The Rise of Digital Manufacturing

Foxconn CEO, Terry Gou recently said that “3D printing is a gimmick.” Yes, that Foxconn – the world’s biggest mass manufacturer of electronic gadgets like smartphones and tablets. He went on to say that 3D printing “did not mean the advent of a third industrial revolution,” alluding to a 2012 Economist article about 3D printing and how it could reinvent manufacturing.

Even though Foxconn has been using 3D printing for nearly 30 years, Gou was not optimistic about the technology’s future, arguing it was unsuitable for mass production and did not have any real commercial value.

Is it at all surprising that Foxconn’s boss would downplay a technology which clearly has its sights set on mass manufacturing?

Mr. Gou said that while 3D printing might be able to manufacture a phone’s shell, it could not manufacture (or assemble) all of the phone’s inner-workings. While this is true, 3D printers are capable of printing some electronics, and breakthroughs in this area are likely to continue. According to the article, Gou also said that 3D printers were currently incapable of printing leather, leading to unsustainable products which could not be mass produced. Not exactly sure what was meant there, but let’s chalk it up to a translation error. Taken literally, it’s a bit bizarre.

For a moment let’s downplay Mr. Gou’s predictions. What if he’s wrong and 3D printing (digital manufacturing) does deliver on its potential? What if you could offer a huge number of products at nearly any location, with little or no supply chain cost? No commitment to mass production, no packaging, no logistics, no scrap, and no waste. Sounds great, but what about all the other important stuff like product quality, speed to market, and perhaps most importantly, the price of the product itself?

What if I told you that you could manufacture products digitally, but the product quality would be inferior and it would take longer to produce each item? What if I added that the price per unit would initially be one hundred times more expensive than traditional manufacturing and that after 25 years, the price would still be still ten times more? Would you predict that digital manufacturing would be at all successful, muchless a huge, growing industry?

Probably not.

But, wait. A scenario like this actually happened. In 1989 Canon launched CLC 500 color copier / printer. While there were plenty of other milestones in 2D digital printing, the CLC was among the first to actually take volume from traditional printing presses. It sold for over $65,000 and printed five full-color pages per minute. At retail, color copies sold for $2 per page and more. At that time, full-color, mass produced pages could be had for two cents all day, assuming you were willing to buy a million of them. The page cost was 100 times more expensive!

Yet digital color copies and prints sold for many reasons. First, people didn’t want to order a million copies, or even 50. They just wanted five. Second, while the quality was nowhere close to traditional methods, it was good enough. Finally, while the machines themselves were slow, the workflow was so much faster. You could hand a printer a disk and get prints the next day. The traditional manufacturing process had 30+ steps and took weeks complete.

Fast forward 25 years and digital printing is big business. In 2013 it is expected to be a $131.5 billion industry and by 2018 will reach $187.7 billion. In 2008, it was 18.5% the size of the offset (mass-manufactured print) market. By 2018, it will be 50%. Over that same time period offset will drop 10% while digital grows by 68%. In 2008, offset sold for a little over a penny a page . By 2018, that will decrease by a tenth. During the same span the average cost per page for digital printing will actually increase from over nine cents per page in 2008 to nearly twelve per page in 2018.

In just 25 years from the tipping point, digital printing has become a massive industry. The price is still ten times more expensive than mass manufacturing…and going up! Shorter turn times, shorter run lengths, full color personalization, photo printing, the Internet, web-to-print, and just-in-time manufacturing all played a role in its success.

Could 3D printing be on the same trajectory?

The quality is nowhere near as good as mass manufacturing, the machines are slow, and the cost can easily be one hundred times more expensive. Right now you can buy a mold for $10,000 and manufacture a plastic part for twenty cents per unit or less. The same product, 3D printed is twenty dollars each.

But 3D printing quality is has gotten better and is probably “good enough” at this point. The workflow is way faster and you can customize and personalize 3D prints. Both the files and printed products can be sold online, but to really capitalize on the savings you’ll want to print locally. Sometimes at home, but if not, somewhere close by.

If you wanted to buy print (digital or otherwise) you might go to a print shop. When you want to buy things, where do you go? Retail. Over the past year we’ve seen Staples, Toys-R-Us, and Tesco experiment with 3D printing service, in addition to the sale of printers. Amazon also recently announced it would begin selling 3D printers and supplies. As 3D printing-as-a-service takes off, more retailers will adopt. For them and their customers, it will be more valuable to have a nearly unlimited number of products available in almost any location.

3D printing will probably never replace mass manufacturing, but it will chip away at the beginning and end of the product life-cycle.

Demand Curve

At the beginning, when demand is unknown, 3D printing will fill the gap. Using our example above, the breakeven between buying a mold and mass producing, or 3D printing at $20 per unit is about 500 pieces. Any more and mass production is a better option. Less, and the fixed unit cost of digital wins. As the quality, speed, and price of 3D printing improve, the breakeven will rise. On the backend, as products near end of life, digital production can help keep parts and products in circulation by eliminating the soft costs associated with mass manufacturing. Why commit to running another 5,000 pieces, when you can print on demand? Even though it is more expensive per unit, it eliminates the capital expense, warehousing, fulfillment, and opportunity cost making it less expensive overall.

In just 25 short years, digital printing managed to overcome many obstacles, competing effectively against mass manufacturing and becoming a huge, multi-billion dollar industry. While there are many other factors to consider, including the big debate about whether 2D printing is even analogous to 3D printing, it does seem obvious that 3D printing has reached its tipping point. New printers are being announced in rapid-fire succession and it seems you can’t go a day without reading about some new, innovative application of the technology. Looking forward the next 25 years, it seems 3D printing certainly has the potential to parallel the success of 2D digital printing. If it does succeed, I for one look forward to watching the Foxconn Chairman and President write his “surname ‘Gou’ backwards [from now on].”

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