On Tuesday, General Electric (NYSE:GE) announced that it intends to acquire two European metal 3D printer companies, Arcam and SLM Solutions, for a combined $1.4 billion. Like many of GE's other growth initiatives, the industrial giant believes 3D printing can benefit it in two major ways. The first is by selling a diversified set of 3D printers, materials, and services to customers, and the second is from the cost savings that 3D printing will have on its existing manufacturing businesses.
By 2020, GE expects to generate over $1 billion in 3D printing revenue, and over the next 10 years, the company believes it can reduce its manufacturing costs between $3 billion and $5 billion. For perspective, Arcam generated $68 million in revenue last year, while SLM generated $74 million. Both of these figures pale in comparison to the roughly $650 million 3D Systems and $700 million Stratasys are expected to generate in sales this year.
Prior to these acquisitions, GE already invested about $1.5 billion building out its 3D printing and advanced manufacturing footprint and expertise, enabling it to become a leading 3D printing practitioner. By adding selecting laser sintering and electron beam melting 3D printing technologies to its portfolio, GE now has the necessary components to become a leading 3D printing player in metals.
An aviation pioneer
GE has made tremendous advancements in 3D printing for aviation applications. Most notably, its next-generation LEAP jet engine, co-developed with Safran under the CFM International brand, features 3D-printed fuel nozzles, which entered service during the second quarter earlier this year.
Compared to its predecessor, the metal 3D-printed nozzle is 25% lighter, 5 times stronger, and is printed as one component, as opposed to 19 conventionally manufactured components that required assembly. These improvements greatly reduce LEAP's maintenance costs, contribute to its 15% overall improved fuel efficiency, and are among the key reasons why it's the best selling engine in aviation history. GE currently has over 11,000 LEAP engines in its order backlog and expects to ship about 110 engines this year and reach 1,900 engines shipped per year by 2019.
By 2020, GE aims to 3D print about 40,000 fuel nozzles annually, and by 2025, the company expects to operate a fleet of around 1,000 metal 3D printers across its industrial businesses. Of this base of 1,000, about 700 will be used for aviation purposes. Instead of purchasing 3D printers to expand its capacity, which aren't usually designed for specific use cases, GE now has the capability to build 3D printers that are custom-tailored to its needs.
As a major 3D printing user, GE has developed processes, solutions, and best practices to ensure parts are made reliably and consistently. Essentially, there's a tremendous opportunity for GE to take its expertise in 3D printing, along with its expertise in developing new materials, cross-utilizing technology, and digitizing manufacturing, to build out a comprehensive suite of end-to-end solutions for the 3D printing market.
In other words, GE's 3D printing approach isn't just about selling plain old hardware. It's about selling hardware that generates streams of software, material, and services revenue. And while $1.4 billion is an enormous premium compared to Arcam's and SLM's historical revenue, the expected cost savings alone should earn GE a solid return on investment and help improve its underlying profitability.
Ultimately, if GE can offer new and differentiated 3D printing solutions to the market, the gap between using 3D printing as a prototyping technology and as a viable manufacturing technology is likely to narrow, which in turn, could drive greater adoption.
Steve Heller owns shares of 3D Systems and Arcam. The Motley Fool owns shares of General Electric. The Motley Fool recommends 3D Systems and Stratasys. 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.