The Era of Commodity 3-D Printers Is Here

A printer that costs less than an iPad is the first step on the road to destroying profit in 3-D printing hardware.

Jan 19, 2014 at 5:05PM

Two years ago, 3D Systems (NYSE:DDD) launched its first consumer-focused 3-D printer at the Consumer Electronics Show. That was the moment the 3-D printing industry began to move toward widespread adoption. This year, a $499 3-D printer made by Taiwan's XYZPrinting debuted at CES. Billed as a true plug-and-play system, XYZ's da Vinci printer boasts superior print fidelity (at its slowest print speed) to the Cube for a fraction of the price.

The $1,300 Cube, which accounted for 10% of 3D Systems' third-quarter revenue, competes directly with the MakerBot, a recent Stratasys (NASDAQ:SSYS) acquisition that reported similar revenue figures to the Cube shortly before its buyout. The cheapest MakerBot, a "mini" model yet to launch, costs slightly more than the entry level Cube. (Other Cube models compete with the typical $2,000-plus MakerBot.) Both of these machines, which are collectively touted as the next big thing in 3-D printing, now look like costlier, less-capable versions of an unknown device produced by an Asian upstart.

Doesn't this remind you of the PC price wars all over again?

Hardware on the firing line
A year ago, I pointed out enthusiasm for 3-D printing technology and stocks had already far outpaced what was then possible. I also noted that 3-D printing, which relies on both hardware and software improvements to drive wider adoption, resembles nothing so much as the progression from large, commercial-scale mainframe computers to inexpensive desktop PCs. Investing in hardware-focused enterprises right as the industry shifts from one model to the next could be a recipe for long-term losses. Thus far, I've been wrong on that count, as both 3D Systems and Stratasys have soared in the past year:

DDD Total Return Price Chart

DDD Total Return Price data by YCharts

But much of the excitement shown on public markets toward 3-D printing hasn't been directed toward consumer 3-D printing, but more commercial 3-D printing companies: million-dollar printer builder ExOne (NASDAQ:XONE) has doubled since its IPO last spring, and large-scale 3-D printer maker voxeljet (NYSE:VJET) clings to a 40% gain since its October IPO, after a one-month double was undone by weak guidance. Aside from the Cube and MakerBot, which are both smallish consumer subsets of the two largest commercially focused 3-D printing companies on the market, most consumer 3-D printers are typically more hobby kits than complete plug-and-play systems.

The da Vinci, which is made by a subsidiary of the multibillion-dollar Kinpo Group conglomerate, is probably only one early salvo in what's certain to be a barrage of lower-cost and higher-capability consumer 3-D printers. While these models will never have the sheer size of the large commercial models (ExOne's largest model tops out at 155 times the total "build volume," or 3-D printable area, as the da Vinci) the progression toward cheaper models does point toward the inevitability of a 3-D printer price war. Another factor in this inevitability is the simple fact that some very important 3-D printing patents expire this year, opening up a new avenue of low-cost competition.

Greenmakerbot

Source: Nicolas Bollusa via Flickr

The da Vinci, Cube, and MakerBot all use fused deposition modeling technology, which went off-patent several years ago. In fact, the MakerBot's rise would not have been possible if FDM had remained patented. This year's patent expirations involve laser sintering, which is a more advanced and accurate form of 3-D production. Some laser sintering patents cover (or will have covered) a high-end desktop machine called the Form 1, which I covered more than a year ago and which uses stereolithography, a different form of laser-based printing. This higher-capability printer is nearly an order of magnitude more expensive than the da Vinci. In a few years' time, the lack of patent protection should bring costs on laser-based 3-D printing down to the price of a new iPad, if not lower.

If 3-D printing becomes common in the home, it won't be because of today's large companies pushing proprietary models -- it'll be the result of a commodification process similar to what happened during the rise of the PC. American manufacturers found themselves pressured on price by a growing group of hungry foreign competitors, and eventually the PC became a commodity with razor-thin margins in which American manufacturers couldn't really compete. The real profit in the PC industry was eventually found in software, and it's quite likely that software and services will become the profit engines of 3-D printing as well. It won't matter whether that software runs on commercial-scale machines in on-demand manufacturing centers or on millions of small desktop printers -- once commodification kicks in, it'll push the profits out of hardware, as it has many times in the past.

There's more than one way to profit from dominant software...
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. In fact, it's the same sort of company we've just discussed -- one that controls a critical software link in the value chain of a rapidly commodifying technology. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

The Motley Fool recommends 3D Systems, ExOne, and Stratasys. The Motley Fool owns shares of 3D Systems, ExOne, and Stratasys and has the following options: short January 2014 $20 puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers