplastic elastomers, ferrous alloys, non-ferrous alloys, sand, ceramic, paper, glass, electrical inks and even biological materials.

Available materials are limited for each class and there is no standardized way to categorize or evaluate them. Injection molding enjoys greater variety of materials.

Industries that lead manufacturing adoption are aerospace, dental, hearing aids and motor sports. Consumers are printing customized toys, jewelry and household items.

Diverse landscape Key industrial providers are 3D Systems, Stratasys, ExOne, Arcam (Sweden),

envisionTEC, EOS (Germany) and Renishaw (UK). For bioprinting, there is Organovo. In the consumer market, players are 3D Systems, Bits from Bytes, MakerBot, Lulzbot,

FormLabs, Sculpteo, Leapfrog and Solidoodle. RepRap is an open-source solution. Most software is bundled, though Autodesk is a thought leader. Five to seven

hundred resellers and distributors globally typically resell CAD/CAM software. Service bureaus include Proto Labs, Kraft Wurx, Shapeways, Staples Easyprint and others.

2 April 2013

Ed Maguire Software analyst [email protected] (1) 212 549 8200

Guest speaker

Todd Grimm Founder & President, T.A. Grimm & Associates

www.clsau.com

3D Systems’ CubeX printer

Source: 3D Systems Corporation

This is an edited transcript of our

14 March 2013 call.

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Todd Grimm Todd is a 23-year veteran of the additive manufacturing/3D printing industry. From his work as a consultant, writer, author, speaker, editor and advisor, he was recently named as one of The TCT Magazine’s 20 most influential in the additive manufacturing industry.

Todd is president of T.A. Grimm & Associates, an additive manufacturing consulting and communications company, editor for ENGINEERING.com and columnist for The TCT Magazine. He is the author of User’s Guide to Rapid Prototyping.

He currently serves on the board of the Additive Manufacturing Users Group (AMUG) as its industry advisor and has served as chairman of the Society of Manufacturing Engineers’ (SME) community for additive manufacturing.

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Speaker Series

2 April 2013 www.clsau.com 3

3D printing: Bytes to atoms It’s great to speak with you. We’re going to be discussing the origins, the present and the future of additive manufacturing and 3D printing. I’d like to start off with a bit of your background as a prelude.

Certainly, I’m a degreed mechanical engineer who discovered that he didn’t want to do that right out of college. So I went into the CAD/CAM marketplace as a technical salesperson, and through that venture, I stumbled onto this brand new technology called stereolithography back in the late 80s, which is the root or the start of this whole industry.

I happened to make a phone call to a former sales manager who I saw written up in a magazine as starting a service bureau. It happened to be the third service bureau ever to be founded using rapid prototyping. I called to congratulate him, and he said, ‘I could use a guy like you.’ This was in 1990. I left the organization selling CAD/CAM, went into the service game and rapid prototyping and stayed with service bureaus until 2002. At that point, I went off on my own. I’ve been an independent consultant dedicated to this field for almost 13 years.

To expand on that, could you discuss the origins of the technology around what’s now called additive manufacturing or 3D printing?

I’m going to tackle the latter part of that statement you just made. It’s very important to understand that additive manufacturing is 3D printing. They’re synonyms for most people. You will occasionally run into someone who uses one term over the other to indicate levels of advanced application or simplicity. But, in general, one should always assume that 3D printing is additive manufacturing and additive manufacturing is 3D printing. Both of those terms are overarching “umbrella” terms. They cover every technology at every price point for every application and every industry.

The founding of this industry was in the late 1980s with the commercialization of a process called stereolithography. That technology was introduced by 3D Systems under the name “rapid prototyping.” So our industry used to be called rapid prototyping, but over the years, we found that that term lacked clarity, and it was also being used by other industries that weren’t necessarily building parts in an additive fashion.

In the industry, there was a push to find another term. Ultimately, we landed on this combination of 3D printing and additive manufacturing.

That start as rapid prototyping, which was very application specific, is still a subset of both 3D printing and additive manufacturing. It is one of the key or core competencies: applying the technology to the development of prototypes, models, functional prototypes and patterns.

To bring this full circle, 3D printing is not a new industry. It’s not a new technology that popped up in the last three or four years, an impression that many have. But it’s not, nor is additive manufacturing.

What were the most common uses of rapid prototyping? In other words, were there particular industries or specific use cases that led to this technology to arise?

Ed Maguire

Todd Grimm

Ed Maguire

Todd Grimm

Ed Maguire

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With the technology in the late 1980s and early 1990s, we were really well suited for initial prototypes, almost a concept model due to accuracy and other physical considerations. We found ourselves in that “fringe area” of product development - right at the industrial design hand-off to mechanical design. And that was the sweet spot, and it still is today. This is still a vibrant, growing application. So we’ll lump this under the term “prototyping.”

There was a lot of media coverage at that time and people were awe-inspired by the technology, looking to use it. But soon they found it to be extremely expensive, both the equipment and third-party services. Because of the cost, most people backed off - they couldn’t justify the value proposition. Those that stayed with it are your typical early adopters of new technology. Many were in aerospace, automotive, high-end electronic devices. Not something you’d put in the consumer’s hands for US$50, but instead something much more expensive that could justify the investment. The industry then grew into motorsports and sporting goods for prototyping and pattern making. Over the last two-and-a-half decades, additive manufacturing has become more common as a prototyping tool in the development process across many, many industries, including all the industries under the manufacturing umbrella - those industries that have a heavy design component.

The technology has also reached into non-traditional areas like sculpture and art, special effects for movies, jewelry-making and other applications.

As soon as rapid prototyping was established, the next step was tools like injection molds, ceramic shells for investment casting or the tools for die-casting. Why not use additive manufacturing, then known as rapid prototyping, for tool making? Thus was born the term “rapid tooling.”

We now had rapid prototyping and rapid tooling under this umbrella. Actually, rapid tooling did not work out well because, although a good idea, the deliverable, cost and quality didn’t yield a strong value proposition. It is used, but it’s just not as big an application. Then in the mid to late 90s, people started exploring, ‘What if we could do production with these machines?’ which gave rise to “rapid manufacturing.”

So additive manufacturing and 3D printing encompass three applications that used to be known as rapid prototyping, rapid tooling and rapid manufacturing.

This transition from prototyping to manufacturing seems to be the change in use case that’s getting people really excited about these technologies.

Yes, absolutely. However, we’re still at a point in time where I think a lot of people who aren’t day-to-day practitioners think it’s a trivial matter to drop in a new technology as a solution for making finished goods. The individuals using it have discovered that that’s absolutely not true.

There are a lot of conversations about it, certainly those with a financial interest in this industry: manufacturers of the equipment (OEMs), materials and software, as well as distributors. The whole chain is looking forward to the day when additive manufacturing becomes commonplace across many industries as a tool for production because there will be a lot more systems sold, there will be a lot more material consumed, when compared to the one-off world of prototyping. In prototyping, you make a few and then you are done, versus making tens of thousands or millions for production.

Todd Grimm

Ed Maguire

Todd Grimm

Speaker Series


There are some great success stories out there, where people are doing production work with additive manufacturing technology. However, we haven’t even scratched the surface: less than 1% of companies are now using the technology for manufacturing.

The reason for this is because of the barriers to insert a new technology, which are technological and societal. Equipment born as a prototyping machine does not have the same constraints as a production device in repeatability (eg, CpK measurements of process control) and, for process control, making sure everything comes out exactly the same. Prototyping machines can lack throughput when you get into higher volumes; accuracy can be a concern; and certainly material choices are key. There is a wide latitude of materials available, everything from thermoplastics, thermoplastic elastomers to ferrous alloys, non-ferrous alloys, sand, ceramic, paper, glass, the electrical inks and even biological materials. There is a lot of diversity in the classes of materials that can be processed; however, in each class, you’ve got just a few available materials. So in the thermoplastic class, you’ve got commercially available polycarbonate, nylon, ABS and a few specialty materials like PEEK or ULTEM, which are trademarked names for mechanically sound and temperature-resistant materials used on aircraft.

