3D Printing: Disrupting the $12 Trillion Manufacturing Sector

3D Printing: Disrupting the $12 Trillion Manufacturing Sector With 3D printing fueling the Fourth Industrial Revolution, an array of countries are poised to capture a competitive edge by investing in this rapidly advancing technology. 1

Traditional manufacturing, which accounts for 16 percent of the world s $80 trillion economy, is on the verge of a transformation. One powerful element 3D printing, or additive manufacturing will push the production of goods closer to the consumer, democratizing manufacturing on a global scale and allowing products to be cost-effectively customized to consumers needs. This Fourth Industrial Revolution, or Industry 4.0, will disrupt the global manufacturing sector, creating an opportunity for countries around the world to capture economic value and create jobs. For now, the United States is the global leader in 3D printing, thanks to the country s early entry into additive manufacturing and its historic leadership in traditional manufacturing. However, A.T. Kearney s 2017 3D Printing Index reveals that the United States is at risk of falling behind as countries such as Germany, Korea, Italy, and the United Kingdom pick up the pace and new players such as the United Arab Emirates and Saudi Arabia enter the field. In this paper, we discuss the trajectory of 3D printing, how this is changing, and what countries can do to capture a wealth of economic growth amid this global disruption. United States, Germany in the Lead for Now The 3D Printing Index measures the degree to which an array of countries labor skills, industrial capabilities, governance, and economic assets support additive manufacturing (see sidebar: About the Study on page 2). Shedding light not only on where each country stands but also on what can be done to improve, the Index shows the United States holds the lead with Germany closing in (see figure 1 on page 3). Korea, Japan, the United Kingdom, and Singapore have also embraced the technology and have begun to capitalize on the opportunity. Challengers such as Australia and China, although lagging, have an opportunity to capitalize on the technology that the leaders have developed, while followers such as Indonesia have a long way to go to catch up. Leaders Leaders stand out in both 3D printing capabilities and macroeconomic indicators. The United States is in the top spot US industry has been experimenting and using the technology in early adoption mode, and has developed a significant portfolio of intellectual property (IP), along with a large installed base of 3D printers. Germany is a close second with possibly the strongest level of awareness and desire to adopt 3D printing and other advanced manufacturing technologies. In addition, Germany s Federal Ministry of Transport and Digital Infrastructure has a strong mandate to coordinate the progress toward Industry 4.0 by focusing on 3D printing as a core technology. Korea, the United Kingdom, and Singapore have also focused on expanding 3D printing and building a strong base of macroeconomic factors, positioning them to take advantage of 3D printing-enabled manufacturing. Challengers Nine countries have broad capabilities to excel in 3D printing but have not yet capitalized on them to catch up to the leaders. Taiwan, for example, is strong in engineering and demand for 3D printing but has so far not used these advantages to grow the 3D ecosystem. Italy also has a strong base but is lacking in macroeconomic factors such as adaptable and reliable governance and workforce skills. However, the country is encouraging companies to adopt 3D printing, mainly in jewelry and metal products, as a way to improve manufacturing competitiveness. Other challengers have an opportunity to catch up by capitalizing on technology 1

