Firm Makes Impression in Rapid Prototyping : Valencia: 3D Systems leads the industry that provides machines for making plastic models from computer designs in hours.
In 1992, Logitech Inc., a computer peripherals maker, had a chance to win a big contract from IBM. The computer giant needed to produce a two-button computer mouse in a hurry. IBM gave Logitech a two-week deadline to come up with a working model and a price to mass produce the part.
So Logitech turned to an unusual model-making machine it had purchased from 3D Systems Corp. in Valencia. The 3D technology can convert a computer design into a real plastic model in hours instead of the weeks associated with traditional modeling materials, such as wood, clay and metal.
When Logitech executives met with IBM a week later, they were able to show IBM a working model, and Logitech won the business on the spot. “It blew our competition out of the water,” said Rick Lutzinger, Logitech’s director of mechanical engineering.
This kind of quick turnaround is why 3D Systems has sold more than 450 of these machines, known in the trade as rapid prototyping systems, to some of the country’s largest companies, including GM, Chrysler and Ford, in addition to aerospace companies, toy makers and producers of consumer goods, such as Tupperware.
Of the estimated 891 rapid prototyping systems at work in manufacturing facilities worldwide, 3D is the industry leader, according to Wohlers Associates of Ft. Collins, Colo., an industry research company.
3D also does in-house design work for customers, besides selling the modeling machines. And 3D’s broadening reputation has finally meant profitable times for the 8-year-old company. The company posted a $2.1-million profit for the nine months ended Sept. 30, compared to a $920,469 loss a year earlier. Meanwhile its sales jumped 38% to $31.1 million in the latest nine months.
This is a sharp turnaround for 3D, which despite its interesting technology, for a long time had difficulty building a profitable business. The company lost nearly $10 million in 1991. Management changes followed, including the hiring three years ago of chief executive Arthur B. Sims, a high technology industry veteran, who led the company through layoffs and installed marketing changes.
Sims set out to broaden the company’s revenues by relying not just on selling the pricey modeling machines, which can cost from $100,000 to $500,000. Now 3D sells service contracts to maintain the machines for buyers, and it also has a staff in-house that is hired to build models for customers that don’t want to buy 3D’s sophisticated machines, but still want to use the technology. Today only half of the company’s revenues are dependent on the sales of new machines.
The company has reported five consecutive quarterly profits, and Sims hopes 3D Systems is at the start of a new period of prosperity, while finding new applications for its technology. Next year it’s also entering a new, and potentially large, market with the introduction of a lower-priced, desktop modeling machine.
Analysts like the changes at 3D. “The new management has done a good job at leading the company into controlled, consistent growth,” said Antoine Tristani, technology analyst with Southcoast Capital in Austin, Tex.
“The challenge we face is much the same kind of challenge the early computer companies faced,” said 3D’s Sims. “We’ve got to figure out where our greatest potential lies.”
Indeed, 3D, which once had the rapid prototyping field to itself, will soon contend with 20 rivals. “All the companies that have jumped in want a piece of 3D’s pie,” said Rolf Hubert, vice president of marketing at Sanders Prototype Inc. of Wilton, N.H., a new 3D rival.
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3D also faces the task of convincing conservative manufacturers--as distinct from its first wave of customers--that its high-priced technology is worth the investment. So far, 3D has sold the bulk of its high-end machines to an elite tier of companies that pride themselves on being at the technological forefront.
3D’s machines work like this: An engineer using computer-aided-design software designs, say, a car part. That design is then fed into a 3D machine, which contains a laser above a vat of liquid plastic. A computer guides the laser to draw a line on the surface of the resins to create a cross-section of the part. That first section immediately becomes solid.
The machine then drops a fraction of an inch and creates another cross-section in the liquid above it. This process is repeated until, a few hours later, a three-dimensional model is completed (hence, the company’s name). 3D’s founder Charles Hull, who remains company president, developed this modeling method in 1986.
Manufacturers use these prototypes to see how a product will look, and to test and spot flaws before committing huge sums to tool up manufacturing plants to build the actual parts. Another key appeal is to shorten the time it takes to get new products to market.
Since 1988, Ciba-Geigy Ltd., the giant Swiss chemical conglomerate, has owned 36% of 3D’s stock. Ciba develops materials for 3D’s technology under an agreement that expires in July. The companies are discussing the terms of an extension of that agreement.
If analysts are correct, rapid prototyping is also a business that will grow rapidly. Wohlers Associates estimated sales of rapid prototyping equipment and supplies at $100 million worldwide in 1993, and expects that by 2006, the industry will hit $1.2 billion in annual sales.
In order to grow, however, 3D must find new markets. Since 1993, 3D has been offering a new application for its machines that can create models for metal parts. 3D’s vice president of strategy and market development, Richard Fedchenko, believes “QuickCast,” as this new system is called, will eventually be larger than 3D’s traditional plastic parts business.
The company also hopes to sell its products to the medical industry. Several research hospitals and medical companies are now using 3D’s technology to make models for prosthetics, and prototypes of human bones and organs that can help surgeons plan operations. Doctors within hours can examine an exact model of a specific patient’s fractured body part before starting an operation. That dramatically shortens the operation, and will probably help the patient recover more quickly.
“Medicine is a real wild card,” said Sims. “I would be really surprised if it doesn’t grow even faster than the manufacturing applications.”
3D executives are also preparing for the 1995 introduction of a smaller prototyping machine suitable for engineering use on desktops. The price will be around $50,000. So far, 3D hasn’t revealed the details of this desktop model, prompting much industry speculation. Some question whether the liquid resins and industrial chemicals that 3D uses in its top end models, which shouldn’t be touched directly, will work in an office setting.
But many in the business see the marketing promise of a lower-priced modeling machine. “All of us recognize the desktop market has a lot of potential,” said Jennifer Maher, marketing manager with Helisys of Torrance, a 3D competitor. “But in order to be successful, you’ve got to get high volume.”
Industry watchers say 3D’s image suffered in its early years because company officials often oversold the technology’s benefits. Manufacturers were initially dazzled, but became disillusioned when many couldn’t figure out how to make the modeling machines improve the manufacturing process, said Geoffrey Smith-Moritz, editor of the Rapid Prototyping Report, an industry newsletter in San Diego. “Companies that bought them ended up making paperweights,” he recalled.
Today, 3D’s executives say they must be careful not to over-promote the technology, especially with new customers. “In the end it comes back to performance, not the promises you make,” said Fedchenko.