With injection molding, not only do you have a lot more selection of thermoplastic families, but within each one of those families, you may have 50 or 100 different choices from 10 different vendors. Not so with 3D printing.

With that, we’re kind of coming in and saying we want to be your production solution. But companies and individuals expect what they’re getting with their other technologies. They want that breadth of material choice to have the option to select one from many that satisfies the needs of their product and their consumers. But we don’t have that. So those are all barriers.

Then there’s also the mindset. For manufacturing, you’re asking them to change their processes, their procedures. You’re asking people who may have a vested interest in keeping things the same to change. With change, there’s always risk, or at least the perception of risk. So the barrier is not only technological, it’s also the mindset of decision makers that decide how products will be manufactured.

Once decision makers see someone else succeed, this opens their eyes. They discover how to minimize risk and maximize gain and then it starts to snowball. Not huge, it won’t be hockey-stick growth in the near term, but we will see growth. It’s not a “drop in” solution, but the growth is there. The growth will get there, just not as fast as conversations in the media might suggest.

I just wanted to drill a little into both of those points. One is the breadth of different types of technologies and materials. As you look at the landscape, is there any type of standardization technology analogous to inkjet and laser printers in 3D printing? Or are we facing such a big variety of different types of materials, different types of manufacturers with different qualities, consistencies and characteristics that the choice of materials is a big issue for adoption?

It is. And that’s an intelligent question. Human beings love to have labels to simply identify something or a group of somethings with a few terms.

Ed Maguire

Todd Grimm

Speaker Series


If I named any manufacturing process that’s been around for a while, for example injection molding, someone who’s familiar with it will be able to state five or six adjectives that apply generally across the board - independent of the size of a part or the plastic it’s made from. It makes it simple to get your mind around it. There are many approaches to additive manufacturing, and because of that, there are no generalizations you can make.

The technologies can be lightning fast or reasonably fast. They can be extremely accurate or have very poor accuracy. They can have no material breadth - they’ve got one material - or have many materials.

So someone who’s interested can’t just jump in and say, ‘OK, collectively, will additive manufacturing work for me?’ They’ve got to dive into each of the individual technology classes at a minimum. Probably they’re going to need to go into each of the general process types. So be it an inkjet where material is cured with light, be it an inkjet with a binding agent, be it a photopolymer that’s solidified with a laser, a photopolymer that’s solidified with light generated by a DLP chip that’s in your overhead projector for a PowerPoint presentation, be it a laser that sinters or melts metal, an electron beam that melts metal, it could be lamination of office paper with an adhesive, it could be lamination of sheet metals, actually foils, with an ultrasonic welding bell. . .

Each one of those processes has its own distinct strengths and weaknesses, and each of those processes has its own set of materials. So it’s a good problem to have. Diversity is fantastic because it just means that there are so many applications out there, many of them we haven’t even conceived of. There are so many industries that can take advantage of the fundamental concept of building something - without the use of tooling and forms - on an additive basis. The basic description for 3D printing/additive manufacturing creates a ton of different process possibilities.

So we’ve got growth potential in new technologies, but also growth potential in industries that haven’t even evaluated it seriously, or applications or new products or new business models. Yet someone needs to have a keen interest in order to engage in the heavy evaluation to answer whether or not there is something that could work in a particularly situation. You can’t make one phone call and be “off to the races.”

As I think about the development of the Pantone color scheme for instance, until somebody just stepped up to the plate and created a catalog, categorization or even a Dewey Decimal System for these different types of materials and approaches, the landscape seems confusing and fragmented. This would explain the business strategies of leading players in 3D printing.

But the other question that I had was around mindset; how that relates to technologies. We’re discussing a process that has historically worked with CAD/CAM systems, software in the traditional manufacturing process, with rapid prototyping as this intermediary. As we move from high-value discrete manufacturing uses to more mass production, are there certain types of technologies or skill sets in short supply? Or is it more when you change business processes that humans have an inherent inertia towards change and new skills once they get good at certain ways of doing things?

Ed Maguire

Speaker Series


Skill sets come into play, but inertia of change is the most significant. Last year, I did a keynote in Europe and proposed the concept that additive manufacturing is a poor substitute for production applications of finished goods. It’s a great alternative, but a poor substitute.

What I mean by that is if I’m a machinist or someone who has an injection molding dynasty, not only may there be a fear of losing control, and if there are 90 people underneath, but also a fear they’re going to lose jobs. So if we are talking about a plastic piece where a company typically injection molds them, they’ve built processes, expectations and requirements around that injection molding process. There are expectations on what kind of accuracy you can achieve, what kind of repeatability, expectations of materials and other demands.

Now what people are saying is, ‘OK. I want everything additive manufacturing can give me, but I want it to live up to all the previous standards or practices that I’ve set, whether or not they apply.’

So one example - I’ve had more than one conversation like this where someone’s looking at pilot production, which means ‘we’re done with our design, we think it’s right and we’re not quite ready or don’t have tooling yet for full production’. The prospective user needs a hundred or a thousand or several thousand pieces to tide them over until production kicks off.

Well, I’ve had conversations with people about additive manufacturing and they say, ‘Well, you know what? The breakeven point, we’re well beyond that because I need 5,000 pieces.’ Breakeven point for additive manufacturing is down around 500 pieces on just a pure price point and they say, ‘Well, I need 5,000 pieces.’

And you say, ‘Well, yes, you’re right, additive manufacturing can’t be advantageous to you unless you change your design or do something else different.’ But you come back and ask, ‘Why do you need 5,000 pieces?’ Often if they’re honest, they’ll say, ‘Because we always have.’ And then you dig and ask why. They may answer, ‘We did an economic order quantity calculation based on short-run injection molds. It never made sense to buy less than 5,000 pieces,’ because once you had the mold and fired it up, one piece and 5,000 pieces was a few dollars difference, so you bought 5,000.

Well, then what you have is that standard. But if you get someone to revisit it, they may say, ‘You know what? We only need 100 in the first six months.’ So that’s an opportunity for additive manufacturing.

There are all these preexisting requirements, and the path of least resistance is to take the same requirements and apply them to additive manufacturing. Doing that strips away a lot of the advantages of additive manufacturing and puts artificial constraints on top. This makes it less likely to be a suitable solution for your business environment.

And the companies that are succeeding, are adopting, are the ones where there’s some other change beyond existing requirements. This could be a unique, complex design that’s impractical to have molded or machined, where additive manufacturing is the only real practical way to go. If you eliminate the unnecessary constraints and requirements and boil it down to the basics, you have a chance of succeeding. Or if you have a company that’s typically making millions of an item and for some reason they’ve got a new product idea that is such a niche market that maybe they can sell 5,000 in their first

Todd Grimm

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year if they’re hugely successful, right there is an opportunity. In general injection molding would be a horrible solution for a production run of 5,000 pieces, but with one business change, now they say, ‘You know what? It is time to look at additive manufacturing.’

Success comes when you’re either forced to change - where you don’t have any other good solutions - or you have a willful dynamic, innovative personality in the company, someone who’s willing to stand up and say, ‘You know what? We need to change the game and take all the heat that comes with that, take all the risk that comes with that and drive that change through.’ So it’s momentum and then living up to preexisting requirements that are some of our biggest hurdles.

What I’d love to do is to tie that into where you see particular industries or particular use cases looking forward, where there’s a lot of interest and also what industries we might actually see emerge or be transformed.

I think about the idea of printing up spare parts for appliances or automobiles as a way of reducing frictions in the supply chain. If you digitize goods and you’re able to print out spare parts for certain consumer goods that you would otherwise have to throw out, then you’re actually changing the dynamics of planned obsolescence and people can keep goods for longer.

