Exploring Financial Challenges and Opportunities in 3D Printing for 2024

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Entering the calendar year of 2024, the 3D printing field takes a moment to look back at a year marred by hefty fiscal hurdles. With obstacles ranging from disturbances in the supply chain to inflation-induced stresses, the year 2023 put the industry’s resilience and adaptability to the test. That being said, it’s worth noting that in every challenge lies a potential opportunity. Let’s take a closer look at the financial issues encountered in the past year and how they set the stage for prospective growth and innovative developments in 2024.

Diving into 2023, the 3D printing sphere was hit by serious disturbances in the supply chain. The manufacturing process of 3D printers, in addition to the acquisition of vital materials like resins and metals, were hindered, resulting in escalated costs and inevitable delays. Businesses found it challenging to uphold stable supply chains, which in turn reflected on their production timetables and fiscal soundness. On top of that, the industry wasn’t immune to the larger economic conditions, including spiralling inflation and mounting financing costs. These factors added to the financial strain of 3D printing ventures, specifically impacting startups and small firms who rely on external capital for their growth and day-to-day functions.

Caught in the midst of economic uncertainties, companies noticed a decreased investment in groundbreaking technologies. The lag in consumer expenditure, especially concerning non-vital sectors like dental 3D printing, demonstrates the struggles businesses face when trying to adapt to fluctuating market conditions.

Steep inflation and unfavorable currency exchange rates brought about considerable challenges for consumers’ capital budgets. This made the selling of capital-heavy 3D printing equipment more difficult, affecting the revenue streams of many companies.

IperionX is making a 100% recyclable metal supply chain. Image courtesy of IperionX.

Industry evolution

In 2023, evidence emerged suggesting that new 3D printing machines weren’t being used as extensively as anticipated, indicating a slower uptake of this technology in standard manufacturing processes. This trend affected the industry’s profit-making ability. Earnings data from some of the industry’s biggest players suggests that while some have managed to maintain stable revenues or achieve some level of profitability, many have also faced challenges, as reflected in net losses and other financial metrics.

For example, during the third quarter of 2023, Shapeways (Nasdaq: SHPW) managed to maintain steady revenue but also reported a decrease in gross profit and margin. Similarly, Velo3D’s (NYSE: VLD) revenue climbed to $22.4 million while the company registered a loss of 12 cents per share. Stratasys (Nasdaq: SSYS) also faced a net loss of $47.3 million, or 68 cents per share. Markforged’s (NYSE: MKFG) net loss deepened, reaching $51.4 million, or 26 cents per share, a stark contrast to the $23 million, or 12 cents per share, loss reported in the third quarter of 2022.

Navigating challenges

With sales taking longer to complete and amid economic uncertainties, several of these firms have begun cost reduction measures, restructuring initiatives, and divestitures, including Markforged, 3D Systems (NYSE: DDD), Stratasys, Desktop Metal (NYSE: DM) and Shapeways. Many of these measures involve reductions in workforce and non-essential spending. For example, Shapeways CFO Alberto Recchi told investors in November 2023 that there will be a 15% staff cut, which could roughly mean at least 25 employees losing their jobs. Others like 3D Systems and Velo3D also announced layoffs.

At the same time, many of these publicly held companies committed to achieving profitability in 2024 and 2025. For example, Markforged management said it remains “laser-focused on profitability” despite these headwinds. Meanwhile, Desktop Metal’s Ric Fulop remarked that he is confident of the company’s road toward breaking even in the fourth quarter of this year.

However, an increase in net losses stresses the tough road to profitability in the sector. Moreover, this difference in earnings highlights the financial strain from the restructuring efforts and market challenges many companies in the 3D printing ecosystem are working to streamline while improving their bottom line. The 3D printing industry also saw decreased investor confidence, reflecting the challenging share performance of publicly traded companies within the sector. This investor skepticism highlighted the need for the industry to demonstrate sustained demand and profitability.

