Understanding the intricate dance of global economic conditions is a challenging task, particularly in the tumultuous 2020s. The complexities are not only hard to experience and observe but also daunting to interpret. While many shy away from deciphering the “big picture,” the manufacturing sector, especially in additive manufacturing (AM), cannot afford to ignore the macroeconomic trajectory.
Macro Insights from IDTechEx Analyst Sona Dadhania
We spoke with IDTechEx senior technical analyst Sona Dadhania in an effort to clarify the complex world of AM. The condition of mergers and acquisitions (M&As) and the inflow of capital into the sector were the two main areas of attention. Dadhania’s observations provide light on how the larger economic backdrop in 2023 helps these seemingly chaotic concerns become more clear.
Dadhania notes that economic anxiety about inflation and interest rates caused a drop in M&As in a number of industries, including AM. Deal-making prudence is exacerbated by the rising cost and complexity of financing acquisition for prospective purchasers. It is anticipated that M&A activity will stay muted until economic worries subside. Deals in such difficult circumstances will be attractive primarily because of their strategic value and growth prospects.
Shifting Investment Patterns in AM
Major AM financing rounds in 2023 emphasized end-user companies that prioritized innovative manufacturing techniques, including AM. Significant money was given to Divergent Technologies, Lightforce Orthodontics, and Zeda, indicating a move away from typical 3D printer OEM business models and toward applications. Dadhania observes a general trend in the sector towards concentrating on particular verticals such as aerospace/medical, automotive, and dentistry.
Investments in emerging additive manufacturing (AM) technologies, such metal 3D printing specialists Fabric8Labs and Seurat Technologies, indicate a change in direction. These businesses will not follow the conventional printer OEM business model; instead, they will employ their technology in their manufacturing facilities. Dadhania emphasizes how this strategy fits with investor preferences in a macroeconomic climate of caution by removing obstacles for clients and providing a speedier route to income production.
The Fragmentation Challenge in AM
The AM market is frequently criticized for being “too fragmented,” especially by OEMs. Dadhania admits this problem and emphasizes how end consumers become confused by the abundance of OEMs with little to no unique selling points. While mergers and acquisitions (M&As) could help lessen fragmentation, some printer OEMs may have to close their doors as a result of insufficient business as the sector naturally matures.
Dadhania highlights the growing contribution of materials to the AM business, predicting that within the next ten years, revenue from material sales will overtake that from printer sales. In order to maximize AM’s potential and efficiency while lowering barriers for end users, the appropriate software is considered necessary. It is imperative to monitor the materials and software markets, as their dynamics are anticipated to be impacted by policy issues and the macroeconomic outlook.
M&A Expectations and Industry Consolidation
Even though M&A activity has slowed down, there is still a strong expectation that it will resume as economic uncertainty progressively fade. Notably, two big acquisitions occurred in November 2023: BigRep acquired HAGE3D, and Nexa3D acquired Essentium. This points to a slow movement in the direction of industry consolidation. Nonetheless, the industry’s complexity is highlighted by the successful acquisitions, with a widespread belief that the market is fundamentally “too fragmented.” Dadhania contends that although mergers and acquisitions (M&As) are a part of the solution to this fragmentation, as the market develops, some printer OEMs may close.
Industry consolidation will be largely determined by the growth trajectory of non-hardware sectors like software platforms and material portfolios. Compatibility with developed feedstock and software markets will become more apparent as materials and software become more standardized. Dadhania highlights that in order to properly analyze the dynamics of the AM sector, each segment must receive equal attention, with materials and software playing crucial roles in driving growth.
Materials at the Core of AM’s Future
IDTechEx predicts that during the next ten years, income from material sales will overtake that from printer sales, indicating that materials will become a more important component of the AM business. The growth of additive manufacturing (AM) is contingent upon innovation and material expansion as users uncover applications that optimize printer utilization and material consumption. Dadhania emphasizes the need to have a strong materials portfolio, noting studies that show a narrow range of materials to be a major deterrent to AM adoption.
The adoption of AM is found to be significantly influenced by software, since appropriate software can reduce obstacles for end users and enable them to fully utilize AM’s potential and productivity. The move in the sector toward funding startups that have a clear route to profitability and revenue creation reflects investor preferences in a macroeconomic climate of caution. Dadhania observes that it’s getting more and more appealing for investors to put an emphasis on applications rather than 3D printer advancements.
The Broader Economic Impact on AM Dynamics
Dadhania emphasizes the connection between AM dynamics and the larger economic environment in his conclusion. Metal powders are already impacted by public policy concerns about global markets for essential minerals. Furthermore, it is anticipated that cybersecurity and artificial intelligence (AI) will draw attention to the software side of the AM sector. Comprehending these macroeconomic variables becomes imperative for proficient analysis and decision-making in the automotive manufacturing industry.