The idea also of this “maker” culture where your people can rapidly prototype personalized and unique goods that can be created and sold on, maybe not just on Etsy, not just personalized figurines, but actual useful household items, seems to be capturing a lot of the imagination these days. From where you sit, what do you see as really promising? As the conversation gets broader, are there any areas where you think rhetoric around 3D printing has reached the peak of the hype cycle?

To answer your question, let me back up just a little bit. I firmly believe that an ideal application for additive manufacturing, especially when you’re looking at production applications, needs at least three of four elements. Those elements are:

Low volume. For quantities of one, a hundred, maybe a thousand. If you’re really pushing it 5,000 pieces. That’s a sweet spot.

High complexity. This is when a design becomes challenging or expensive to manufacture through traditional methods. If combined with the first element, that translates directly to high-value components, expensive with very few of them produced.

Flexibility. This refers to where a product or the business itself can enjoy the flexibility of the freedom of the design. You’re not unlimited by any means, but there are far fewer constraints with additive manufacturing as far as flexibility. Flexibility also applies to changing a design at any time with very little penalty. It’s not like there’s cost in tooling or a production line with trained people. You change the CAD data, you hit the go button and you’ve got a new version. There’s also total flexibility of the production schedule. The additive manufacturing machine doesn’t care if it’s producing 15 different parts at the same time or a batch of 15 of the same parts - every time I hit the go button, I can change within that machine. So there’s flexibility in production rates and inventory.

Ed Maguire

Todd Grimm

Speaker Series


Efficiency. This is the last leg and it relates to time, but I don’t like to use the word “time.” I prefer efficiency because this implies little time, little effort and few steps. One of the hallmarks of additive manufacturing is that you can be on that machine in some cases within a minute and a half of having a CAD model exported to an STL file because you don’t have to have a human generate tool paths and think about the approach. You don’t have to build fixturing to hold the part. It’s just “process the data, get it on the machine, hit the go button.”

So those are the four legs. A good candidate for additive manufacturing has three or four of those legs.

With just two of the four, it could be a pretty good solution but it will be harder to justify.

If you think of businesses, industries, companies or product types where those four elements exist and they could benefit from all four elements, that’s the sweet spot for additive manufacturing.

To your example of replacement components: The one challenge there is you’ve got a square peg and round hole. If an item was originally produced without additive manufacturing and you’re trying to make a replacement part, it’s going to be hard for people to accept something with different quality parameters, different strengths, etc. So it’s a bit dicey, but a great model to consider.

Where that’s going to take off is providing flexibility for something low volume, low demand with high complexity. This could happen when management looks at a business and says, ‘You know what? Our repair/spares business is not a profit-generating business. But it’s a necessity to keep our customers happy.’

In this case, a company could look at additive manufacturing and move to a different business model. So now, as the consumer orders a replacement part, you fire up the machine, you make it on-demand so you’ve got zero cost of inventory, you don’t have scrap, you don’t have obsolescence, you don’t have tools sitting around.

You’ve got extended product life if you choose because you don’t have to worry about worn injection molds; where if you can’t make good parts anymore, your options are to spend another US$50,000 on a tool or kill it because there’s not enough demand. If you look at those criteria, aerospace is an industry where there’s been a lot of success, but it depends on the company and their approach. Boeing has been a big adopter, as one example, and you’ve got those four pillars there because you’re looking at low volume when you’re talking about commercial aircraft, very high-value components and low volume with high complexity.

Aerospace is also looking to drive out as much weight as possible and that typically means either advanced materials or sophisticated designs that maintain strength and have much less weight. That starts to fall into the sweet spot for additive manufacturing.

There are challenges to put additive-manufactured parts on an aircraft, regulations for safety for example. What we’re limited to right now is companies like Boeing doing non-critical components where if it fails,

Speaker Series


passengers might be a little bit uncomfortable, but it’s not going to affect passengers physically, damage them permanently or put them in jeopardy.

Dental is a high-profile poster child for success, and you’ve got that first leg in every single case. There’s the need to customize a product for each and every consumer. It’s a given. With dental, you’ve got smaller components, which are good for additive manufacturing because typically time and cost are size dependent. It’s not feature dependent like traditional manufacturing. So you’re seeing a lot of work in making the restorative items, bridges and crowns either directly or indirectly with additive manufacturing. There is a lot of work in what manufacturers would call fixtures, devices that place an implant in someone’s mouth precisely. They’ll scan you, they’ll generate a digital model of your mouth, they’ll then invert that to create a negative to create a physical piece that fits over your existing tooth structure and jaw structure. Then they can precisely locate the drilling holes at the optimum angle to go into the jawbone and establish depth guides.

So now you can very quickly, very efficiently have the patient back in the office, drop this guide into their mouth while they’re under anesthesia and perfectly place the drill, drill the holes and then put your metal posts in so you can mount your restoration device. It’s not only doing the bridges and crowns, it’s this jig application. All that has the benefit of those four legs of additive manufacturing being advantageous.

Motor sports (Formula 1, motorcycles, race cars, boats, for example) love additive manufacturing. Low volume, high complexity.

Most prominent is the hearing-aid industry that has been using additive manufacturing for 12 to 15 years now. I believe the number is 90% of all ear-hearing aids, the shell itself is actually produced through additive manufacturing. Every item is custom. It’s got to fit the ear canal and the biggest reason for a rejection of a hearing aid is a poor fit that allows sound to come around it or make the device uncomfortable. Now you’ve got virtually a perfect fit every time that is digitally created versus having a human manipulate things. So there is a lot more comfort, a lot more satisfaction and, the key thing for the manufacturers, a lot fewer returns.

Align Technologies’ product is called InvisAlign for teeth straightening. They make clear aligners you put in your mouth, wear them for a week or so at a time, toss them out and put a new set in. That’s all facilitated by additive manufacturing. The aligners aren’t made in an additive manufacturing machine; the forms that the aligners are molded around are. So it’s an indirect play in production applications.

I would like to step back and talk about the industry. I’d like to get a sense of players that make up the ecosystem. There are a couple of companies that make the machines, some service bureaus and material makers. Could you describe the complexion of the industry as you see it?

I’m going to set aside consumer-facing machines for a second. For industrial machinery and materials intended for industrial applications, we actually have a very tiny community of manufacturers.

Ed Maguire

Todd Grimm

Speaker Series


Globally, there are about two dozen, maybe three dozen providers on the high side of commercial machine suppliers that sell more than a few per year. So it’s not huge, and the number of hardware providers that are public companies is even smaller. In the United States, you’ve got Stratasys, 3D Systems and ExOne, a recent IPO. Over in Europe you’ve got Arcam. For bioprinting, there is Organovo, which I believe is public. For equipment, that’s it.

With the exception of 3D Systems, most of these companies have one or two core technologies that they offer. 3D Systems has five, the most in the industry.

It’s not like those two dozen companies have two to five processes and those two to five are directly competitive with most of the others in the industry.

In most cases, these machines have one or two competitors, something so similar that it’s direct. So it’s a bigger ecosystem than what it would appear by looking at the number of companies and the number of players.

The same is true for materials because for the most part in the industrial world, materials are directly distributed by the manufacturers of the equipment. The consumer is unaware of the manufacturing company behind the raw material. They don’t have access to them. Yet, there are a small number of third-party companies selling materials into the space.

And the reason for that is the manufacturers have worked very diligently at protecting the revenue stream off of materials. And that’s a critical ongoing revenue stream for them. It’s not to their advantage to have lots of third parties making materials for their machines.

Software is the same. There are a handful of names. When you get into the free stuff that’s meant for the consumer, there are a lot of players, but on the industrial side there are a handful of recognized companies. That ecosystem is very small.

