Stratasys's (NASDAQ: SSYS) news coming out of EuroMold, a leading 3-D printing trade show held last week in Frankfort, might not make for as exciting press as the numerous new printer models introduced by competitor 3D Systems (NYSE: DDD). However, the importance of Stratasys' introduction of a new material, Nylon 12, for use in its Fortus line of printers shouldn't be overlooked. Here's what you should know about this new wrinkle in the fabric of Stratasys's business.
Nylon is the third-most-common engineering thermoplastic used in traditional manufacturing. So Stratasys' introduction of Nylon 12, and plans to launch other nylons, opens up many new potential markets.
Stratasys' material is called "FDM Nylon 12," with the acronym standing for "fused deposition modeling," Stratasys' primary 3-D printing technology. (The company's other technology is PolyJet.) FDM involves heating a thermoplastic filament to its melting point and then extruding it layer by layer to create a three-dimensional object.
Stratasys believes its material can create new opportunities for manufacturers in the aerospace, automotive, home appliance, and consumer-electronics industries. FDM Nylon 12 will allow for more advanced prototyping than was previously possible using Stratasys' systems. Additionally, the material opens up new small-run production opportunities.
The best one-word description of Nylon 12 is "tough. It's generally used to produce components that need to stand up to high vibration, repetitive stress, fatigue, and/or chemical exposure. Some examples include interior panels, covers, environmental control ducting, and various vibration-resistant components. It's also well suited to produce tools, jigs, and fixtures used in the manufacturing process.
If you have battery-operated smoke detectors in your home, there's a good chance the snap-fit closures are made of Nylon 12, as these closures are subject to repetitive stress. Stratasys' Fortus printers can now be used to make prototypes of snap-fit closures to be used in various applications, and would likely be a good fit for some companies with small-run production needs.
Nylon market size potential
Stratasys' management stated that 3-D printing using nylon is currently a $200 million market, with Nylon 12 accounting for 20% to 30% of the market, according to a Barron's article, which quoted a note from Canaccord Genuity analyst Bobby Burleson. So this one material opens up $40 million to $60 million a year in new business potential.
Nylon 12 is just Stratasys' starting point, as the company has plans to launch other nylons, including Nylon 6, the most widely variety. So eventually, we're talking about up to a $200 million market -- not chump change for a company with $400 million in annual revenue. And, no doubt, the market size will grow as 3-D printing, an additive manufacturing technology, continues to replace traditional subtractive manufacturing.
Currently, the entire nylon 3-D printing market is owned by companies that use selective laser sintering, or SLS technology. The major SLS players are 3D Systems and privately held German-based EOS. Concept Laser, also privately held and based in Germany, is a smaller SLS player.
If Stratasys' claims are accurate, there's good reason to believe it will be successful in taking a chunk of the nylon business away from SLS technology. The company claims that its FDM technology is capable of producing tougher, more flexible unfilled nylon parts than other additive manufacturing technologies. Specifically, it claims that its material's elongation-at-break specification surpasses that of other 3-D printed Nylon 12 materials by up to 100% based on published specifications.
Additionally, Stratasys' Fortus printers enable customers interested in 3-D printing of nylon products to enter the market at a considerably lower price point, which should help expand the overall market size. Barron's quoted Burleson as writing the lower-end Fortes systems start at $100,000 vs. an entry point of $500,000 for an SLS system.
There's one potential drawback: Generally, FDM is a slower process than SLS. However, even if this proves to be true, the cost/speed trade-off and/or the improved toughness/speed trade-off will likely appeal to select customers.
Foolish final thoughts
Stratasys' introduction of nylons will let it compete for up to $200 million a year in new business. Now that this important thermoplastic material hole will be filled, Stratasys' investors can hope the company will 3-D print a nylon line and hook a metal play, to round out its materials capabilities.
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