Everything was going so swell. A clubby group of frenemies merrily ruled the roost. Stock prices soared like Predator drones. The Israelis and Minnesotans had kissed and made up, adopting a wayward young upstart in the process. The Peace of Krailling brought a much needed respite to patent attorneys on both sides of the Atlantic. DMLS & SLM word games had ceased.
A rapid stream of TV camera crews gawked and marveled at our amazing new technology. A Greek chorus singing a happy song for a change. Materials, processes and technologies almost all neatly locked away behind patents. Crack cocaine margins on materials. Gobble, gobble, gobble, went the insatiable mouth of the Rock Hill Python. The industry a goat, being swallowed whole. The band played on and all was well with the world.
Enter da Vinci
Then, along came da Vinci. Specifically XYZ Printing’s da Vinci 2.0 3D printer. Sounds like a few guys in a garage with dollar signs fluttering before their eyes as their hands fumblingly assemble yet another RepRap with a new name. The Desktop 3D printing industry, a Witness Protection Program for RepRaps. Now, the ‘2.0’, does this imply that this is an iteration improving upon the renaissance man himself? Can you just call something a da Vinci? Is it allowed? Can you just do this and not one Italian will complain? OK, good to know. Note to self: write business plan for Botticelli washing up liquid. “Give your dishes the Birth of Venus treatment...”
Back to the printer
A 20 cm x 20 cm x 20 cm build volume. 0.1 mm layer thickness. Both par for the course nowadays. ABS cartridges for printing, that’s a bit square.
12 colours of filament. $25 (£15, €18) for either 300 g or 600 g of material. (I have contradictory accounts of how much material is in the cartridge). Steep price. I think it will be appropriate here to quote King C. Gillette, the inventor of the safety razor and the razor and blades business model:
“The greatest feature of the business is the almost endless chain of blade consumption, each razor paying tribute to the company as long as the user lives.”
A nice thought to accompany you during your next shave or the next time you lug around some of the world’s most expensive plastic to fill your printer.
Print results look nice, the system seems accurate. So far so good. But, a $499 (£300, €360) price tag for the da Vinci 1.0 and $649 (£390, €460) for the 2.0, now that’s interesting. Six da Vincis or one Replicator? Hmmmm.
So the da Vinci 2.0 made by XZY printing is an interesting machine. If it is reliable it could really put a lot of printers on a lot of desktops.
The most interesting thing about it, however, is that it is not made by a couple of guys in a garage. Actually, I’m not even sure if there are garages big enough to hold all of them. It is made by New Kinpo Group, a Taiwanese electronics manufacturing service (EMS) firm doing contract manufacturing for Samsung, HP and others. They make inkjet printers, laser printers, LED panels, eBooks, set top boxes, HVAC boards, LED lights, power supplies, SAN and NAS storage, hard drives... the list goes on.
EMS companies are in an extremely competitive business with operating margins hovering from around 0.5 to 3 percent and gross margins around 5–15 per cent. Scale, innovation, efficiency, low costs and operational excellence are required to survive. Mastery of these is need to let precious few thrive.
3DS and Stratasys have had operating margins around 15 per cent and gross profit margins between 50 per cent and 60 per cent. Both have shown strong revenue growth over the past years and Stratasys now has a market cap of $5 billion on revenues of $484 million while 3D Systems is at $6.95 billion on $513 million. The guys at New Kinpo must be gleefully anticipating entering a market with gross margins of 50 per cent, all 25,000 of them. New Kinpo has 1400 R&D staff and revenues of over $10 billion. It has 18 factories worldwide and eight R&D centres.
Why the name New Kinpo Group?
Well it is a subsidiary of Kinpo Group and new. The parent company makes computers, calculators and does lots of stuff with its 80,000 employees. This is a big company, the biggest company you’ve never heard of. No English Wikipedia article on them but they do have over $40 billion in annual revenue. $40 billion is a lot. Kinpo has higher revenue than DuPont, Sainburys or Lufthansa. Its more than Facebook, eBay and Yahoo rake in, combined. If McDonalds and Starbucks merged they would have around the same revenue as Kinpo.
It could be that its entry into the 3D printing market is for show. A fun thing for the marketing folks. But, I don’t think so, I think these guys are serious about this market being their future. Kinpo makes over 10 million mobile phones and printers as well as 48 million laptops and hard drives per year. But, it has to be a worried company. Hard drives are under threat from the cloud. Laptops are under threat from tablets. Tablets and phones may also actually usher in the paperless office or at least an office with less paper in it. Margins and volumes in the EMS industry have both seen better times. Kinpo’s expansion into the telecoms market was not a success and it will soon complete the sale of its Vibo unit, booking a loss of $162 million.
Fish in a barrel
It makes great economic sense for Kinpo to find a new product niche where it can leverage its manufacturing expertise to similar devices. It also makes sense to rather than contract manufacture, own the customer and build a brand. It risks losing customers if it does this with one of its existing products. But, since none of them currently make 3D printers, 3D printers are one of few options it has to do this in. If this device category also comes with 50 per cent gross margins and seems very high growth it would be a logical avenue to pursue.
If you then have a lean organisation used to low margins, deep experience in manufacturing and have more R&D guys than the competition has employees, chances are you may actually be successful. A major proof point for me is that the CEO of New Kinpo Simon Shen, is also the Chairman of XYZ Printing. This is no mere marketing exercise in my mind, no these guys are coming. Eventually they will make a capable credible reliable cheap 3D printer and it will be sold at WalMart. You are a fat happy salmon swishing around pleasantly in a barrel while thousands of miles away a few hundred Taiwanese engineers are loading shells into shotguns.
Whereas Kinpo is large there are two other EMS companies larger than it, Quanta and Foxconn, both also Taiwanese. Quanta was founded by an ex Kinpo co-founder, Barry Lam. It grew quickly by adding more engineering services to its product offering and because Lam’s key insight was that laptops would become a significant product. Meanwhile Kinpo continued making calculators. Foxconn experienced a lot of growth by basically making everything Apple sells — contracts that Kinpo must have been asked to bid on.
Foxconn President Terry Gou has said, “3D printing is a gimmick. If it really is that good, then I’ll write my surname ‘Gou’ backwards.” I don’t know Kinpo founder Rock Hsu. I’ve never met him. But, I’ve got to assume that someone who founds a $40 billion revenue company with over 80,000 people working for it has got to be ambitious and determined. I’ve also got to assume that building something this huge has to be gratifying but watching others, one an ex colleague, build bigger companies in the same business has got to make one hunger for more.
What if this time it is Rock who spots the next big thing? What if this time, Barry and Terry get it wrong? What if, Terry ‘Uog’? Rock Hsu has said of 3D printing, “This is an another form of dream factory.” For manufacturers in our industry his dream may become their nightmare.