About the Study The 3D Printing Index is based on 38 quantitative metrics in six dimensions: 3D printing capabilities (50 percent weight) Accounts for a country s current 3D printing footprint with metrics such as the global share of 3D printer sales, the global share of 3D printers installed (normalized by GDP), 3D printing governance engagement, and 3D printing patent applications Macroeconomics (50 percent weight) Demand (10 percent weight). Estimates the potential demand for 3D printers, manufacturing experience, and economic complexity and know-how, including metrics such as consumption per capita, domestic market size, and manufacturing output (normalized by GDP) Trade (10 percent weight). Quantifies the impact of 3D printing in the export of goods, access to foreign capital, and quality of trade infrastructure using metrics such as import of goods, foreign investment, and trade infrastructure quality People (10 percent weight). Assesses the level of workforce skills, availability of digital skills, and support for reskilling with metrics such as graduates in science and engineering, the number of people with a tertiary degree, availability of digital skills, and support for reskilling Governance (10 percent weight). Evaluates a country s political stability as well as the efficiency of the legal and juridical systems using metrics such as regulatory efficiency, the Rule of Law Index, and regulations to protect intellectual property Technology (10 percent weight). Measures the capacity to innovate with new technologies, available infrastructure, and investment in R&D, including metrics such as Internet penetration, new business models enabled by technology, capacity for innovation, and availability of risk capital To ensure geographic and economic coverage, the Index assesses 28 countries, which account for more than 80 percent of worldwide manufacturing output and gross domestic product (see figure). Figure The 3D Printing Index examines 28 countries around the world North America United States, Canada, Mexico South America Brazil Europe United Kingdom, Germany, France, Italy, Spain, Turkey, Russian Federation, Portugal, Poland, Czech Republic, Sweden Asia Pacific China, Japan, India, Republic of Korea, Indonesia, Singapore, Taiwan, Malaysia, Vietnam, Australia Africa Nigeria, Kenya, South Africa Source: A.T. Kearney analysis 2

Figure 1 The 3D Printing Index assesses each country on six dimensions United States 7.5 Germany 6.8 Republic of Korea 5.6 Japan 5.3 United Kingdom 5.2 Leaders Singapore 5.0 Canada 4.7 Sweden 4.5 France 4.2 Australia 4.0 China 3.9 Italy 3.8 Malaysia 3.71 Taiwan Spain 3.71 3.3 Challengers Russian Federation 2.8 Czech Republic 2.8 Turkey 2.7 Portugal 2.6 India 2.5 Indonesia 2.5 Mexico 2.4 Brazil 2.3 Followers South Africa 2.3 Poland 2.2 Vietnam 1.8 Kenya 1.1 3D printing (50%) Trade (10%) Governance (10%) Nigeria 0.9 Demand (10%) People (10%) Technology (10%) 0 1 2 3 4 5 6 7 8 9 10 Index score 1 Discrepancy in bar length due to rounding. Source: A.T. Kearney analysis developed by the leaders. China, for example, is using many existing 3D printing technologies but is lagging in both 3D education and general secondary education and digital skills. However, the country plans to install 3D printers in all 400,000 elementary schools within the next two years. The challengers will need government-led strategies and policies that support the construction of a sustainable 3D ecosystem. Followers Most of the followers do not have all of the macroeconomic factors to embrace 3D printing. Indonesia, for example, lags in metrics such as digital skills, technology infrastructure, innovation, and experience with 3D printing. To move ahead, the followers will need government engagement and policies that promote technology adoption and infrastructure development. 3

An Eye on Growth Being a first mover in the 3D printing ecosystem does not ensure that a country will hold onto a top spot. To maintain their momentum, the leaders will need to unlock the full potential of 3D printing by making it more mainstream in the manufacturing sector. To understand this trajectory, the 3D Printing Index not only examines where countries stand today but also compares the pace of growth as they have adopted this expanding technology (see figure 2). Korea and Italy are gaining ground on the United States and Germany, and if this trajectory continues, Korea could become the global leader thanks to a national, government-led R&D road map focused on 3D printing. Germany is likely to maintain a strong leadership position because of its comprehensive Industry 4.0 strategy, which focuses on both solving short-term industrial problems and keeping an eye on long-term growth by expanding its material portfolio and machinery capabilities. Figure 2 Korea and Italy are outpacing the leaders in growth of 3D printing 3D printing: current 3D printing: year-over-year change United States 7.0 Germany 6.0 Republic of Korea 4.4 Japan 3.6 Singapore 3.4 United Kingdom 3.1 Taiwan 3.0 Canada 2.7 Sweden 2.6 Italy 2.6 France 2.3 China 2.2 Malaysia 1.9 Turkey 1.8 Australia 1.7 Spain 1.5 South Africa 1.3 Russian Federation 1.1 Brazil 1.0 Portugal 1.0 Czech Republic 0.7 Mexico 0.7 Indonesia 0.7 Vietnam India Poland 0.5 0.4 0.3 Nigeria Kenya 0 2 4 6 8 10 Republic of Korea 10.0 Italy 9.2 United Kingdom 8.8 Germany 8.6 France 8.3 Singapore 8.2 China 6.4 Canada 6.2 United States 5.5 Russian Federation 4.9 Sweden 4.4 India 4.0 Malaysia 4.0 Vietnam 4.0 Australia 4.0 South Africa 4.0 Spain 4.0 Turkey 4.0 Taiwan 4.0 Japan 3.8 Mexico 0.7 Brazil 0.7 Portugal 0.7 Czech Republic 0.7 Indonesia 0.7 Poland Nigeria Kenya No change Decline No market 0 2 4 6 8 10 Source: A.T. Kearney analysis 4

