1 Must-Watch Interview for 3D Systems Corporation and Stratasys, Ltd. Investors

In the following video, 3D printing specialist Steve Heller interviews Terry Wohlers, president of Wohlers Associates, a leading authority on 3D printing and author of Wohlers Report 2014. This report on the state of the 3D printing industry is often referred to as the "bible" for 3D printing insights. In other words, investors in 3D Systems (DDD 0.44%), Stratasys (SSYS 3.07%), and other 3D printing companies would be hard-pressed to find a more valuable resource for gaining understanding on the industry.

Topics covered during the interview include:

• Common 3D printing misconceptions
• Key drivers of metal 3D printing demand
• The major differences between two leading direct metal 3D printing technologies: direct metal laser sintering and electron beam melting
• 3D printing in space
• 3D printing "crossing the chasm" into more direct manufacturing applications
• Navigating the 3D printing landscape as a novice investor

A full transcript follows the video.

Steve Heller: Hey, Fools, Steve Heller here. I'm joined today with Terry Wohlers of Wohlers Associates. He is the president and CEO of Wohlers Associates.

Terry Wohlers: That's right.

Heller: Your company is pretty much the godfather of 3D printing insights. From a global perspective, you have more insights than any company out there that's covering the space.

I wanted to just jump right in here. There's a lot of media hype out there. There are a lot of misconceptions. In your opinion, traveling the world, seeing all the 3D printing, what are some of the biggest misconceptions that you see out there?

Wohlers: There are many. One is that these machines are very simple and push-button. You throw data at it in the form of a file, you push a button, and out pops a shiny part. That's not the case.

Now, some of these low-cost systems are much simpler, and in many cases easier to operate. But especially the high-end industrial machines, there's a lot of steps. There are a lot of things that need to be taken into account in terms of quality control, powder management, powers, heat, so forth. They're not simple.

Another misconception is that you can make anything with these machines. Well, almost anything, but there are limitations just like anything, in terms of materials, how thin a wall you can make on an enclosure, for example. How small a hole or channel you can make. You have to get the extra material -- the support material or powder -- if it's a powder-based system, you have to remove that somehow and if it's too small or too long a hole, you can't get it out, so there's that as well.

A third misconception is that you can make one part just as inexpensively as you can make many parts. Well, in some cases that's true. On the very inexpensive machines, that is often the case.

But with the industrial machines, especially the powder bed systems, both metals and polymers, you want to pack in as many parts into that build chamber as you can. If you don't, you're wasting time and money, so there is economy of scale. You want to fill up every square inch of that chamber with a part.

Heller: There's a lot of post-processing involved, too, in a lot of cases, especially around the metal 3D printing space, is that correct?

Wohlers: Yes. We did a project for Airbus, and we listed nine steps in producing a part on a metal-based machine. The first two steps, one is preparing the data, the second is to build. But then there's stress relief: That's a heat treatment. It's removing the supports and anchors, which can require EDM [electrical discharge machining] or a band saw or other tools. It's CNC [computer numerical control] machining to improve the surface quality, and other surface treatment.

There could be porosity inside the parts, and you don't want any porosity if they're being made as a hip implant or a craniofacial-type reconstructive implant, or a jet engine part. That'll be in production soon with the LEAP engine from GE.

These things need to be taken into account, so it's not just a machine, but it's a lot of ancillary equipment that surrounds the machine, and then a lot of experience and know-how to make good parts.

Heller: Yes, and there's still a very big learning process happening in that space.

Wohlers: Yes, and companies are at different levels. Companies that have had this for a long time know a lot about it. In fact, they often know more about the machines than the companies that sold the machines to them. Then there are many organizations that are brand-new to this, and they're just now discovering the capabilities and limitations of these machines.

Heller: Very good.

Moving on now, you travel the shows. You've been all over the world, traveling to these conferences. Rapid 2014: What is your biggest takeaway from this year's conference?

Terry Wohlers: The biggest takeaway, I'd have to say, would be the number of people -- more than double the number of people at this event compared to one year ago.

Heller: Wow.

Wohlers: So that, the number of new people as well, and then I'd say the overall enthusiasm and the excitement; that people are just so engaged, and they want to be a part of this industry, and many are.

