General Electric’s Plan for 3D Printing with Metals
When we first heard about 3D printing, it was a rumor floating around in the recesses of Hewlett-Packard’s (NYSE:HPE) printer development teams. Someone had heard that HPE was actually printing chess pieces, something that sounded right out of Star Trek. Then when desktop 3D printing started gaining in popularity, people found that printing chess pieces just wasn’t that interesting after you had done it a few times. The ability to print any shape in plastic in small batches just isn’t that compelling. Sure, Adidas is now starting to use 3D printing to build customized shoes, but we’re just not seeing the sort of adoption that drives shareholder returns.
Look no further than the two 3D printing darlings that fell from grace. If you bought shares in Stratasys (NASDAQ:SSYS) and 3D Systems (NYSE:DDD) 4 years ago when we first started writing about 3D printing, you would have lost -82% and -86% respectively. If we look at the YTD returns for both of these stocks, SSYS appears to be showing some life with a +26% return while DDD has sunk -35%. The positive return from SSYS isn’t great considering that an investment in a NASDAQ ETF would have returned +25% without all that risk. So where’s all the opportunity?
The application of 3D printing in metals may be where all the opportunity is at. One company entering this space lately is General Electric (NYSE:GE). You may recall that GE made a $1.4 billion investment in Concept Laser and Arcam (STO:ARCM). That is in addition to the $1.5 billion they have spent on additive technologies over the past decade across all six GE businesses resulting in 346 patents in material science. This was highlighted in today’s investor update presentation by GE about how they plan to reinvent themselves:
In case you haven’t been following what’s going on at General Electric, they’ve largely been pissing off their shareholders as evident by the -39% YTD drop in share price compared to a return of around +18% over the same time frame for the Dow Jones Industrial Average. While they’ve shown promise as a company that wants to build the “Internet of Everything” with their recently established GE Digital division, they’ve shown poor performance in their core businesses, mainly power. In response to general dissatisfaction by their shareholders, GE held an “investor update” today in which the focal point was a 50% cut in their dividend. What also stood out in the presentation were mentions of 3D printing (what they refer to as additive) peppered throughout the slide deck, and featured as one of their 4 primary talking points for the entire presentation (Aviation and Additive). Here’s a look at their slide which talks about the plan to focus on additive as a key component of their turnaround strategy:
$1 billion in revenues by 2020 isn’t going to move the needle much for a company that saw $123 billion in 2016 revenues, but the fact that they are more bullish now than ever on 3D printing, and plan to have an installed base of ~3,000 machines in just two years’ time, bodes well for anyone out there working on 3D printing with metals. Now that they’ve cut the dividend, there’s some free cash flow that could be used for making some acquisitions. It’s not like there are a ton of players in the space. While we’d love for them to pick up ExOne (NASDAQ:XONE) so we can finally close out our position, there are other players out there doing some pretty remarkable things when it comes to 3D printing with metals.
Earlier this year, we looked at The 7 Most Funded Metal 3D Printing Startups and one of the names on that list was a company called Markforged. Just last week, Markforged closed a $30 million funding round which led us to take a closer look at what they’ve been up to. Along with one of the slickest looking websites we’ve seen in a while, we found some really amazing numbers that are worth sharing.
Founded in 2013, Massachusetts startup Markforged has taken in $54.8 million in funding so far from investors that include Porsche, Siemens, and Microsoft to build a line of industrial 3D printers that print parts that are 23X stronger than standard 3D printer parts, 50X faster than traditional manufacturing methods, and at a 20X lower cost. When you look at the people that are using these 3D printers, you see big names that span multiple industries like P&G, Google, Amazon, Ford, Toyota, Raytheon, Dow, and Disney to name just a few.
The first printer developed by Markforged in 2014 was the world’s first composite printer, and since then they’ve been putting out new printers like mad. In 2017, they began dabbling in 3D printing with metals launching their Metal X printer which is up to 10X less expensive than alternative metal additive manufacturing technologies and up to 100X less than traditional fabrication technologies like machining or casting:
In regards to price points, an article by Tech Crunch states that “The X3 costs a mere $36,990, while the X5 costs $49,900” with both being “aimed at what Markforged calls ‘local manufacturers'”. The parts that come out of these machines are pure metal and 99.7% dense, indistinguishable from any other metal parts. The main difference is that these parts went from design to fully functional metal parts in under 24 hours using popular metals like titanium, stainless steel, and aluminum. This is what mature 3D printing looks like, as evident by the extent to which companies are adopting these printing capabilities across all industries.
For GE to make such a point to talk about additive throughout their presentation and to say “they’re more bullish than ever” on additive means they need to grow that area fast to hit their stated targets. While we don’t know what their installed base of 3D printing machines is today, it hardly seems anywhere near ~3,000. Take this press release from Arcam this past June:
Arcam AB, listed on NASDAQ Stockholm, has received an order from GE on 10 EBM systems. GE, which is the company’s main owner since November 2016, will use the systems in different companies in the GE Group. The systems will be delivered in 2017 and 2018.
That’s a big order yet only represents 10 actual printers. The order value for these 10 3D printers is about $11.93 million USD or around $119,300 per printer. It could very well be the Arcam A2X seen below:
The reason to point out GE’s emphasis on 3D printing going forward is hardly to make a bullish case for buying shares in GE. The revenues expected from this push are expected to be quite small when compared to the bigger picture. What is more interesting here is to see how this stands to impact smaller startups like Markforged. And it’s not just Markforged that may be looking at GE as a potential suitor.
In July of this year, Desktop Metal took in a Series D funding round of $115 million making it the largest funding round ever for an additive manufacturing company and bringing their total raised now to $212 million. A whole slew of VCs have backed Desktop Metal, and they’re likely itching for an exit now as the startup enters the later stages of funding. The fact that General Electric is an investor in Desktop Metal makes this whole scenario even more likely. Now that GE has some cash to play with, let’s see if they spend some of it on acquisitions in the area of 3D printing with metals.