Over the past few weeks, Stratasys has become the object (of desire) of multiple takeover offers – from Nano Dimension and from 3D Systems – and has initiated a merger with one of the companies that have made the most acquisitions in recent years, Desktop Metal. Like in 2012/13 (with the Stratasys-Objet) and 2020/21 (with Desktop Metal – ExOne), mergers are seen positively by the stock market, with all major 3D printing stocks making significant gains.
Over the past couple of years, Stratasys, Nano Dimension and 3D Systems all conducted acquisitions, in an ongoing attempt to consolidate an extremely fragmented industry. For anyone looking at the AM industry from the outside (or even from the inside), this process may look like a wheel spinning out of control but Stratasys CEO Yoav Zeif has been very clear that this effort is driven by the need of the AM industry to mature into fewer and stronger AM companies, like Stratasys, that can offer customers more value for their money.
What drives us and me personally is not money, not the market’s respect and not ego. What drives our strategy is that we see a problem with global manufacturing and we want to solve it.Yoav Zeif, Stratasys CEO
Consolidation and additive mass production
The AM industry’s need for consolidation and the need for AM to meet production requirements in terms of part quality, part cost and workflow automation go hand in hand. According to Mr. Zeif, they are equally urgent. Not just for the AM industry to grow but also to address the very real criticalities that traditional manufacturing presents and that are no longer sustainable.
“I can assure you that everything we are doing is part of a deeply thought-out strategy,” Mr. Zeiv said, “it’s all part of a structured plan and we understand that this also requires some courageous moves. The bottom line is that our goal is to deliver value. Everything starts and ends with our customers’ best interests.”
This is something we have heard quite a few times before and Mr Zeif recognizes that “we [as in the both Stratasys and the AM industry as a whole] have so far failed to do this. I’m here with my teams – he told VoxelMatters – to make sure that we are really delivering. Not promising; delivering.”
|Stratasys||Desktop Metal||Nano Dimension||3D Systems||Nexa3D||Markforged|
|Polyjet (Objet)||Metal/Sand binder jetting (ExOne)||AME||SLA||SLS||CFF (Composites)|
|FDM||Single pass jetting (SPJ)||Micro SLA (Nanofabrica)||MJP||cDLP||ALD (metal filament)|
|cDLP (Origin)||Robotic sand binder jetting (Viridis/ETEC)||Ceramic/Metal DLP (Admatec)||CJP (legacy)||SLS (XYZprinting)||Metal binder jetting (Digital Metal)|
|SLA (RPS)||DLP and cDLP (ETEC)||FGF (Titomic)|
|SAF (Xaar3D)||Wood binder jetting (Forust)||SLS|
|Bioprinting (Collplant/Origin)||Bioplotter bioprinting (ETEC)||Benchtop SLS (WeMatter)|
|BMP (metal filament)||Bioprinting (Allevi, Volumetric)|
|DMP (metal L-PBF, Phenix)|
Shown in the table above, key brands and technologies of some of the companies that are most active in conducting acquisitions across the global AM industry. Source: VoxelMatters Research.
Urgency to scale
Our initial skepticism – as outlined in this recent article on Stratasys’ planned merger with Desktop Metal – is that large industrial adopters often tell us that they don’t use and don’t plan on using AM for large batch part production. Even though our own data does indicate that final (end-use) parts already represent the most significant unit number of AM parts produced and also the largest revenue opportunity, in just about every segment of AM and AM adoption, what this data does not show is that part value and thus relative profitability are more significant when it comes to prototypes and tools. Thus, we argued that, as the market leader and as a steadily growing, profitable company, Stratasys has no urgency to change the status quo. But large production is the only way the industry can scale and Mr. Zeif says that not only they are aggressively targeting end-use part markets but that end-use parts are already a key part of Stratasys’ core business.
“It’s not just a goal for us, we are doing it on a daily basis,” he tells us. “The way Stratasys operates today is very different from the past. What drives us and me personally – he adds – is not money, not the market’s respect and not ego. What drives our strategy is that we see a problem with global manufacturing and we want to solve it.”
With extensive experience at both McKinsey and large-scale chemical refineries, Zeif can speak from experience. “[Traditional manufacturing] is too heavy in terms of investment, it’s rigid – he says. You need to put up large CapEx, and set up huge manufacturing plants as near as possible to your customer but you can’t because labor cost is too high. So, you move production to low-cost labor countries, build large plants and send products all over the world with airplanes, ships and pipes. But most of what you are shipping is just air.”
This leads to a lack of product personalization – which means huge warehousing costs – combined with a huge global footprint. Existing digital processes such as CNC milling are too energy-hungry and wasteful. Not to mention the geometries that can only be achieved with AM.
Zeif has been at Stratasys for just over 3 years “But so far – he concedes – we have not been able to fully exploit the advantages that AM can offer.” He lists four reasons: cost per part, quality of the parts, end-to-end workflows and company stability. We could not agree more and Mr. Zeif argues that Stratasys has taken steps in all these areas and that the Desktop Metal merger fits exactly within this strategy. Let’s see exactly how.
Delivering final parts
In terms of delivering on cost per part, Mr. Zeif mentions the recent case of the US Navy installing as many as 25 F900 systems and getting a full return on its investment in a matter of just a few months. While this may still be a relatively rare case, Mr. Zeif is convinced there are plenty of these opportunities around, where AM can already offer real and immediate added value. And we just need to find them.