There's new opportunities developing and they want to look at, does it make sense for them as an individual, or their company? A lot of people are carrying two business cards. One is their company, and one is their own, where they are entrepreneurs and they want to be a part of this on their own as well.

Heller: Very good. So the biggest theme, you said, would be interest at an all-time high, focus on metals as well. Would you say aerospace is driving most of the metal demand right now?

Wohlers: Well, two areas. Really medical -- and a part of medical would be dental. Both are building many medical parts.

Just one application would be an acetabular cup. That's a hip cup, which mates with the hip stem and ball, that forms the joint in your hip. Those cups are being made in quantities of tens of thousands. More than 90,000 have been produced to date. Those would be made in solid titanium, so the orthopedic industry, they're embracing this and using it.

The dental industry, more than 20,000 copings every day of the week are being produced by additive manufacturing. A coping is the main body of a crown or a bridge, so if you have a rotten tooth and you have it removed.

Then aerospace, absolutely. Airbus will be flying soon on the A350, their new aircraft, these cabin brackets. They're these very complex brackets that hold the main body of the aircraft. They connect the cabin, like the lavatories and the galleys, to the airframe.

Traditionally they're machined. There's a lot of waste and scrap, and they're heavy, and they're expensive. Now they're doing them additively [with 3D printing], producing these and saving tremendous amounts of material, and they're reducing weight, too. If you're an airline, like with Lufthansa or United, that's very important. They'll buy a lighter aircraft over a heavier one, because they save fuel.

Heller: Very good.

Moving forward, in terms of metal 3D printing advancements, you've been quoted before saying how it's come [further] in 10 years than [plastic has in] the almost 30 years that plastic has been around commercially, since 1988.

I was wondering, in terms of the development cycle, in terms of technology going forward, what you see for the prevailing technology. Direct metal laser sintering seems to be the most preferred technology, with General Electric 3D-printing their LEAP engine fuel nozzle with the technology.

Electron beam melting seems to be more applicable for the orthopedic implant area. I was wondering if you could give me any comments on that.

Wohlers: Yes, metals have taken off. We believe, based on our research for our report that we do annually, Wohlers Report 2014, that the metals industry grew -- this would be additive manufacturing metals -- grew by more than 75% last year. Why is that? Because these companies are developing business cases, and they're qualifying and certifying these parts for flight, for orthopedic implants.

You're right, there are two broad classes of machines. One uses a laser to heat and melt powder, and the second is an electron beam energy source, to do the same thing: very similar process, similar powder, but different energy source.

There are pros and cons to each. The advantage to the laser-based is that you can get very fine resolution, very nice surface features, details. You can remove the powder from smaller holes and channels.

But the downside is that it's much slower. It's many times slower than an electron-beam-melting type of an approach, and you need more supports and anchors to secure the features of the part down to the build plate so the parts don't distort and warp as the parts are being built.

The plus side of electron beam melting is it's, like I say, much faster and you have far fewer supports and anchors. That means...

Heller: Less post-processing.

Wohlers: Not only less post-processing, but also less material used to support the parts, so it builds faster, you have less scrap.

Also the parts come out, for orthopedic implants, not entirely ready to go, but you can build what's called a trabecular surface, which allows for osseointegration. Bone likes titanium and [they'll] grow right into it. They produce these structures with this process, that permit the bone to better interface and adhere to the implant.

Heller: Very good.

So in terms of having an advocate for 3D printing, Elon Musk recently, with SpaceX, just introduced the Dragon Version 2 spacecraft, which has 3D-printed rocket thrusters, which is going to bring the spacecraft into the 21st century. Upon re-entry, no more parachutes needed. It can basically land with the precision of a helicopter as a result of it.

These sorts of announcements are obviously really pushing the boundaries of the technology. I wanted to see what you thought about having an advocate like Elon Musk for younger generations to look up to, and aspire to become, and get interested in 3D printing, for future generations of engineers and designers.

Wohlers: Yes. You're too young to remember the 1960s, because I doubt you were born then.

Heller: No.

Wohlers: But I was around. I was very young at the time, but I remember when we launched into space, and the man on the moon. I think it played a big role in getting young people -- really, people of all ages -- excited about space and science and technology and engineering, and a lot of people wanted to get into that field, I think largely because of the space program back then. I think a lot of that has fallen off in the last two, even three decades.

