What Opportunities Does ARK See in 3D Printing?

From drugs to automotive engines to food, 3D printing — or additive manufacturing, to use the technical term — has the potential to transform multiple industries, especially in light of recent supply chain crises. The sector could be on the cusp of major consolidation.

• 3D Systems is in talks to acquire Stratasys, which has already agreed to merge with Desktop Metal.
• Manufacturing robots and 3D printing could be a $9trn market by 2030, according to ARK Invest.
• The ARK 3D Printing ETF is up 3.4% year-to-date.

Back in 2013, the UK government published a blog post by Chris Harrison, one of its patent analysts, which argued that 3D printers could soon be widely used in households.

“It may not be long before consumers readily have the technology to scan any off-the-shelf product and print a replica at home,” wrote Harrison, adding that some 3D printers were selling for under £250.

A decade on, however, and 3D printers haven’t entered many homes. In fact, they’ve more or less left the mainstream consciousness. Yet, while the hype has died, there’s still optimism that even our dinners could one day be 3D-printed.

For example, food scientists at the National University of Singapore have come up with a way to turn plant proteins into 3D-printed vegan seafood. Meanwhile, mechanical engineers at Columbia University have managed to print a cheesecake. But it remains to be seen whether 3D-printed food will ever land on household plates

“Because 3D food printing is still a nascent technology, it needs an ecosystem of supporting industries such as food cartridge manufacturers, downloadable recipe files, and an environment in which to create and share these recipes,” noted the Columbia engineers.

Additive Manufacturing M&A Activity

Until 3D-printed food is commercialised, additive manufacturing could have a more noticeable impact within industry.

Stratasys [SSYS], a maker of 3D printers and related technologies, is one of the pioneers of additive manufacturing. In June, the Israeli-American company announced a new logistics hub in the UK, which is already home to more than 3,000 of its polymer 3D printers.

“The UK has become a highly strategic territory for us, so it’s vital that we are closer to the market in terms of presence while also having the increased versatility to improve our overall service offering,” said Yann Rageul, Vice President of Commercial Enablement at Stratasys, in a press release.

Stratasys is in talks over a potential acquisition by competitor 3D Systems [DDD], having rebuffed offers from Nano Dimension [NNDM] in July. Nano Dimension Chairman and CEO Yoav Stern described their takeover approach as a bail-out, because Stratasys is “running out of cash after destroying over $2bn of cash shareholder value”.

The Stratasys-3D Systems news follows the former agreeing back in May to combine with another major player, Desktop Metal [DM], which is making metal and carbon-fibre printing more accessible.

This merger manifestly made sense Stratasys. Chief Technology Officer Guy Menchik told industry publication 3D Printing Industry back in January that they’ve been “seeing a significant acceleration in materials development for additive manufacturing”. Combining with Desktop Metal should open up new manufacturing applications and opportunities going forward.

Consolidation Could Drive Growth

In their merger announcement, Stratasys and Desktop Metal said they would be targeting $1.1bn in revenue in 2025, and that they were anticipating the additive manufacturing industry will grow to a value of more than $100bn by 2032. Yet the two companies brought in just $651.5m and $209m respectively in 2022.

Consolidation in the additive manufacturing sector could be vital if growth is to be realised. It’s been on the cards for more than a decade, following a flurry of activity in 2011 and 2012 that saw Stratasys make a couple of acquisitions and 3D Systems snap up 13 companies, according to an IDTechEx report.

An investment banker involved in the current dealmaking activity in the additive manufacturing sector told the Financial Times in July that “consolidation should happen”. Stratasys, 3D Systems and Nano Dimension “should be together”, they added.

Technological Advancement in the Hands of Few

Consolidation, especially between 3D printer manufacturers and materials makers, would mean fewer smaller companies and fewer but bigger players with a larger pool of talent, knowledge and skills to advance the industry.

As technologies improve and materials get better, speeds will increase and costs will come down. This will help to create more additive manufacturing applications and drive adoption across multiple industries.

Among the analysts, Boohoo’s share price has a 42p price target. Hitting this would see a 24.7% upside on Monday’s close.

“While upfront costs can be higher, 3D printed parts can be produced much faster with more durability than parts manufactured traditionally,” noted Sam Korus, Director of Research for Autonomous Technology and Robotics at ARK Invest, comparing the technology to traditional manufacturing in the firm’s 2023 edition of its Big Ideas report.

Efficiencies on the Back of AI and Robotics

The ARK research published in January found that integrating sensors and machine learning algorithms into 3D printing operations could reduce print error by approximately 30%, reduce material waste by up to 40%, and increase the durability and strength of products.

The use of robotics, meanwhile, could drastically cut the time it takes a print job to go from design to production. This would in turn help to shorten supply chains and reduce the likelihood of bottlenecks in the future.

Korus has estimated that the manufacturing robots and 3D printing market could grow at a CAGR of approximately 80% between 2022 and 2030, from a valuation of $70bn to approximately $9trn.

How to Invest in 3D Printing Stocks

ETFs, or exchange-traded funds, offer an economical and diversified way to invest in a variety of stocks within a particular theme.

Funds in Focus: the ARK 3D Printing ETF

The ARK 3D Printing ETF [PRNT] is the sole fund explicitly covering the theme. As of 30 June, exactly half of the portfolio was allocated to 3D printing hardware, with 30% going to 3D printing simulation services and 13% to 3D printing centres. Scanning and measurement and 3D printing materials had weightings of 5% and 2% respectively. The fund is up 3.4% year-to-date.

The Pacer BlueStar Engineering the Future ETF [BULD] is an alternative play — it holds Stratasys and Nano Dimension. As of 21 August, the information technology sector accounts for 74.2% of the portfolio, while industrials make up 22.8%. Consumer discretionary and healthcare both have allocations of less than 2%. The fund is up 13.1% year-to-date.

The ProShares S&P Kensho Smart Factories ETF [MAKX] is another option, as it holds Stratasys and 3D Systems. As of 21 August, software and services has been allocated 31% of the portfolio and capital goods 22.4%. Technology hardware and equipment account for 18.6% and semiconductors account for 17.5%, while telecommunications services and materials have single-digit weightings. The fund is up 13.9% year-to-date.