The United States is at risk of losing the top spot From 2015 to 2016, 3D printer sales grew by 11 percent in the United States. During the same period, the installed base of 3D printers expanded by 14 percent, a growth rate that is below the leaders average. 1 The United States also scored below the leaders average in government engagement in 3D printing a sign that other governments are more active in shaping the future of additive manufacturing. To avoid losing its leadership position, the government will need to engage more with the 3D printing ecosystem. Although the country has taken action with moves such as the Department of Defense including 3D printing as a key capability in its 2018 budget recommendations, policymakers should consider implementing a broader program of initiatives around digital and 3D design education, 3D adoption, and incentives for companies to adopt 3D printing. The US scored below the leaders average in government engagement in 3D printing a sign that other governments are more active in shaping the future of additive manufacturing. Korea is the benchmark in government engagement From 2015 to 2016, printer sales in Korea grew by 51 percent. In the same period, the installed base of 3D printers expanded 37 percent. To keep up with worldwide innovation and trends, the government has established a 3D printing road map for R&D and is providing national support to execute its plan. This is reflected in terms of IP creation as the number of 3D printing patent applications has grown more than 300 percent over the past few years. The government is also taking steps to encourage growth in 3D printing, such as expediting industry regulatory approvals and introducing tax incentives. Italy is investing in 3D printing to reduce unemployment Unit sales of 3D printers in Italy grew by 38 percent from 2015 to 2016. Over the same period, the installed base of 3D printers grew 14 percent. Jewelry and metal products businesses are the early adopters of 3D printing as a way to boost competitiveness and create products that were not possible with traditional manufacturing processes. Italy is also using 3D printing to reduce its high unemployment rate, especially in industries where the country has historic expertise. In addition, the government is preparing the workforce by supporting universities and research centers that have established 3D printing training and education programs. Italy has also implemented multidisciplinary initiatives, such as creating 3D printing hubs and centers of excellence. 1 Statistics for 3D printer sales, installed bases, and number of patent applications are from Wohlers Report 2017: 3D Printing and Additive Manufacturing State of the Industry by Wohlers Associates. 5

China lags in technology advancements and intellectual property From 2015 to 2016, unit sales of printers grew by 36 percent in China. Over the same period, the installed base of 3D printers grew by 27 percent, but there has not been much growth in the number of patent applications. The country is taking advantage of 3D printing to improve its competitiveness and maintain its large manufacturing base. So far, the strategy has revolved around adopting 3D printing and creating on-the-job know-how. However, this has had limited success because it does not fully support improving workforce skills. In fact, China is below average in educational metrics such as tertiary degrees, secondary education, and the number of engineers and designers. Quality education is available only in major metropolitan areas, and despite the country s intent to install 3D printers in its elementary schools, it will take years to see results. The government should develop 3D printing education at the university level and create vocational programs across the country to prepare the workforce for modern technologies. China is taking advantage of 3D printing to improve its competitiveness and maintain its large manufacturing base. A handful of newcomers are also changing the playing field. Two in particular are striving to become 3D printing powerhouses: Saudi Arabia plans to 3D print more than a million homes in the next five years Over the past year, Saudi Arabia has been accelerating the development and adoption of 3D printing. For example, with Saudi government support, the Chinese 3D printing company Winsun signed an agreement worth $1.5 billion with Riyadh-based construction company Al Mobty Contracting to lease 100 3D printers that produce concrete structures. Valued at $1.5 billion, this joint venture aims to help the country address its shortage of affordable homes by printing up to 1.5 million homes. In addition, Saudi Arabia is using public private partnerships to accelerate adoption of new technologies. UAE is preparing to be a global hub for 3D printing Intent on becoming a world leader in Industry 4.0, the UAE government has defined six strategic pillars, including establishing a Fourth Industrial Revolution Council, creating a knowledge-sharing system of think tanks for new technologies, and approving national initiatives to pilot and explore technologies such as 3D printing. In addition, the government has launched the Dubai 3D Printing Strategy to promote the country s status as a global hub for 3D printing by 2030. The strategy also stipulates that every new building in Dubai will be at least 25 percent 3D printed, beginning in 2019. And the Dubai Health Authority has committed to setting standards for and regulating 3D printing in the health sector, including for prosthetic limbs, teeth, and hearing aids in public clinics and hospitals. 6

