Wednesday, July 9, 2014

3D Printing

Casting about for ‘news’ about HP that could help the momentum play that Whitman seeks so avidly, I found an item by Trevis Team, writing in Forbes’ Investing column on March 28, 2014 (my notes in red): 
HP CEO Meg Whitman at the shareholders meeting on March 20, announced that the company is planning to enter the 3D printer arena by the end of this fiscal year. (HP’s fiscal year ends October 31.) Although, 3D printing technology is over a decade old (actually more like twenty years, for HP’s original patents-CHH), it has recently caught the imagination of manufacturing industry, as some of the advancements in the field have reduced price of owning, and manufacturing with, a 3D printer. As a result, the 3D printing industry is expected to grow at a robust pace of over 30% per year in the coming years. At present, small companies such as 3D Systems (NASDAQ: DDD) and Stratasys operate in this industry.  However, with HP’s entry into this market, competition will surely heat up. While HP has not divulged much information on its product offering, in this article, we will size up the 3D printer market and analyze why HP is entering this market. Additionally, we will try to analyze how HP’s foray will impact the 3D printing industry. 
Sizing The 3D Printer Market
The global three-dimensional (3D) printing (also known as additive manufacturing, rapid prototyping or direct manufacturing) industry is widely considered a disruptive force to a number of manufacturing practices around the world, as it reduces the need to maintain and operate factories that have significant capital requirements.
According to Gartner, the combined end-user spending on 3D printers (3DPs) is estimated to be $412 million in 2013, a year-on-year growth of 43%.  Enterprise spending is estimated to total more than $325 million in 2013, while the consumer segment is estimated to reach nearly $87 million. Gartner also projects that 3DP spending will grow by 62% in 2014, reaching $669 million, with enterprise spending of $536 million and consumer spending of $133 million. Gartner estimates the number of units shipped to increase from 56,507 in 2013 to over 98,065 in 2014 (don’t you love the precision, if not the accuracy?  CHH). It also expects the units shipped to double in 2015.
Most of the growth in 3D printing spending is currently driven by one-off or small-run models for product design and industrial prototyping, jigs and fixtures used in manufacturing processes and mass customization of finished goods. However, as the 3D printing technology advances, both in hardware and software technology together with reduced materials cost and complexity of creating 3D printed items, its applications will expand to mass market areas such as architecture, defense, medical products and jewelry design. As a result, according to Wholers Associates (not exactly a household name for ‘futures’ guesses?), the sale of 3D printing products and services, which includes printers, ink and products, is expected to grow to over $10.8 billion by 2021. However, this number pales in comparison to the revenues of the global manufacturing industry, which runs in trillions of dollars. Considering the market size of the manufacturing industry, we believe that the addressable size for 3D printer industry and its products is very large.
Why Is HP Entering 3D Printer Market Now?
HP is a leader in the 2D printer market, with a 40% market share in 2013 according to IDC. The company believes that 3D printing is a natural progression of its 2D printer business, where it has a sizeable share. In its shareholders meeting held last week, HP announced that it has plans to enter the commercial 3D printing market by the end of this fiscal year. The main reason why HP is entering the 3D printer market now is because a host of core patents such as apparatus for producing parts by selective sintering have either expired or are expiring within a year (sort of supports the notion that this is oder than a decade, ehh?). As a result, HP won’t have to spend huge amount of time and money on developing new technology and processes for discovering how to model 3-D objects. Furthermore, the high cost of consumables in 3D printing has been a major barrier to innovation in the field. However, HP claims to have solved a number of technical problems such as low quality print output and long printing time that have hindered broader adoption of the high-tech manufacturing process.  (This is the first key sentence in the report).
HP’s Foray To Positively Impact 3D Printing Industry
HP’s foray in 3D printing will add some momentum to a fledgling industry that is dominated by smaller players and could help counter criticism that the technology is still too immature for widespread consumer adoption. Moreover, HP’s entry will bolster innovation in the industry as it has deep pockets (HP has nearly $16 billion in cash on its books), and can easily fund any R&D to improve future processes or ink (Plastic filament), which costs anywhere between $25 to $45 for a kilogram depending on the quality and manufacturer.
Additionally, HP can expedite the adoption process since it can mass produce 3D printers cheaply and market it through its well established distribution channel. HP has a relationship with several companies to whom it supplies its printer and PC. It can help these companies to manufacture some of their products as well. Such a move will create synergy not only for HP, but for its customers as well.
Although, the company did not disclose much about the product that might be introduced, it said that it will first target “enterprise” customers, which are comprised of businesses, government agencies and other organizations. While it is too early to speculate, we believe that most of the revenues from 3D printer will come from ink sale rather than sale of unit printers, primarily due to the fact that as adoption of 3D printing gains traction, manufacturers will require more ink (duh, pretty insightful?).

1 comment:

Unknown said...



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