The second challenge, ensuring part quality, is something that VoxelMatters has been advocating by actively collaborating with key companies in this area, such as Theta Technologies and AM-Flow. Besides establishing a 45-people Quality unit, Stratasys has recently acquired quality assurance software company Riven. The Berkeley, Calif.,-based start-up developed Warp Adaptive Modeling software to quickly inspect, diagnose and automatically correct deviations between CAD files and actual 3D printed parts. This is expected to help remove a potentially significant bottleneck in the parts production process that will help Stratasys customers scale adoption of additive manufacturing using any Stratasys 3D printer running GrabCAD Print software. “Without quality we are nothing,” Zeif says. The third point, the need to establish an end-to-end workflow that integrates 3D printing, is directly connected to part quality: the machines need to see and understand every individual part to automate the workflow, from CAD to final part.
Finally, and this brings us to the Desktop Metal merger, the AM industry needs consolidation. “It’s a startup industry and that’s great for innovation,” Mr Zeif argues, “but it’s not always what large adopters want. Companies like Tesla, Boeing, or GM need stability. These types of customers were very happy about our merger because they do want to invest in Desktop Metal technologies, but they need a larger structure to adequately support their investment and the relative risks they are taking in order to get the rewards down the line.”
Why Desktop Metal
Why did Stratasys merge with Desktop Metal and not with another company? And why – along the same train of thought – was Desktop Metal not acquired by someone else? I think the reasons are connected and fairly clear. Stratasys merged with Desktop Metal because it is confident that its technologies are the best ones to grow its business and scale into both polymer and metal production. The company was an early investor in Desktop Metal and many Stratasys distributors around the world also sell Desktop Metal products.
Desktop Metal merged with Stratasys and not with another company because there aren’t many companies around that can fully understand and evaluate the potential and validity of Desktop Metal’s technologies and properties.
“Desktop Metal is a rough diamond and Stratasys has a good name,” Mr. Zeif explains. “We can interact with many other companies in the industry, and we selected Desktop Metal because we found the highest levels of complementarity of both portfolios. No less important – he adds – is the fact that they’re bringing the innovation from MIT. It’s rooted in their culture and we can take that innovation and make it into a real business.”
Even so, Desktop Metal’s reputation has taken a hit in recent times, as its founder Ric Fulop’s AM 2.0 vision, which took the company to a $2 billion stock market valuation, was slowed down by challenges in developing the market and integrating acquisitions. Mr. Zeif considers this just negative hype. “When I arrived at Stratasys there was a negative article on the company every week,” Mr Zeif says. “[They were] saying we were ‘at the end of our run’, ‘no way we could grow’, ‘losing market share’. Now they are saying similar things about Desktop Metal.
“We invested thousands of hours in due diligence and we learned that there are very valid and stable technologies within the technologies that Ric [Fulop] acquired – Zeif clarifies. No one is better in terms of the reliability of binder jetting than ExOne. They are also the leader in sand casting while EnvisionTEC, or ETEC, is the company that invented DLP. They cover the low-end chair side dental segment as well as large-scale industrial with the 8K series. While our Origin printers cover the high productivity range. Combined, these are $200+ million yearly businesses. We need to invest to make them all into even more marketable products but there are already many great synergies.”
The product intended to fully realize the AM 2.0 vision is high-speed metal 3D printing and sintering. Several companies are developing it but Desktop Metal is the only company that has invested significantly into developing the sintering and sintering simulation capabilities. “They’re the only ones that make the software and they have 50 patents only on the furnace. The sintering phase is extremely complicated; our guys were there for weeks learning about it. If I was not personally sure that we can productize it, we would not go for it.”
Zeif also confirmed he has shut down two metal projects that within Stratasys because they couldn’t differentiate from other technologies on the market. “But with this one,” he says, “we can differentiate and deliver the promise. It’s not going to happen tomorrow morning. It could take between a few months to two years, but we will be there with the best metal technology.”
Consolidating and synergizing
Mr. Zeif sees more possible synergies between the two companies. First with the liquid resin material business and IPs, combining Desktop Metal’s ETEC and Adaptive3D materials with Stratasys’ recent Royal DSM/Covestro AM materials acquisition and the company’s long experience with developing and manufacturing photopolymer resins for its Polyjet technology. “We have enough capacity to support Desktop Metal resins and Covestro materials in our plant in Israel, all at a much lower cost,” he confirms.
The biggest synergies may be found in the jetting hardware, by combining Stratasys’ unique jetting expertise – deriving from its world-leading Polyjet business – with Desktop Metal’s jetting requirements, driving the high-speed metal production goals of the P-50 and P-1 systems.
“We didn’t just merge with Desktop Metal because it was available. We chose Desktop Metal because we really want to deliver the promise of additive manufacturing with a unique and distinctive approach,” Mr. Zeif says. “We don’t want more of the same. We want to take this industry into manufacturing. And in order to do it, we need to combine innovation with professionalism, with focus and discipline and processes.”
Integration and consolidation won’t be easy but it’s the only way. “[How we will do that is] something that for me to know and for you to wonder for the next three, four months,” Mr. Zeif jokes. “But it’ll be fantastic. And I’m so happy with the talent that we will be joining us from Desktop Metal,” he concludes.
I cannot even imagine what it will be like to integrate all of Stratasys and Desktop Metal’s properties or what will come out at the end of the process. Hopefully, it will be a much more streamlined, solid company that can continue to drive the AM market into maturity through a solid, integrated and far-reaching commercial and marketing global structure. While I have learned about never saying never in AM – I don’t think Stratasys will want to be acquired by another company anytime soon.