One of the hottest areas of technology recently has been 3-D printing. The two largest companies in the industry are 3D Systems (DDD) and Stratasys (SSYS). 3D Systems has been around since 1986 and is one of the early pioneers of 3-D printing. In terms of market share, Stratasys dominates the industry.
Research firm Wohlers Associates estimates that 3-D printing market is worth $2 billion a year, and the firm expects the market to triple over the next five years. With growth like that, it's no wonder momentum hounds are all over these names: Year to date, DDD is up 40% and SSYS is up 26.5%.
In the past, the 3-D printing market was seen as a slow-growth business, with limited prospects beyond functional prototyping. Revenue was lumpy as the companies relied on a few big equipment sales to giant global manufacturing companies in aerospace or automobile manufacturing. In fact, at the end of 2011, Wohlers estimated there were just 49,035 3-D systems installed worldwide. But with 3-D software sales of upwards of 5 million, the market for 3-D printing is heating up. Eventually, all those 3-D designers will have to print their designs.
As design software has improved, materials technology advanced and the price of 3-D printing has come down, the range of industries that can use 3-D printing has greatly expanded. Today, for example, Stratasys has more than 8,000 customers in about a dozen different industries ranging from architecture and aerospace to medical-device manufacturers and jewelry makers. Even Orange County Choppers is using the Stratasys Fortus 400 to print motorcycle parts.
The average selling price of a 3-D printer has fallen by about a third since 2001. The average price of a professional set-up is about $80,000. Consumer desktop units, like 3D Systems' Cube printer, is $1,200. 3D Systems has said it will introduce a $500 printer by year's end.
The mix of revenue is beginning to shift from large equipment sales to consumables and re-occurring software sales. Consumables generate significantly higher gross margins (70%) than equipment sales (40%). Specialty materials can command margins as high as 80% and 3-D design software is even more profitable with margins has high as 90%.
Next week, I'll write more about 3D Systems and Stratasys, so stay tuned.