When you get into the reseller channel, that’s where you get your size because the equipment manufacturers need global representation. The vast majority of system sales occurs through a distributor or a reseller versus a direct sales force. Most people are relying on that channel, which means lots of feet on the street, which means lots of individual businesses in the three- to 15-employee range. There I’d say we’ve got 500 to 600, maybe 700 globally.

So it’s a highly fragmented industry of small mom-and-pop types of shops?

Yes, exactly. Historically their success has come from tapping into distributors of CAD/CAM software. That’s where everybody went first and that’s where the success has been, because they’re talking to the same kinds of people about the same kinds of challenges.

So to understand our industry, a background in the CAD/CAM market and the dynamics there can help discern a lot about what has happened in the past and what will happen in the future, at least from a distribution vantage point.

Where is the most profitability for the providers of these systems? Is it providing the printers? Is it in the material? Is it in software or is it being a service bureau?

Ed Maguire

Todd Grimm

Ed Maguire

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Definitely not in software. Software is usually bundled with the purchase of a system; with one license you’re free to use it throughout your organization because the vendors want everyone to be able to feed these machines. Definitely not in services. I haven’t seen numbers since I left the services market a little over 10 years ago, but that was on a downward trend at the time and pressure has only continued.

Service bureaus are not walking away with fistfuls of cash. Yet, I would expect them to have better bottom lines than a traditional machine shop. You are looking at around 10% net.

So that leaves materials and machines. On machines, profitability is attractive at the gross margin level and also the net level; however, customers tend to purchase on a one- or two-off basis. For the average company, you’re looking at a couple of machines. For big companies, you’re looking at maybe five, six, seven, but it’s rare that all seven would be the same machine from the same manufacturer because these devices aren’t directly competitive.

You’re likely to see a 3D Systems platform sitting right next to a Stratasys platform, sitting next to an Objet platform (which is now Stratasys following the merger), sitting next to an envisionTEC platform and so on. Until we get into manufacturing, because it’s prototyping and because there’s a diverse need, machine sales do not see huge repeat business.

Materials are the attractive profit generator because it’s an ongoing revenue stream and margins on materials themselves are quite lucrative, quite attractive.

That would fit into a “razors and razorblades” model, one that is giving rise to dozens of open-source communities for 3D models, including MakerBot’s ThingVerse where there’s a lot of sharing of ideas or designs, but ultimately the most profitable business comes from selling the printing materials.

Let’s go to the “maker” or consumer market. I am using the language of consumer-oriented machines because maker refers to someone that loves to dabble in their spare time to create things, more of a power user. This doesn’t fit all consumers.

With consumer-facing machines, it’s an interesting dynamic. The razors and razor-blade model doesn’t fit perfectly, by the way. It’s difficult to give away or take a loss on machines and make it up on materials on the back end. Companies have tried that approach without success, at least not yet.

There are so many consumer-facing companies, I don’t even keep count of them because they pop up every week. Just this week, I heard an estimate of 80 companies either in early funding mode with VCs or through KickStarter or they’re actually producing machines.

Eighty hardware companies offering products for the consumer is way too many. That will collapse on itself very quickly. That’s an enormous number for this industry to support. I’m thinking in a short time you will have the five top players, maybe five to 10 others who take the rest of the markets. The reason there are so many is that the bulk of these technologies are based on the extrusion process that Stratasys designed and patented back in the early 90s.

Todd Grimm

Ed Maguire

Todd Grimm

Speaker Series


And the reason they’re based on that is Stratasys’ core technology went off patent. At the University of Bath in England, a gentleman named Adrian Bowyer had this grand idea of an open-source program to come up with a self-replicating rapid prototyping machine. The project was called, “RepRap.” It started off with student efforts to design hardware, develop software and find the right materials. Then it truly became open source with lots of collaborators around the world. They were able to come up with working machines and freely gave away the bill of materials for the hardware you need, freely gave away the software and it pointed users to sources for materials. This took off for the avid hobbyist, the person who wants to tinker because it was a bit of pain to build these.

What happened is that Adrian came up with a self-replicating business instead of a self-replicating 3D printer. People could go into the pool of free R&D, pull everything out, source the components, put their spin on it and say, ‘I’ve got a machine for you. I’m going to sell it under my name’ and that’s basically how 80-85% of these companies have been born. They borrowed open-source technology (perfectly legally). So it just spawns more and more companies.

This includes MakerBot, perhaps one of the better-known names. That includes 3D Systems. Their Cube product is based on that open source, and 3D Systems has other products also spawned from RepRap that they acquired Bits from Bytes and BotMill.

Back to materials: because they’re selling to the consumer base and because their initial market was open-source-minded people, the fundamental structure was freedom to change the machine and freedom to source anything from wherever you want, including materials. So users have grown up in a market where they can get material wherever they can find it as cheaply as they can.

Many of these companies in the consumer market, and this includes MakerBot, are going to try to sell machines on a one-off basis, then try to figure out other revenue sources because they don’t have control over the material revenue stream. It can go away. I think what will happen is that the companies that survive will do their best to lock their machines down so you can only buy materials from them. 3D Systems already has - with the Cube machine you can only buy their material.

So now there are all these companies. And there is supposedly a revolution coming where you and I and every other homeowner or renter can buy one of these machines and make whatever our minds can conceive. But that is an absolute fallacy.

You can’t make 60% of what your mind can conceive even if you have the CAD data. The machines are just not that capable. There are a lot of things that they can’t do that industrial machines can, which means a lot of parts that cannot be printed to any kind of customer satisfaction.

The premise will not be realized unless consumers adjust expectations to accept a sub-par quality item just because they can make it themselves. There are some that tout mass customization put in the hands of the consumer, but if everyone’s got an iPhone case that’s customized to their design, if everyone’s got customization, is it truly unique anymore? If it’s not truly unique anymore, is it worth spending the time, money or effort? I think that premise could collapse on itself. It’s like a monogrammed shirt: if

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everybody could have monogrammed initials on their shirt for free and it didn’t take any time, the value would diminish because it’s no longer unique. Then you become unique by not having a monogram.

So with this, you mentioned the word, “hype.” I am a very big believer in Gartner’s hype cycle, where you have the Technology Trigger, the Peak of Inflated Expectation, the Trough of Disillusionment, the Slope of Enlightenment and the Plateau of Productivity. I believe we are near the peak, and over the next 12 months the conversation will die down and a lot of people will walk away saying, ‘Whatever happened to that 3D printing stuff? Don’t see it anymore. Don’t read about it anymore.’ They may write it off. This happens with every technology. The Trough of Disillusionment is a necessary evil, and that’s where the real work begins. You dig yourself out and then you pick up nice steady-state growth, 10%, 15%, 20% growth. I believe we are in an over-hyped situation, and the rhetoric on the consumer machines has been loosely built on history in the additive manufacturing industry that the people promoting hype don’t even know existed.

There are stories out there where you can do “X” and I don’t care what “X” is, but when the world reads this story and thinks, ‘I can do “X”’ and they believe that this application just appeared last week, that it’s brand new and exciting. Then there is the impression that it’s happened so fast, the birth of a brand new industry around 3D printing that has emerged in the last couple of years. Projecting into the future, the view that if all of this happened in just a few years lead the imagination to create an even more fantastic future based on a faulty premise.

In all reality, that application probably happened five, 10 or 15 years ago on industrial equipment, only it wasn’t written about and was borne out of hard work over the last two-and-a-half decades.

So to tell the consumer story, they borrow a piece from the industrial market, and then create this mosaic that isn’t any single technology or business segment. It creates a view of a fantastic future, but the story doesn’t really hold water if you look closely. This hype is driving a tremendous amount of interest for anyone who’s got money to invest: analysts, fund managers, individual investors, companies who want to acquire businesses, companies that want to build business. They’re coming out of the woodwork because of the stories in the media, and I think that’s risky in that the stories are built on expectations that aren’t true.