Hopefully, these new space programs like that -- and Made In Space is another one -- where a lot of young people, your age and maybe even younger... in fact, they'll have the first 3D printer on the International Space Station later this year. [Editor's note: It has since successfully landed.] It's certified to go up into space.

It'll be for testing, but it's a 3D printer that will be run, to test, to see, and then ultimately to build replacement parts or tools, or manufacture on demand with digital inventories in space. That's where it's going.

We're also working with NASA on a project to look at metals; what's the best approach to building metal parts in space, either in orbit or maybe on missions to Mars?

It's surprising that the astronauts, they lose stuff in the space station. You wouldn't think, but stuff floating around, they get lodged and they lose tools, like hand tools and things of that sort. It may be easier in the future to build this lost piece of whatever than to find it. Also, things wear out, things break, or maybe you don't anticipate a need to have something.

In the future, at some point, we believe that the astronauts will be building parts of all types in space, largely controlled from Earth. The controls can be done -- the setup and all of that -- and then the astronauts will reach in. There may be some hand work, some post-processing, but that's where they want to go with the space program.

Heller: Very good.

In terms of crossing the chasm, on the 3D printing direct manufacturing side, we're actually using parts in finished products. We're nearing that chasm. We're not exactly there. We're basically on the way up. In your opinion, what will it take for 3D printing, for direct manufacturing, to really cross that chasm?

Wohlers: That's a good question. It really depends on the type of product we're talking about. If you're doing a piece of jewelry like a pendant or a bracelet, it's not regulated. Pretty much anybody, you or I or anybody, can produce a design, manufacture it, and sell it.

But if you're doing a hip implant, dental work, jet engine parts, automotive parts, there are regulatory agencies, so there's not only qualification of the processes and materials, but there's certification that goes on, and with that comes a lot of steps.

Some argue that the machines are not really where they need to be in terms of manufacturing quality standards, in terms of repeatability and reliability and process controls, to ensure that each layer is built the way it should be and that it's not full of porosity. Of course, there's post-inspection often, but that's expensive and you want to keep that to a minimum.

We have the opportunity to see what's inside every part that's being built, as it's being produced, so companies are working to produce cameras and feedback systems and so forth so that problems can be solved.

Heller: The future emphasis of 3D printing manufacturing is going to be more emphasis on quality controls, quality assurance, validating the technology.

Wohlers: That's correct. That's a big part of it, absolutely.

Heller: There's a lot of misinformation out there, especially in the investing landscape. I try to do my best job of trying to give investors a good opinion of what's going on out there. You're basically the boots on the ground. You see a lot of stuff from a lot of different places.

There's a lot of penny stocks, there's a lot of hype, there's a lot of "3D printing is going to change the world. Everybody's going to have Star Trek replicators soon." All that's definitely blown out of proportion.

Some of that's just starting out. Let's say you've got a cousin [who] says, "I want to invest in 3D printing, and I don't know anything about it," and they're really excited about it. What would you tell them? What would you say?

Wohlers: It's easy to draw conclusions quickly, based on what you hear or read, or maybe some television segment. I would just say, be careful. Due diligence goes a long way; meaning, do your homework. Read. Talk to people who know more about it than you. Then carefully move ahead.

You can lose it as fast as you can invest in, say, a stock or whatever it might be. There's a lot of business opportunities that are developing.

Not to discourage anyone from exploring those things. Like someone from GE said, this technology called additive manufacturing and 3D printing -- terms that are used interchangeably -- won't create thousands of jobs and businesses. It'll create tens of thousands of new businesses and opportunities in the future; and I couldn't agree more.

I think with that, we'll see a lot of young people, people of all ages, get into this in ways we've not seen in the past. But be careful, because there's a lot of competition in certain areas; people who are more mature and have done this, and maybe can do it better than you. Can you compete with them?

Heller: Being patient, maybe there's other ways to invest in 3D printing and get exposure to 3D printing than necessarily investing in a stock. Maybe you could figure out a way to start a business, or design. There are other ways to get exposure to the space.

Wohlers: Absolutely.

Heller: Thank you so much for your time, Terry.

Wohlers: You're welcome.

Heller: Appreciate it.

Wohlers: You're welcome, Steve.