Adapting strategies

One of the most prominent difficulties was the urgency to decrease the cost per component to remain competitive with conventional manufacturing processes, all the while upholding quality parameters. Achieving a balance between innovation and cost-effectiveness was critical.

In the year 2023, many private 3D printing entities navigated a market filled with economic challenges. They targeted these hurdles by expanding their manufacturing capabilities, enhancing technological prowess, and branching into new applications, especially in sectors like healthcare and aerospace. Despite their efforts, a worrisome number of these promising startups, although generating revenue, find themselves on shaky grounds, as highlighted by 3DPrint.com‘s Editor-in-chief, Joris Peels, in his “RIP 3D Printing” series.

Peels points out, “We’ve only begun to explore the potential uses of the technology,” and “Although there have been some enhancements in cost and quality of parts, these improvements are minimal. The costs are still too high for most applications, and issues with precision, yield, and repetition remain. Rather than progressing and revolutionizing traditional manufacturing methods, the situation is at a standstill and doesn’t seem to have a clear direction. The overall ambiance is pessimistic.”

Much of this situation is reflected in a 2023 study performed by Materialise (Nasdaq: MTLS). The research showed that while production companies recognise the advantages of 3D printing, they run into obstacles when it comes to implementing and scaling this technology for mainstream manufacturing. The survey involved 327 manufacturers from Germany, Japan, and the USA, unveiled that even though many firms are aware of the benefits of 3D printing, they frequently lack the necessary proficiency and awareness to efficiently apply and increase its usage. The research underscored the issues in hiring knowledgeable employees and incorporating 3D printing into current production operations. Despite these obstructions, the survey painted a hopeful picture, indicating growing interest in 3D printing with companies intending to expand their usage and investments in the future.

Turning challenges into opportunities

The supply chain problems of 2023 have brought to light the advantages of localised production. This pattern could see an upturn in 2024, with companies making use of 3D printing for local, on-demand manufacturing. This transition could likely bring down logistics and transportation expenditures and decrease the effect of global supply chain disruptions.

Moreover, the financial strain experienced throughout the previous year could stimulate the inception of novel financing structures, making technological integration more accessible for small and medium-scale businesses. This could include alternatives like leasing out 3D printing equipment or adopting a pay-per-use business model, which could forge new pathways for expansion.

In the face of declining consumer expenditure in particular sectors, businesses have an opportunity to branch out into industries that remain relatively unaffected by economic recessions. Industries like aerospace, defense, and healthcare that exhibit consistent demand for 3D printing could promise more dependable revenue streams for the sector. Furthermore, the quest to decrease the cost of each 3D printed component could catalyze the development of superior technology, making 3D printing more cost-effective and efficient. Not only do such advancements have the potential to decrease operational expenses, they also promise enhancements in product quality and reductions in production times.

Growth Opportunities

Due to the swing in investor confidence, firms may feel the need to bolster their investor relations and maintain transparent communication regarding their growth tactics, innovation progress, and plans for sustained profitability in the long run.

Also, a greater focus on sustainability could become a significant market advantage. Companies that adopt environmentally friendly practices in 3D printing and use sustainable materials are likely to attract customers and investors who are environmentally responsible.

As the 3D printing industry moves into 2024, it stands at a crossroads between ongoing financial challenges and emerging opportunities. The ability of companies to adapt, innovate, and evolve in the face of these challenges will be key. Embracing new business models, diversifying into robust sectors, and focusing on sustainability could be the keys to transforming these challenges into stepping stones for future success. In this context, the upcoming Additive Manufacturing Strategies (AMS) 2024 event, from February 6-8 in New York City, organized by 3DPrint.com and Additive Manufacturing Research, emerges as a pivotal gathering. Offering a platform for industry leaders to share insights and forge connections, AMS 2024 will feature panels and networking opportunities that could provide even deeper understanding and strategic guidance, building on the strategic discussions and connections initiated at AMS 2023.

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