At the same time, it’s been a good for the industry because us old-timers have always felt that we weren’t getting the attention we deserved. There wasn’t enough awareness and consideration of the technology amongst people who should be using it. Well, now awareness is not the issue. Now it’s just a matter of aligning expectations to realize that a US$500 kit 3D printer won’t do what you need it to do. You’ve got to look at starting at a higher price points.

One of the questions we discussed earlier was the phenomenon of declining prices. When you look at some areas of technology, you get Moore’s Law, and we’ve also seen fairly steady price declines at least with these high-end systems. How do you see the price declines of more powerful machines impacting potential demand at the industrial level? I recently heard an anecdote that Ford is looking to place personalized 3D printers on the desks of all its engineers. Is there a price point where we start to see prototyping

Ed Maguire

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become even more widespread than among professional users, not just hobbyists but in the mainstream and industry, and the other question would be, is it even necessary?

I want to clarify that in the industrial class of machines, there has been no decline in price. If anything, prices are the same or increased, and that includes materials and machines. What has happened on the industrial side is that some companies are taking subsets of what their higher-end machine does, repackaging it and selling it for lower price. They are testing out price elasticity.

A classic example is Stratasys, they have their Fortus line. When they introduced Dimension at a new price point in the US$30,000 range about 10 years ago, it took off like gangbusters. But Dimension wasn't exactly what Fortus is. It does less. From Dimension they went down market with new models . . . with the uPrint that had a US$15,000 price point. uPrint was a subset of Dimension capabilities, which were a subset of Fortus.

So they're driving prices down and testing elasticity, and finally last year, they introduced Mojo, a complete bundled system for US$10,000. Every time that they took those big steps of US$30k to US$15k to US$10k, as I understand it they saw tangible positive price elasticity. They increased the number of users and found a lot more revenue, but didn't necessarily cannibalize higher-end sales.

The market has been static for machines of a given specification. It hasn't declined in price. And I don't believe it will. There's not enough pressure because the discerning professional buys first on capability, second on price.

In the consumer class, 3D printers are running between US$500 and US$3,000. That’s the price drop - consumer versus industrial - that people cite as a reason for industry growth. However, the consumer-class machines are inferior to what you can get for US$10k, US$15k, US$20k, US$25k, US$30k, US$60k, US$100k. They don't do the same thing at the same quality level. A key reason that those companies can offer 3D printers at that price point is that they are borrowing someone else’s R&D. It makes for a very low barrier to entry.

The cost of building a consumer-oriented business is much smaller without the R&D component.

I can see a lot of professional users seeing if they can use the consumer-oriented 3D printers as a personal output device. When they take it to the next step, when things get a little more serious, they go to an industrial-class machine. I could see that model working. The consumer-oriented machine becomes a pro-sumer model in a distributed environment. I think it will happen, whether that's today, five years, 10 years, I don't know the timeframe, but the key element is going to be for the discerning professional to achieve output quality good enough to get the job done. And I think that's the big question. Can they do the job?

I suspect a lot of people will try this approach, thinking that they can get everything they need for US$2,000, only to discover that they are wrong and then turn around and buy something more capable. So lower-end machines become almost a learning tool, where through trial and error, users gain a better sense of what they really need, becoming a more educated buyer going into the industrial market.

Todd Grimm

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However, I really believe that instead of the US$100 3D printer that the media wants to talk about, you'll see people paying between US$500 and US$1,000 for machines from all the new companies that may not have the best business strategy. They believe that low price is going to win. Sometimes it does, but a lot of times it doesn't and you bankrupt your business that way. Most of these newer systems are very similar, and it's hard to tell them apart. To differentiate, they're going to have to invest in more R&D and other support development, which costs money, which will drive up price.

It’s my view that the new price point where the war will be fought will be US$5,000, not US$100. There will be pressure on industrial systems to come down to this US$5,000 price point to satisfy the Ford engineers of the world [recently cited as adopting consumer-oriented 3D printers for the desktop], and there will be a demand that forces the current consumer-oriented market to elevate to pro-sumer, and the cost is going to have to go up to US$5,000.

I'm not looking into a crystal ball. I'm looking at history because 3D Systems bought Bits from Bytes, who sold a US$1,700 kit. Now they've got the Cube. If you fully trick out one of their Cube Xs, it's a US$3,000 device, a US$1,300 jump in less than two years. MakerBot used to sell a US$1,700 kit. They're now selling the Replicator 2 for US$2,199 base. It's gone up. So I expect them to keep pushing up in price. So for all the consumers out there who think that they're going to have a US$100 awesome machine, not anytime soon. It's actually going to become farther out of their reach for the kind of capability people really want.

Are there intellectual-property barriers that Stratasys and 3D Systems have? You mentioned Stratasys’ patent of the extrusion process had expired that allowed RepRap and other open-source projects to take hold. Are there other patents, competitive barriers or vulnerabilities that incumbents have in the market that could lead to disruption in one or other segments?

Patents are important. As with any technology, they are critical for manufacturers of the equipment. They've done, overall, a good job of filing for patents and getting patents to protect them. Patents are what keep many technologies out of the United States, for example.

There are technologies operating in Europe that you cannot buy here because patents and licensing keep them out of the United States. It's critical for these companies. At the same time, since many of the technologies were born between 1987 and 1995, many are either off patent now or coming off patent. That includes 3D Systems, which bought Z Corporation, and they carry the Z printer line now. That technology came out of MIT. It's either off patent or soon to be off patent, so it's going to be fair game. Stereolithography, obviously, was developed in the late 80s, so there's a fundamental process there, it’s not protected by patent anymore. Selective laser sintering, the fusing of powdered thermoplastics originated in the early 90s and patents are coming off.

That will create an opportunity for new companies. And it's going to put some pressure on those public companies that we know. And by the way, ExOne’s core technology is based off the same MIT patents as Z Corporation was using. So their protection isn't strong at all. However, these companies have been exceptional at add-on patents, to keep extending the life of the technologies and many of these prove to be barriers, because what the companies knew 20 years ago is just a tiny slice of what they've experienced over the last two decades making good parts.

Ed Maguire

Todd Grimm

Speaker Series


What's becoming available is the core knowledge and approach, but there have been a lot of proprietary enhancements added along the lineage to make better and better and better parts, and each one of these has been patented.

The easiest example is with one of the barriers with the consumer-class machines that uses the extrusion process Stratasys uses. Their biggest issues are warpage, delamination and other form deficiencies because of stresses.

And the reason the stresses are so bad is that they're taking hot thermoplastic and depositing on a heated bed, but it's exposed to ambient temperature, so you're going from 180° C down to 20° C rather quickly and there's no thermal management.

Stratasys has a heated build chamber around their build area. That heated build chamber is under patent, and it's that heated build chamber that allows them to do better thermal management, which manages the stresses, which allows them to build a better part. So that’s the most obvious example and, until that technology falls off patent, which maybe could take another five years, these companies won't be able to produce the quality of part that people expect from industrial-grade machines unless they can design around the patent.

3D Systems has the same thing. This is probably off patent too, but years ago the service bureau I worked for was exclusively selective laser sintering. To make better parts, they were using an alternating hatch pattern, as we called it.

So the laser would draw along, back and forth, in the machine on one layer, and then it would rotate it some angle, maybe 45 degrees for the next layer and draw the part, and then it would, rotate maybe 45 degrees. That helps to manage stresses. Well, until 3D Systems bought DTM, DTM couldn't do that because that basic fundamental approach was under patent for the stereolithography process. Something as simple as the pattern that you draw to better produce a part could be under patent. So there's going to continue to be barriers.

Now, one question that I've had is why is it that this market is dominated by specialists? When I look at HP, it would seem that someone like HP or the Japanese companies could be major players, but instead they have been focused on different markets. It seems this would be a market that would be potentially attractive for a bigger tech concern. And we haven't seen that. Any thoughts about why that's the case?

