New digital frontiers

THE digital tidal wave up-ended the music, book, film and newspaper industries. The rise of new printing technology now threatens to wreak similar havoc on producers of three-dimensional objects.

While this shift will take years, 2012 is shaping up as the year the technological hype hits the mainstream.

A 3D printer takes digital blueprints or scans and recreates them one layer at a time. Layers of plastic, metal or other compounds are bonded together to produce an object.

If a rare car breaks down in a remote area, for instance, a suitably equipped local workshop might be able to produce the needed part immediately from a downloaded file instead of waiting for it to be shipped. 

So far, only a few materials can be used, the process can take a long time, and items need to be assembled afterwards. But 3D printing is already changing manufacturing around the edges.

Additive manufacturing, as it is formally known, is currently most widely used in making prototypes. Barclays estimates this and other specialised markets such as dental fillings add up to about $2.5bn a year at the moment. 

As printers become cheaper, new materials become available and machines can handle more complex tasks, the impact will increase. Local manufacturing will cut down on time and shipping costs. Companies will need to hold less inventory.

Customisation - of orthopaedic parts tailored from digital scans of patients, for example - will become far simpler. Manufacturers will be able to switch or modify parts more easily, and pioneers will find new products that only printers can make. 

But anything involving just a digital file and a readily available printer will encourage copying and piracy. The day may well come when teenagers can scan or download their friends' designer sunglasses and print a copy. 

Listed companies that produce 3D printers, such as Stratasys and 3D Systems, both valued in the $600m to $800m range, offer immediate plays on the sector, and other producers are considering IPOs. Related companies, such as $6.8bn design software firm Autodesk, may also benefit.

But the technology is developing rapidly. Opportunities will abound, but investors should beware hype in the coming year - and look out for disruption to traditional manufacturers over the next several.

 - Reuters

* The author is a Reuters Breakingviews columnist. The opinions expressed are his own.