Additive Manufacturing: A Future Stiffled By Broken Economics?

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Additive Manufacturing: A Future Stiffled By Broken Economics?

For quite some time, additive manufacturing (AM), commonly known as 3D printing has been taunted as a game-changer in manufacturing. However over time, little has changed to warrant seeing AM as a game changer. Rather, on the contrary, some companies in this sector have even closed leaving many questioning the game-changer assertion.

Currently, the premise of AM lies in its ability to produce complex, integrated parts and offer unprecedented design flexibility. However, as experts point out, the economic model underpinning this industry is fraught with issues that make it prohibitively expensive and difficult to scale.

One of the most pressing issues is the high cost of AM technologies. A major contributing factor is that most AM printers are still manually assembled, similar to how luxury cars are crafted, which significantly drives up the price. These high production costs are passed on to the consumers, limiting accessibility primarily to large firms with substantial capital. For instance, advanced 3D printers can cost anywhere from $100,000 to over $1 million, depending on the complexity and capabilities of the machine.

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Moreover, the market for AM remains relatively small, which prevents manufacturers from benefiting from economies of scale. As a result, the cost per printer remains high because manufacturers need to recoup their substantial initial investments. That is besides the materials used in AM, particularly specialised polymers and metals, which are sold in small batches and marked up significantly, further inflating the cost of production.

Apart from costs, the AM industry’s boutique production model is also problematic. In this model, the businesses focus on small-volume, high-margin outputs leading to high per-unit costs, which deters larger-scale adoption and inhibits market growth. Furthermore,  since AM machines often suffer from low utilisation rates, service providers, in an attempt to cover their high operational costs, impose hefty markups on their services, which in turn suppresses demand and perpetuates the cycle of underutilisation.

The above two problems perpetuate a cycle where AM is the reserve of only a small market size resulting in intense competition among AM providers. This competitive pressure often leads to a race to the bottom in pricing, squeezing profit margins and making it difficult for companies to invest in long-term innovations. Many firms struggle to survive in this environment, which further stifles the potential for industry-wide advancements.

However, all hope is not lost on this industry provided the right solutions are adopted. One of the most promising solutions is to use AM technology to produce AM printers themselves, thereby automating the manufacturing process. By developing fully automated manufacturing lines, companies can significantly reduce the cost of producing printers and increase their availability. Although this approach requires substantial upfront investment, the long-term benefits of reduced production costs and increased market penetration justify the expenditure.

To address the issue of niche market trap, it is essential to standardise AM production processes. Developing standardised AM production cells can replace bespoke assembly lines, making the technology more economically viable. 

Standardisation will also facilitate broader adoption by reducing complexity and ensuring consistent quality. Additionally, scaling up the production of AM materials can drive down costs since larger batch production and streamlined supply chains will make materials more affordable, further promoting the adoption of AM technologies.

However, the above solutions do not address a major challenge which is the underutilisation of the AM printers. Considering that the depreciation of a 3D printer is set to 5 years compared to the 19-12 years for conventional machines, underutilisation only means that the service providers will have to increase their markup significantly each time the printer is utilised to recoup their investment within the 5 years.

To counter this challenge, service providers should specialise in specific materials or products to increase the usage rates of their machines. Higher utilisation can lead to lower operational costs, which can then be passed on to customers through competitive pricing models. By lowering service costs, AM providers can attract a broader customer base and stimulate demand.

 In the long run, taking a bold view of the future, and investing in that vision will be necessary to bring the game-changer aspect of AM into play. However, that will require significant investment which many individual companies do not have. 

Therefore, it is also crucial that there is ample policy support from governments and institutions. This could include providing subsidies or tax incentives for companies investing in AM and public funding for AM-related research and infrastructure.