In the following video, 3D printing specialist Steve Heller and industrials analyst Blake Bos discuss Incodema, a largely unknown yet highly ambitious 3D printing manufacturing service company. Incodema is vying to corner the for-hire metal 3D printing market, now that General Electric Corp. (NYSE:GE) has purchased Morris Technologies, a leading metal 3D printing service provider, and has taken its 3D printing services off the market. According to Incodema, an estimated 50% of metal 3D printers for hire went offline as a result of GE's acquisition.
Although Incodema isn't a publicly traded company, Blake and Steve talk about the value of 3D printing services and highlight two publicly traded companies that cater to the space. In particular, Stratasys, Ltd. (NASDAQ:SSYS), through its recent Solid Concepts acquisition, as well as rapid prototyping and manufacturing specialist Proto Labs, Inc. (NYSE:PRLB), could be great places for investors to start looking for prospective investments. Still, investors should understand the high degree of risk associated with investing in a highly competitive, high-growth industry such as 3D printing services.
A full transcript follows the video.
Blake Bos: Blake and Steve here, Fools. We're live in Detroit, Michigan, we're at The Big M manufacturing conference. We're here checking out a bunch of 3D printing news, a bunch of manufacturing stuff, we're checking out the industry insiders.
Steve, we're at this exhibit, it's called Incodema, am I pronouncing that right?
Steve Heller: Yeah, you did.
Blake: I got it there, but anyway so it was a really surprising visit. We talked to a bunch of their reps. Apparently they're really a big deal. They'll looking to have a very big presence in the 3D printing space. I was wondering if you could give our investors out there an idea of what's going on there.
Steve: Yeah, so the industry dynamic to back up, I believe it was late 2012, General Electric purchased Morris Technologies, which was considered the premier 3D printing manufacturing company to help boost their [GE's] own operations. GE is currently working to 3D-print LEAP engine fuel nozzles for their upcoming jet engine, so these are going to be fully made on a 3D printing machine. They're obviously going to be post-processed, probably machined a little bit, but the actual part is going to be grown on a 3D printer and they needed Morris to come on.
So when Morris came out of the market, they went just in-house at GE, all this excess capacity disappeared, so now there's no more 3D -- it was estimated 50% of 3D metal printing capacity disappeared off the market.
Blake: So no one could go anywhere to get their stuff printed anymore?
Steve: Right, they couldn't -- Morris is now exclusively with General Electric, does not take orders from the public to do 3D printing manufacturing, so as a result of it, Incodema now formed a new company and they're looking to just go directly after the 3D printing metal opportunity. They hope to own 50 to 100 metal 3D printing machines.
Blake: They have about seven right now?
Steve: They have about seven right now but as an entire unit, we were told that they produce about 1,800 3D-printed parts a day across plastic, metal, everything.
Blake: Yeah, and they have a huge CNC subtractive manufacturing presence.
Steve: Right, so they go from the actual part and they go ahead and machine it and finish it off and create finished products for customers, so they're really focused on larger manufacturing runs in the thousands.
Blake: I think they mentioned Honeywell, Boeing, some big aerospace companies, some really big names is who they're working with.
Steve: Right, so they're working with the bigwigs in the aerospace industry and defense industry who need customized solutions, and they're the company that seems to have the expertise and the knowledge base around using these printers because it's not just like you get a 3D printer and you can actually operate one of these things. It's kind of an art form and you have to learn how to orient a product just right so that if it has cylinders in it, what shape do the cylinders come out at if you're orienting one way versus another, that completely could change the build quality and the actual finished products.
Blake: So as far as a takeaway perspective of say, in Stratasys they have the Solidscape company they just bought, or you know, Proto Labs they have a new Fine Line acquisition, both are doing like a service center model but it seems like they're more based on concepts or prototypes.
Steve: Smaller manufacturing runs, where Incodema is more -- you know, they're trying to go larger scale. They're trying to be a direct 3D printing manufacturer.
Blake: So it doesn't seem like they're competing directly with Stratasys or Proto Labs yet.
Steve: Maybe, I think they're an order of magnitude larger I believe.
Blake: Yeah, so investors maybe in the future that could be a competition if Stratasys or Proto Labs wants to go after the big manufacturing.
Steve: Right, and I think that the real value in the industry is not going to be the printing product, it's going to be the expertise. There's right now a talent shortage going on. Jobs cannot be filled. There's all these open jobs in 3D printing and Incodema has the expertise and that's what's going to drive value to their business.
So the focus on services, as investors, I think is important. Like looking at Proto Labs, because they provide the services, they have the expertise. Looking at Stratasys, because they just acquired Solid Concepts, which was the company that 3D-printed a metal functioning handgun, 4,500 rounds it's already fired. So it's unbelievable the capabilities when you have the expertise, but that's the most important aspect of probably long-term where 3D printing is heading.
Steve: Yeah, exactly.
Blake: Talent retention, talent attraction, so maybe investors get on Glassdoor.com if you can, make sure the company you own is doing well, has good workplace ratings, because nobody wants to work somewhere that it's not a good place to work at.
Steve: Right, you need a strong culture that attracts people and a growing entrepreneurial spirit and, yeah, I think that focusing on design and expertise is definitely the way to look at the investing landscape.
Blake: Yeah, all right, well thanks Steve. You've heard it here folks, Incodema (still struggling with that one). Pay attention to them, pay attention to talent attraction, pay attention to those strategies, big manufacturing, small manufacturing runs, prototyping.
Blake Bos owns shares of Apple. Steve Heller owns shares of Apple and Proto Labs. The Motley Fool recommends Apple, Proto Labs, and Stratasys. The Motley Fool owns shares of Apple, General Electric Company, Proto Labs, 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.