In the spring of 2020, Sam O’Leary’s phone started ringing nonstop.
The appellants were executives in the automotive and aerospace industries. They were all seeking help from his industrial 3D printing company in Germany, SLM, to produce vital parts that were suddenly becoming scarce as the Covid-19 pandemic disrupted international shipping.
“I haven’t spent a day away from the office,” says O’Leary, who has taken to showing the company’s specialized machines to customers via video calls. His clients’ concerns were always the same, he says: “I have a big problem, I need to reduce risk, I need to relocate.”
SLM’s customers have previously used its technology for niche applications, such as the production of gooseneck mounts for aircraft and brake calipers for performance vehicles.
But, despite the increased cost and complexity of 3D-printing metal components, they’ve turned to the technology for more common parts, such as the hinges that hold regular car seats in place.
So while many other industrial companies saw their order intake slow to a halt, revenue for the Lübeck-based company – whose shares had fallen to record lows before the pandemic hit – rose. by more than a quarter in 2020.
Sales were on track to have increased by a similar amount in 2021. For 2022, O’Leary expects SLM sales to increase by 40%.
High profile global supply disruptions chains over the past two years – including the temporary blockage of the Suez Canal, floods and fires in Texas and Japan, and ongoing bottlenecks in semiconductor production – have led to equally optimistic forecasts for the rest of the so-called “additive manufacturing” sector.
Last year, a study by Lux Research estimated that the market for 3D printed parts, which was worth $12 billion in 2020, would grow to well over $50 billion by the end of the decade.
Governments around the world have sought to determine how and where components are made. In Germany, the recent chronic shortage of semiconductors has resulted in millions of fewer cars being produced than customers wanted to order. As a result, it is one of many countries that have pledged to support the “reshoring” of manufacturing of key components to protect their economies.
But, despite such enthusiasm, there is growing evidence that companies like SLM serve a small market.
A survey of European businesses conducted by EY in early spring 2020 found that more than four-fifths were considering bringing their supply chains closer to home. When the same survey was conducted in April last year, however, this view was shared by only 20% of respondents.
Similarly, only 15% of multinational companies surveyed by the Association of German Chambers of Industry and Commerce (DIHK) said they would outsource production.
Their position has been taken up by the sporting goods group Adidas. Just five years ago, the company launched a program to build factories in Germany and the United States that would use local materials and advanced manufacturing techniques, such as 3D printing, to produce sneakers. tailor-made for nearby customers.
He had to do anything but abandon this plan at the start of the Covid-19 pandemic. But, after supply chain disruptions reduced Adidas’ revenue growth by around 600 million euros in the three months to the end of September 2021, boss Kasper Rorsted has said emphatically that he had not changed its mind about relocating manufacturing.
“We have around 800,000 people deployed in our [suppliers’] factories,” he said in November. “It’s an illusion to believe that you can move an industry that has developed for 30 years in Asia, to a very sophisticated industry, to certain regions.”
Even if it were theoretically possible, Rorsted added, raw materials would still need to be sourced from around the world to produce the parts, making the prospect of relocation a “total illusion”.
“You wouldn’t even be able to find the people [that would need to do the work currently being done in Asia],” he said.
German economists are not convinced either.
“If the EU were to decouple even partially from international supply networks, this would significantly deteriorate the standard of living of people inside the EU as well as its trading partners, and should therefore be avoided by all means. “Warns Alexander Sandkamp. He is one of the authors of a study by the Kiel Institute for the World Economy according to which the regionalization of production would cost Europe hundreds of billions of euros.
The recent catastrophic floods in Germany, which cost the country 40 billion euros, according to insurance group Munich Re, are further proof that “shocks can also happen on our doorstep”, adds Sandkamp.
Even SLM’s O’Leary is quick to add a caveat to his company’s bullish outlook.
“We mainly work with regulated industries,” he says. “So if you’re part of an aerospace supply chain. . . you don’t just buy a 3D printer and say, “OK, well, I’ve decided to walk away from my supplier wherever [they are] in the world and I will do it internally”.
A recent development program with a major British aero-engine manufacturer, he adds, took two years to become operational, due to the time required to install the necessary machinery on site and obtain the necessary approvals from of the British Civil Aviation Authority.
“Demand is definitely growing,” says O’Leary. “But there’s also a reality in that it’s regulated and time-consuming technology and change.”
Additional reporting by Olaf Storbeck