Well, they tried and failed. Sony jumped into this industry in the 90s and is pretty much gone. HP private-labeled the Stratasys product for two years with the intent of going international and taking over more of the low-end systems for Stratasys. It ceased that business unit; tried and failed. Canon used to make components for one of 3D Systems’ machines, and many people speculated that Canon would become the new brand of 3D printers. It hasn't happened.

Again, we have a lot of people and the media saying, ‘Well, it's obvious that Amazon's coming into this market. It's obvious Apple's going to come into this market to own the digital printing world.’ Well, no. It's not that obvious.

Ed Maguire

Todd Grimm

Speaker Series


The key element lies in the model for marrying the right kind of sales personality to the right kind of product being sold. It's called the quadrant solution, which says you've got four different kinds of products, you go from the high-high-high end, brand new thing, and you're basically selling smoke-and-mirrors because it still doesn't even exist yet. Then you go into a consultative sale, where it's highly technical. You've got to address every single spec to get the customer to buy. Then you move into something that becomes relationship selling, where everything's pretty much the same, the features and benefits just differ a little bit, and it's more about the relationship with the selling entity.

And then, finally, down to retail where it's just a checkout counter.

What companies have found is that we are still locked into that consultative sell quadrant, and so for HP, I've got strong indication that they found that it was too long and too involved and too expert of a sales process. It didn't fit the business model for their large format printing machines because they thought they were going to drop them into their existing distribution channel for much different use cases. So that's one issue right there, and then there’s the market size. It's still teeny-tiny on a relative basis. I just saw a comparison that showed more iPads or iPhones are sold in a day than additive manufacturing sales in a year.

The industry is small, but there's this impression that it’s massive, and it's going to grow 100% per year and that it's obvious Amazon's going to get in. Only now, we're still tiny and to a company like Canon, Sony and HP, it's just a gnat on the behind of an elephant.

For companies that get in now, it would be a matter of believing they have to stake their claim early in order to have a chance of being the market leader, the brand everyone turns to versus waiting it out. So it's more of a strategy, and those that jumped in and have jumped out, they tried it and it didn't work out. Timing wasn't right.

How would you compare the leaders Stratasys versus 3D Systems and now ExOne? As we look forward, how would you stack up their relative strengths and potential vulnerabilities?

First off, you've got three very, very, very different companies. And three companies for the most part with differentiated product lines. So, in most cases, they are not that directly competitive.

Let's start with ExOne because it's the easiest, it’s much smaller than the other two. ExOne has a technology using inkjet print heads with a binder that can work on sand, metal, glass and ceramic. It's highly differentiated - especially with its MFlex machine - because no one else offers the ability to process that many different classes of material in the same machine. That's a heck of a differentiating factor. They also have a lot of speed, especially for metal parts. They're much faster in the machine than competitive direct metal technologies. This allows them to make the big, bulky industrial items you'll see at trade shows they attend. Some big, bulky items like large valve bodies.

As I understand it, they're in the oil and gas industry for components that go on drill rigs, and even, the drill heads, for boring miles into the ground. So they're uniquely positioned with really no direct competition. However, they

Ed Maguire

Todd Grimm

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are kind of out on an island by themselves. If you go by the philosophy that you need competition to grow in an industry and to get people's attention, they're kind of off on their own, and that could hinder growth for them in their applications.

The other extreme is 3D Systems. 3D Systems has been on a rampant acquisition binge for the last three years. Well over a dozen service bureaus, and three to four companies that are design oriented. They picked up Z Corporation. They picked up two software companies in the 3D scanning arena. Under the message that they want to be everything - content to print - they want to own that whole ecosystem.

They have five different technology platforms ranging from roughly US$1,500 up to US$1.2 million. And each one of those is different and has a different set of customers and advantages. And then they've got their retail arms. Then they've got the web properties to supply data for the Cube. They've got the service bureau arms. So they look more like a conglomerate or holding company than everyone else in the 3D printing industry. No one I know is privy to their grand plan and how it's going to be executed other than its content-to-print message. Most people I know question it and are baffled by this constant stream of acquisitions. It's just not making sense to many of us. I'm not going to take one side or the other. It's just many of us are questioning the strategy. Anytime you're managing that many separate interests, markets and dynamics, it can be really defocusing and you can quickly become “jack of all trades, master of none.”

That puts Stratasys in the middle. For Stratasys, their merger with Objet gives them two core technologies. The extrusion process of fused deposition modeling - that is what Stratasys invented and patented. The PolyJet process of Objet, which is the ink-jetting of photopolymers that come out as liquid droplets and then they're solidified with UV light. So you've got those two core technologies - more than ExOne, less than 3D Systems. Both of those companies, until the merger, have focused exclusively on those core technologies, with the exception of Stratasys which has set up a service bureau called RedEye and acquired Solidscape for printing highly detailed wax patterns. Correction, with Solidscape, Stratasys has three core technologies.

3D Systems always had a service arm, but they really ramped up after seeing RedEye's success. So, Stratasys’ product strategy is more focused, and that means that their distribution channel is a lot more focused: easier to get your hands around things than the distribution channel for 3D Systems. I don't know of anybody that's skilled enough to sell everything from US$1,700 to US$1.2 million. And not to say that, every reseller, most resellers, maybe all resellers don't have that full breadth, but the resellers have big slices of that breadth. That makes it tough.

Just to sum it up, I'd say 3D Systems is the rapid growth company. I see Stratasys more as the steady growth company, the steady growth company that is more conservative in their business actions, and then ExOne as the spunky young startup, although, startup is incorrect.

ExOne has actually got a history that goes back 15 to 17 years because it was originally under the umbrella of Extrude Hone, a company owned and overseen by Larry Rhodes, a wonderful gentleman considered a guru in the

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manufacturing world. Larry passed away, Extrude Hone changed, ultimately, the business unit was spun off and reborn as ExOne. It's not a startup, but still a spunky young company that's ready to take on the world.

Are there any other companies of scale that have major promise that come to mind? Lastly, I would just love to hear more on the service bureau market and what you see as really the potential there.

One company that doesn't get mentioned a lot, that has been around for a long time, is envisionTEC. envisionTEC has a photopolymer-based technology that uses digital light processing (DLP) to generate light patterns.

There is EOS out of Germany, a strong third in the industry to Stratasys and 3D Systems, that sells both a laser sintering platform for plastics and a laser sintering platform for metal. They've been around since the early days of the industry, a strong player.

The direct metal market is emerging, and it's going to become quite dynamic and interesting near term. There you've got a lot of players including EOS, who sells a direct metal system. They are competing with a company called Renishaw, which is out of the UK and publicly held. It's a global business that sells tools and components to the manufacturing community. They acquired an additive manufacturing company called MTT. So they've got a direct metal technology. Directly competitive with them is another German company, smaller, called SLM Solutions, and then there's another German company called Concept Laser, which is a business unit of the Hoffman Innovation Group. The other one that is public is Arcam out of Sweden. It has the direct metal technology that uses electron beam melting (EBM).

The last topic I wanted to just cover was service bureaus. We’ve recently seen some interest around Proto Labs, which recently came public, and there are a few others. Staples is launching Easyprint in Europe and a few others like Shapeways are looking to open up in the United States. Any thoughts on who the customers might be and where that might leave the industry?

Well, first off, there are two distinct markets just like for the machines. You've got a consumer-facing service organizations, and you've got the industrial service bureau. The industrial-service-bureau marketplace has existed since 1989. The market has seen ups and downs, and it’s really competitive. We've been through too many service-bureau consolidations and collapses, so it's reached steady state. 3D Systems and Stratasys both have entities there. The market, I'd say, is not really attractive because you work awful hard for the money, but a lot of people in the investment community - mergers and acquisitions for example - are looking hard at these companies thinking it's an easy way to get into the industry.

