When TCT last caught up with Stratasys CEO Yoav Zeif, the focus was on Stratasys, its wave of merger and acquisition (M&A) activity, industrialising polymer 3D printing, and why he opted to work in the additive manufacturing space.
That conversation took place at Formnext 2021 and was published 12 months ago. We're now a year on and while Stratasys' inorganic growth has returned to a more normal pace - just the two acquisitions (Covestro Additive Manufacturing & Riven) and one divestiture since that conversation - the activity across the industry still hasn't let up.
At IMTS 2022, we gauged Zeif's thoughts on where additive manufacturing is today and what consolidation means for the industry.
Hi Yoav, it’s great to see you again. As we sit here in the Additive Manufacturing Pavilion of IMTS, what’s your assessment of where additive manufacturing is within the broader manufacturing landscape?
Those major trends that we discussed already – supply chain, sustainability, personalisation, new complex geometries, EV, aerospace – are creating significant tailwind for additive. So, let’s not lose the big picture. 3D printing will be in manufacturing. The only question is how long it will take. What’s the pace? How long will it take to shift the status quo from traditional to additive?
It will not be all of manufacturing, but it will be a significant part of it: 5%, 10%, I don’t know. But we are now 0.1%, let’s say. With 100% growth, we will be at 0.2%. It’s a good reflection here [at IMTS], we’re nothing. We’re such a small fish in this big pond of manufacturing.
So, what can the industry do to move that along?
The number one thing is solutions. We need to change the mindset and stop selling machines and start sending tailored solutions for use cases. That’s the only way to succeed. They need someone that will show them that the economics works, and they receive the same part quality in traditional manufacturing. If we cannot do it, it will not happen. But I think that we can. So, when you put together the long-term trends and how the industry is evolving, not only the technology but the concept of having the full workflow, including the digital workflow, real package, that will make a difference. This is our responsibility.
Then there is, what can increase the profitability of us as an industry? And here is all the M&A stuff at scale because the most important thing in M&A from my perspective, is to create the scale needed to create those solutions. If we’re one company that do one sintering technology, it doesn’t matter which one, I don’t have the capabilities to run automation, to do post-processing, to do pre-processing, the design to be the digital thread. That’s impossible. So, you need scale. And it will happen. It’s happening and it will keep happening.
Get your FREE print subscription to TCT Magazine.
Exhibit at the UK's definitive and most influential 3D printing and additive manufacturing event, TCT 3Sixty.
What’s your take on the M&A activity in the AM space recently? What are the pros and cons?
The pros are clear. Better solutions and better value to our [customers]. We can create scale, we can create focus, and invest more in tailoring those solutions. It’s very clear that there is an advantage at scale. Scale carries with it advantages.
What are the cons? We are so small as an industry, I don’t see major cons. The consolidation significantly reduces options for the customers, but there are hundreds of startups, so there will not be 200 startups in metal, there will be only 150. I don’t see the big con.
What about competitiveness? If we look at Desktop Metal and ExOne, for example, does that have a negative effect?
I think it’s a trade off. If Desktop Metal and ExOne – and it’s a great example – together can really make it happen with this binder jet and sintering control, which [maybe] they could not do separately, then the benefit is much higher than any reduction in competition. Because separately, both of them didn’t break the code. I don’t know if they did it now or not. I’m sure they will in the future but separately, all of them had challenges with controlling the sintering process and shrinkage. If they can do it better together, it’s a good example.
One of the biggest M&A deals in the last couple of years is Nikon’s takeover of SLM Solutions. What do you think is this significance of this deal for the rest of the AM industry?
I think it’s a milestone. Those guys are serious. Nikon is a serious industrial company. It’s not like someone came here for private equity, or a VC, saying ‘I have here a possibility to exit in three or five years, driving the hype. No one thinks like this. This is a serious industrial company. And Japanese, you know the Japanese culture, they don’t do anything if they’re not sure that there is a path to what they want to achieve. They’re so conservative. Suddenly, a serious industrial company with a conservative culture decided they will pay six times the revenue of a company that is not profitable, just because they see a future for additive.
Do you anticipate more companies like Nikon buying into AM?
I have no doubt it will happen. I have no doubt that it is creating a new benchmark in terms of valuations and prospects. Within the industry, it’s a recognition in our ability to deliver in manufacturing, because the manufacturer is saying it, not us anymore. One of the things that is limiting the whole industry is that we need to believe that it’s possible. I believe in it. Many people say ‘this is a dream’ of manufacturing. I can believe it. Remember, the one thing that is limits us as people, but also as companies, is our beliefs.
You’d think, though, that so many people stay in this industry for so long that, despite any cynicism or scepticism, there’s some semblance of belief in the potential of this technology. But do we need to rein in expectations? Or express belief that this technology can do all the things we think it can?
The way I look at it, actions speak louder than words. We need to go use case by use case, industrial company by industrial company, identify the highest, the most important, and those use cases where we can contribute the highest value, and just piloting them and show them the products. It’s not about talking anymore, it’s about delivering. Dental, we know at Stratasys, we have some unique value, we can disrupt it, and we can implement data, we now need to go and do it.
We have some unique applications in aerospace that only we can do with our FDM, we need to go out there and do it with the customer together. And then success will breed success. Then, not only will Nikon buy, maybe another large manufacturer, and then we’ll get to the critical mass, where we will not be any more an exotic technology to invest in, but a mainstream solution that can deliver higher value if it’s small volume, medium volume, or if it's a unique structure, of if it’s a place where you need to personalise like insoles, for example.
So, you have this cube of scale, of volume, complexity of geometries, and personalisation. And within those pixels in this cube, there are billions and billions of opportunities.
What do you expect to see next in terms of M&A activity in the AM industry?
Consolidation is the inevitable outcome of an industry where you have hundreds of startups. Go to Formnext and look at the size of the industry and the number of companies [exhibiting]. It’s a mismatch. Small industry, many companies. The only way that it can work is to create scale, the only way to create scale is to either collaborate or consolidate.
Is there fluctuation between growth and the need for consolidation?
I'm an economist and in industrial organisation, there are many models like this. The size of the industry has to go with a growth prospect because in the end you need to pay salaries. So, you're growing, it looks lucrative. And then there are many new companies, and then you're not making money and then you consolidate, and you make money. The fact that we are moving to manufacturing and there are so many companies, startups, that are addressing it, in order to be there means that you have to consolidate, to gain the scale, to invest in manufacturing, and within manufacturing, it will be another cycle of growth, and then you'll see more companies and so on.
Finally, Yoav, additive manufacturing in the manufacturing space. How does it evolve in the coming years?
Significant growth because of the trends and because of the awareness. The awareness is different. [At IMTS], I am meeting CEOs – we just did a roundtable – who didn’t want to talk with me in the past. Why? Because they said, ‘okay, I need to look at the future of manufacturing, there are many things there – automation, robots, whatever – but I cannot avoid looking also at 3D printing, because there is something there in the versatility. Versatility is important.
I’m very positive. Now it’s 100 [exhibitors at IMTS], next time there will be 200. And they will consolidate, and then so on and so forth.
