Like clockwork, it seems that a disruptive technology comes along every decade and offers the potential to fundamentally change the world. The personal computer began to make its way into households in the 1980s, the 1990s brought the Internet to the forefront, and the 2000s spawned the early days of the smartphone revolution. The next technology poised to revolutionize the world is "additive manufacturing," more commonly referred to as "3-D printing." For investors in the know, there's still a tremendous opportunity for growth, because the 3-D printing industry only generated about $3 billion in revenue last year. Many believe that number will grow by orders of magnitude in the future and potentially threaten China's manufacturing stronghold in the process.
3-D printing 101
On a high level, 3-D printing is a layer-by-layer additive manufacturing process, meaning it can build objects out of a variety of materials "slice by slice" until an object is fully "grown." This differs from traditionally manufactured objects, which often start out as a solid block of material that is then shaved down into its final shape. Between faster lead times, no tooling, and nearly unlimited complexity, the advantages of 3-D printing over traditional manufacturing methods can be profound for manufacturers. Taking everything into account, 3-D printing has the potential to make fundamentally better products than conventional methods, more efficiently.
It's not surprising that a host of companies have begun taking notice of the built-in advantages and efficiencies of 3-D printing. For example, General Electric (NYSE:GE) is working to 3-D print upward of 40,000 fuel nozzles a year for its next-generation Leap jet engine from its U.S. advanced manufacturing facilities. According to General Electric, a conventionally manufactured fuel nozzle would have to be made in 20 parts, but a 3-D printed fuel nozzle can be produced as one part. Clearly, the amounts of labor and resources that GE saves from using 3-D printing to consolidate mission-critical components are quite meaningful.
Consequently, General Electric plans to have 50% of its manufactured products "touched" by 3-D printing over the next 20 years, meaning that either the products themselves are 3-D printed, the products were created using 3-D printed tools, or early iterations of the product were 3-D-printed in the development phase to aid product design. It will likely take billions of dollars in new investment for General Electric to grow its 3-D printing and advanced manufacturing capacity to accommodate these ambitious plans. And that's just one manufacturing company! The continuing worldwide adoption of 3-D printing may ultimately promote a resurgence in localized manufacturing that could cut China's manufacturing base out of the equation.
Tremendous untapped potential
According to Wohlers Associates, a 3-D printing insights firm that has been tracking this sector since the beginning, the 3-D printing industry has an impressive 27% compound annual growth rate over the past 25 years. In the last three years, industry growth has accelerated to 32.3% a year, compounded, suggesting that the technology could be reaching a tipping point as uses for 3-D printing are still being discovered. Going forward, Wohlers believes that "[3-D printing] continues to offer tremendous untapped potential, especially in custom and short-run part production."
Despite this tremendous growth potential, the industry only generated about $3 billion in worldwide revenue last year -- that's peanuts compared to the $10.5 trillion worldwide manufacturing base. By 2021, Wohlers estimates that the 3-D printing industry should be worth $10.8 billion -- still significantly less than 1% of worldwide manufacturing. Ultimately, if 3-D printing can grow to represent just 1% of worldwide manufacturing, we're talking about a $105 billion a year industry. Talk about the early innings for 3-D printing investors!