Now let's tackle Proto Labs. One thing that gets lost in communication is that Proto Labs is not an additive manufacturing company. They don't do any additive manufacturing or 3D printing. They are a company that uses traditional manufacturing processes, like CNC machining, of individual parts or CNC machining of injection molds into which they then injection mold plastic parts. That's their business.

Ed Maguire

Todd Grimm

Ed Maguire

Todd Grimm

Speaker Series


It's a sorry state that while these financial articles you see toss Proto Labs in there, Proto Labs is playing in the same market as additive manufacturing, but it's not even directly competitive. And Proto Labs has done well for themselves because they've taken something established, known for lots of inefficiencies, slow to get a tool, slow to injection mold parts, slow to get machine parts, and they've made it much more efficient through software and business practices.

Proto Labs' unique value proposition is that you can upload digital data to them, have an instantaneous quote and in as little as seven days turn around injection-molded parts. If you go anywhere else, you're looking at a minimum of four weeks, probably six to eight weeks. And they compete on a small volume and a small lot kind of order, so less than 50,000 pieces. Proto Labs is a good company, but it has nothing to do with additive manufacturing. It just happens to be a player servicing the same design and manufacturing process customers.

That, then, leaves us to the other names that people usually hear. You've already mentioned Etsy once, and then there’s Shapeways. There's a company called Kraft Wurx that's similar to Shapeways, and there are others. These are all companies that are consumer facing. They are not satisfying industrial market demands. What they're about is giving an individual at home either a portal where they can upload their own original design and have it 3D printed, meaning they are doing CAD-like work, or they can go into that environment and modify something that already exists, or they can buy something 3D printed that was designed by someone who runs a store on the website.

Shapeways' model has three legs. It is doing extremely well. It’s impressive how many parts that they're making, but they know very well that to expect the consumer to create their own 3D digital data is not a path for growth. Something has to change that, and it can't be CAD software.

I believe with Shapeways, the real success comes from providing a stock item that customers can tweak to their liking, or there’s a designer who produces beautiful jewelry. If you like it, you can buy one-off pieces. The designer makes some money, Shapeways makes some money as the manufacturer distributor.

As a matter of fact, one of my wife's Christmas gifts came through Shapeways. A beautiful pendant designed by a woman named Bathsheba Grossman, made out of a brass-like material. Beautiful. It’s so exciting.

To close this out, Ed, this prediction of everyone having a 3D printer in their homes, the first thing that will happen before that's possible is you'll see tremendous growth in Shapeways and lots of similar businesses because people will tap first into the services channel versus having a machine.

I'd liken the current interest in consumer 3D printing machines to the bread-making machine craze of the early 90s, where the promise of a hot, fresh, artisan loaf of bread made in your home whenever you want is too tempting to pass up. Spend US$250 on a machine, that’s affordable. But as soon as you learn that you had to plan your meal out because it took so long to make and you had to clean the thing up, you started using it less and less. So it ends up in the closet. And then some stuff got stacked on top of it. You didn't pull it out anymore. Finally, you sold it at a garage sale.

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For the average Joe, the need to use one of these machines will be sporadic. They will turn to a Shapeways-like organization first. There, they'll develop the appetite for 3D-printed parts, and only after that appetite is developed will they consider bringing it in-house or not in-house, bringing into their home.

Do you think there are any misperceptions in the market about these technologies that we haven't addressed yet or are there other aspects that you think are actually optimistic or promising that people aren't necessarily aware of?

Let's start with the misperceptions. A lot of the things that are being discussed are certainly possible sometime in the future, but just because the basic process of 3D printing can do something, doesn't mean it's always going to be possible. For bio-printing organs and the like, 3D printing is the easy part. Getting cells to grow and building the vascular system, etc, that's the tough part.

You read about bio-printing an ear or a simple organ. It doesn't mean it’s mainstream ready. That's still very much an R&D project, and there's a lot of biological technical hurdles to overcome. It's those kinds of things where people think that future is within grasp, but it's out there at a distance. It can happen, but it may take quite some time.

Ed Maguire

Todd Grimm

Appendices Speaker Series


Appendix 1: Presentation by Todd Grimm



What is 3D Printing?

Interchangeable term with additive manufacturing Additive process: all industries, applications, price

points

Origins in Stereolithography Stereolithography debuted late 1980’s

Created rapid prototyping industry

Rapid prototyping (application) continues today Rapid tooling – limited success

Rapid manufacturing - the next wave



Materials

Diverse – many classes Thermoplastics, thermoplastic elastomers,

photopolymers

Ferrous and non-ferrous alloys

Sand, ceramic, paper, glass

Electrical inks, biological materials

Options limited within each class

Lack standards to characterize performance

Conventional methods – by process Not as diverse (class)

Greater variety



Four Criteria for Production

Low volume Small production quantities (relative to injection

molding)

High complexity Expensive/challenging to manufacture through

traditional methods

Flexibility Desire freedom to modify design and schedule

Efficiency Rapid turnaround with few steps & little effort from

design to production



Financial Matters

Prices are not declining Instead, new products with lower price points and

lesser capability

$5K systems New battleground short term

Money to be made in Hardware

Materials Revenue stream is critical Not quite razor+razor blade model



What’s Next for 3D Printing?

Currently at the peak of “hype cycle”

Industrial vendors are highly differentiated

Specialists will continue to dominate

Widespread use for production will take time

Too many consumer 3D printers – most will fail

Expect service bureaus to capture consumer Bridge to vision of a 3D printer in every home

What’s Next for 3D Printing?

Growth Industries

Applications

Adoption rates

Double digit Not exponential

Sharp uptick When accepted for

manufacturing Expected Unrealistic



Appendix 2: Company landscape 3D Systems Corporation (NYSE: DDD)

FY12 revenue: US$353.6m

Technologies (US$2k-900k price range)

3D printing (3DP - MIT license)

Film transfer imaging (FTI)

Fused filament modeling (FFM)

Multi-jet modeling (MJM)

Selective laser sintering (SLS)

Stereolithography (SLA)

Product lines

ProJet (SLA, FTI, MJM)

Zprinter (3DP)

Cube (FFM)

BotMill (FFM)

Bits from Bytes (FFM)

sPro (SLS)

iPro (SLA)

Material classes

Photopolymers

Thermoplastics

Wax

Plaster (powdered)

Arcam AB (Stockholm: ARCM; OTC US: AMAVF)

FY12 revenue: 146.2m SEK

Technology (approx US$500k-plus average price)

Electron beam melting (EBM)

Product lines

Arcam A2/Q10

Material classes

Metals

Concept Laser GmbH

Technology (approximately US$300k-plus average price)

LaserCUSING

Product lines

M



Material classes

Metals

envisionTEC

Technology

Digital light projection (DLP)

Product lines

Perfactory

PixCera

Ultra

Aureus

Material classes

Photopolymers

EOS GmbH

FY12 revenue: US$125m

Technology (US$200-900k price range)

Laser sintering (LS)

Direct metal laser sintering (DMLS)

Product lines

EOSINT

Formiga

Material classes

Thermoplastics

Metals

Sand

ExOne (Nasdaq: XONE)


Technology (US$300-900k price range)

3D printing (3DP - MIT license)

Product lines

No branded names

Material classes

Metals

Sand

Ceramics

Glass



Formlabs

FY12 revenue: Not disclosed

Technology (US$3k average price)

Stereolithography (SL)

Product lines

Form

Material classes

Thermoplastics

MakerBot Industries


Technology (US$1.7-3k price range)

Fused filament modeling (FFM)

Product lines

Replicator

Material classes

Thermoplastics

Materialise NV (software, services)


Product lines

Magics

3Matic

Streamics

.MGX

HeartPrint

Organovo Holdings Inc (OTCQX: ONVO)