Catching up with the Leaders The countries that are accelerating in 3D printing are developing a comprehensive 3D ecosystem. Many of the fastest-growing countries have highly engaged governments that are pushing the capability and ecosystem forward. These governments realize the vast economic potential of 3D printing for their manufacturing base. Government engagement, including methods such as federal entities, investments, and incentives, is a forward-looking metric used to examine year-over-year change. In the 3D Printing Index, countries that score high in government engagement also score high in year-over-year change. Leaders and challengers will both need a national road map that prioritizes workforce education, a demand stimulus, and incentives to reduce barriers to R&D and 3D printing. Forward-thinking policymakers will also take advantage of public private partnerships to work alongside the developing ecosystem. These partnerships have the power to develop a complete 3D ecosystem. For example, private institutions can partner with universities to find ways to use 3D printing to solve industry problems. This will not only teach students tomorrow s workforce how to design for 3D printing but also encourage industry to adopt the technology. The followers can overcome macroeconomic barriers by focusing on niche markets, as Italy has done with jewelry and metals. Focusing on existing strengths will generate opportunities to capture economic growth and create the potential to leapfrog into the Fourth Industrial Revolution. In the years ahead, 3D printing will create economic value and an array of new jobs. Countries that want to win this race and capitalize on the technology must expand their government engagement to foster the technology s adoption and develop a comprehensive 3D ecosystem. Authors Sean Monahan, partner, New York sean.monahan@atkearney.com Angela Kurdys, consultant, San Francisco angela.kurdys@atkearney.com Sam Brannen, director, Global Business Policy Council, Washington, D.C. samuel.brannen@atkearney.com Rafael Angelo, consultant, San Francisco rafael.angelo@atkearney.com The authors wish to thank Clarence Chen, Ben Smith, and Bharat Kapoor for their valuable contributions to this paper. 7

A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world s foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues. For more information, visit www.atkearney.com. Americas Atlanta Bogotá Boston Calgary Chicago Dallas Detroit Houston Mexico City New York San Francisco São Paulo Toronto Washington, D.C. Asia Pacific Bangkok Beijing Brisbane Hong Kong Jakarta Kuala Lumpur Melbourne Mumbai New Delhi Perth Seoul Shanghai Singapore Sydney Tokyo Europe Amsterdam Berlin Brussels Bucharest Copenhagen Düsseldorf Frankfurt Istanbul Lisbon Ljubljana London Madrid Milan Moscow Munich Oslo Paris Prague Rome Stockholm Stuttgart Vienna Warsaw Zurich Middle East and Africa Abu Dhabi Doha Dubai Johannesburg Riyadh For more information, permission to reprint or translate this work, and all other correspondence, please email: insight@atkearney.com. The signature of our namesake and founder, Andrew Thomas Kearney, on the cover of this document represents our pledge to live the values he instilled in our firm and uphold his commitment to ensuring essential rightness in all that we do. A.T. Kearney Korea LLC is a separate and independent legal entity operating under the A.T. Kearney name in Korea. A.T. Kearney operates in India as A.T. Kearney Limited (Branch Office), a branch office of A.T. Kearney Limited, a company organized under the laws of England and Wales. 2017, A.T. Kearney, Inc. All rights reserved.