Technology

Bioprinting

Product lines

NovoGen

Material classes

Biological materials

Proto Labs Inc (NYSE: PRLB)

FY12 revenue: US$126m

Technology

na (services not based on 3D printing)



Product lines

Protomold

Firstcut

Renishaw Plc (LSE: RSW.L)

FY12 revenue: ₤331.9m (note: 3D printing is a very small contributor)

Technology

Selective laser melting (SLM)

Product lines (US$500k-plus average price)

AM

Material classes

Metals

Shapeways (services - to the consumer)


Technology

na (services using many platforms)

Product lines

na

Material classes

na

SLM Solutions GmbH


Technology

Selective laser melting (SLM)

Product lines (US$500k-plus average price)

SLM

Material classes

Metals

Stratasys Ltd (NYSE: SSYS)


Technology

Fused deposition modeling (FDM)

PolyJet

Smooth curvature printing (SCP)

- Offered by SolidScape Inc. (subsidiary)

Product lines (US$10-500k price range)

Fortus (FDM)



Dimension (FDM)

- Includes uPrint and Mojo

Object (PolyJet)

- Includes Eden and Connex

3Z (SCP)

Material classes

Thermpoplastics

Photopolymers

Wax

Others

The following list includes hardware, material, software and services suppliers. The list is comprehensive but not complete.

Advance Laser Materials Arkema Asiga Beijing Tiertime Technology Co, Ltd Blueprinter ApS Bolson Carpenter Metals CRP DSM Somos DWS Höganäs AB (STO:HOGAB) Irepa Laser Keyence LUXeXcel Matssuura Machinery Corporation Microfabrtica Monolite UK Ltd Mcor Technologies netfabb Optomec Phenix Praxair POM Group Realizer Sciaky Inc Sintermask Valspar Voxeljet Technology GmbH

Note: List does not include the bulk of the consumer-oriented machine manufacturers

Speaker Series


Notes

Important disclosures Speaker Series


Analyst certification The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report.

Important disclosures CLSA (which for the purpose of this disclosure includes subsidiaries of CLSA B.V. and Credit Agricole Securities Asia B.V., Tokyo Branch)/Credit Agricole Securities (USA) Inc ("Credit Agricole Securities (USA)")'s policy is to only publish research that is impartial, independent, clear, fair, and not misleading. Analysts may not receive compensation from the companies they cover.

Regulations or market practice of some jurisdictions/markets prescribe certain disclosures to be made for certain actual, potential or perceived conflicts of interests relating to a research report as below. This research disclosure should be read in conjunction with the research disclaimer as set out at www.clsa.com/disclaimer.html and the applicable regulation of the concerned market where the analyst is stationed and hence subject to. This research disclosure is for your information only and does not constitute any recommendation, representation or warranty. Absence of a discloseable position should not be taken as endorsement on the validity or quality of the research report or recommendation.

Neither analysts nor their household members/associates may have a financial interest in, or be an officer, director or advisory board member of companies covered by the analyst unless disclosed herein. Unless specified otherwise, CLSA/Credit Agricole Securities (USA)'s did not receive investment banking/non-investment banking income from, and did not manage/co-manage public offering for, the listed company during the past 12 months, and it does not expect to receive investment banking relationship from the listed company within the coming three months. Unless mentioned otherwise, CLSA/Credit Agricole Securities (USA) does not own discloseable position, and does not make market, in the securities.

The analysts included herein hereby certify that the views expressed in this research report accurately reflect their own personal views about the securities and/or the issuers and that unless disclosure otherwise, no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report or revenue from investment banking revenues. The analyst/s also states/s and confirm/s that he has/have not been placed under any undue influence, intervention or pressure by any person/s in compiling this research report. In addition, the analysts included herein attest that they were not in possession of any material, non-public information regarding the subject company at the time of publication of the report. Save from the disclosure below (if any), the analyst(s) is/are not aware of any material conflict of interest.

Key to CLSA/Credit Agricole Securities (USA) investment rankings: BUY: Total return expected to exceed market return AND provide 20% or greater absolute return; O-PF: Total return expected to be greater than market return but less than 20% absolute return; U-PF: Total return expected to be less than market return but expected to provide a positive absolute return; SELL: Total return expected to be less than market return AND to provide a negative absolute return. For relative performance, we benchmark the 12-month total return (including dividends) for the stock against the 12-month forecast return (including dividends) for the local market where the stock is traded. For example, in the case of US stock, the recommendation is relative to the expected return for S&P of 10%. Exceptions may be made depending upon prevailing market conditions.

Overall rating distribution for Credit Agricole Securities (USA) Equity Universe: Buy / Outperform: 65%; Underperform / Sell: 35%; Restricted: 0%; data as of 31 December 2012. Investment banking clients as a % of rating category: Buy / Outperform: 75%; Underperform / Sell: 25%; Restricted: 0%; data for 12-month period ending 31 December 2012. For a history of the recommendations and price targets for companies



mentioned in this report, as well as company specific disclosures, please write to: (a) Credit Agricole Securities (USA), Compliance Department, 1301 Avenue of the Americas, 15th Floor, New York, New York 10019-6022; and/or (b) CLSA, Group Compliance, 18/F, One Pacific Place, 88 Queensway, Hong Kong.

© 2013 CLSA Asia-Pacific Markets ("CLSA") and/or Credit Agricole Securities (USA) Inc (“CAS”)

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Subject to any applicable laws and regulations at any given time CLSA, CAS, their respective affiliates or companies or individuals connected with CLSA/CAS may have used the information contained herein before publication and may have positions in, may from time to time purchase or sell or have a material interest in any of the securities mentioned or related securities or may currently or in future have or have had a business or financial relationship with, or may provide or have provided investment banking, capital markets and/or other services to, the entities referred to herein, their advisors and/or any other connected parties. As a result, investors should be aware that CLSA, CAS and/or their respective affiliates or companies or such individuals may have one or more conflicts of interest.

Regulations or market practice of some jurisdictions/markets prescribe certain disclosures to be made for certain actual, potential or perceived conflicts of interests relating to research report. Details of the disclosable interest can be found in certain reports as required by the relevant rules and regulation and the full details are available at http://www.clsa.com/member/research_disclosures/. Disclosures therein include the position of the CLSA Group only and do not reflect those of Credit Agricole Corporate & Investment Bank and/or its affiliates. If investors have any difficulty accessing this website, please contact



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Singapore: This publication/communication is distributed for and on behalf of CLSA Limited (for research compiled by non-US analyst(s)) and /or CAS (for research compiled by US analyst(s)) in Singapore through CLSA Singapore Pte Ltd solely to persons who qualify as Institutional, Accredited and Expert Investors only, as defined in s.4A(1) of the Securities and Futures Act. Pursuant to Paragraphs 33, 34, 35 and 36 of the Financial Advisers (Amendment) Regulations 2005 with regards to an Accredited Investor, Expert Investor or Overseas Investor, sections 25, 27 and 36 of the Financial Adviser Act shall not apply to CLSA Singapore Pte Ltd. Please contact CLSA Singapore Pte Ltd in connection with queries on the report. MICA (P) 138-12-2012

The analysts/contributors to this publication/communication may be employed by a Credit Agricole or a CLSA company which is different from the entity that distributes the publication/communication in the respective jurisdictions.

MSCI-sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indices. This



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© 2013 CLSA Asia-Pacific Markets ("CLSA"). Key to CLSA/Credit Agricole Securities investment rankings: BUY: Total return expected to exceed market return AND provide 20% or greater absolute return; O-PF: Total return expected to be greater than market return but less than 20% absolute return; U-PF: Total return expected to be less than market return but expected to provide a positive absolute return; SELL: Total return expected to be less than market return AND to provide a negative absolute return. For relative performance, we benchmark the 12-month total return (including dividends) for the stock against the 12-month forecast return (including dividends) for the local market where the stock is traded. 01/01/2013

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