How 3D Printing Will Overhaul Globalization as We Know It

Thought to open the curtain a bit on my next book – here are some pieces:

In the early 1980s, an engineer named Chuck Hull approached his boss with an idea: to build a machine that printed out objects you could hold in your hand. Focused on the company’s business of producing UV lamps, Hull’s manager shot down the idea. But eventually the two men reached a compromise: Hull would dedicate to making UV lamps by day, and craft his dream machine at nights.

Three decades later, Hull’s envisioned 3D printer broke through at the 2014 annual Computer Electronics Show in Las Vegas. Tech Republic hailed 3D printing as an industry “poised to transform nearly every sector of our lives and jumpstart the next industrial revolution.” TechCrunch reported Martha Stewart spying on 3D printers to craft her Easter wares.

Stilettos, President Obama’s bust, and even houses have already been 3D printed. 3D printing will not only change our lives, it will save many lives: 3D printers produce human organs. Another huge impact will be on global production and trade. Over the past three decades, corporations from Dell to GE and Sony became built on global supply chain, offshoring production to low-cost manufacturing hubs, and outsourcing parts, components, and even many services around the world. The shift was dramatic: the 1970s, 70 percent of global manufacturing was in the United States, Japan, and Western Europe; by 2010, this share had dropped to 47 percent, with East Asia, Mexico, and Eastern Europe claiming much of the rest.

Economist Stan Shih famously pictured global production as a “smiley curve.” At both ends of the U-shaped smile are high value-added activities: idea-creation, R&D, branding, design at one end, and distribution, marketing and sales, and service contracts at the other. In the low middle is the low value-add part of manufacturing and assembly. The point of offshoring was to shift the low value-add part to where it is most economically done, in low-wage countries proximate to ample supplies of parts and components. China became the world’s factory, typically mass-producing final products bound for U.S. consumers; South-East Asia prospered as China’s warehouse. The winners of this economy were countries with cheap labor and their eager sponsors – Western shoppers devouring computers, clothes, cars, and call center services.

3D printing is fundamentally streamlining this set-up. Parts and components are now digital designs traveling in the cloud, 3D printed right where they are assembled in final products. Slack will be shed in factories around the planet: with software guiding the printing process, 3D printing makes it possible for each item to be made differently without any retooling. 3D printer then patiently adds only as much material, razor thin layer by layer, as is needed for the product. This additive manufacturing contrasts with the old, “subtractive” production of cutting, drilling and bashing metal.

For example, a 130-employee Houston-based ClearCorrect, a maker of invisible braces, previously used milling machines to make models of customers’ teeth that were thermoformed with a thin, clear plastic to make braces. Only one model could be made before resetting the expensive machinery, which also often broke down. With 3D printing, the company ran batches of 60 to 70 models at once, taking five minutes each, as opposed to 1 model at 13 minutes with milling. The company has downsized to a 4,000 square feet facility and three people to produce models from its 11,000 square feet hub with 10 to 15 people manning milling machines.

Such savings will make products cheaper: according to GE, changes in the product design and reductions in raw material costs cut the cost of 3D printed components by up to 25 percent. Companies are taking advantage: Boeing already makes 300 different smaller aircraft parts using 3D printing, saving in the labor costs that before went into making these intricate parts, while Ford uses 3D printing to quickly produce prototype parts such as cylinder heads, intake manifolds and air vents and engine covers, shaving months off the development time for individual components. Add to that the millions saved in running global supply chains – the heartburns of international logistics, defects made in China, and just-in-time inventory management.

These efficencies overwhelm wage differences between such countries as China and the United States, incentivizing companies to locate factories in key demand centers rather than on low-cost Asian manufacturing platforms.

With 3D printing making trade weightless, hub-and-spoke regional production hubs in East Asia, Europe, and North America can replaced by fully globalized sourcing and localized manufacturing. Companies will be completely oblivious to labor costs as robotics and automation advance, and when 3D printers graduate to producing complex turn-key products. This does not only entail insourcing to the United States and end to the Asian export-driven manufacturing platform; it also means that now even complex products such as cars and airplanes can be made in developing countries where they are consumed, without the costs of customs duties, delays, and dependence on lackluster domestic suppliers. The hub for Nike’s manufacturing, China has recently 3D printed sports shoes, complete but for the laces.

3D printing is a boon to consumers, customization, delivery times, and price. Many can have their own 3D printer – desktop models already retail for less than $500. And just like when 2D printers appeared, it is not necessary to own a 3D printer to enjoy the technology. UPS is installing several Stratasys printers at its sites across the United States for consumers and businesses to submit their designs and get the printed product. An entire market of local and remote printing services is springing up in cities around the world.

McKinsey Global Institute calculates that 3D printing could generate $230-$550 billion in economic gains per year by 2025, most of them incurred by the consumer, followed by gains in manufacturing and the use of 3D printing to create tools and molds. The fringe benefits are remarkable: carbon emissions are cut as physical trade subsides. The military and car repair shops too win, just like car repair shops: both can print parts in the field rather than waiting for them to be shipped from another continent.

The impact of 3D printing is especially great for small businesses, before stifled by the high cost of 3D printers. Now, 3D printing cuts the start-up cost for small businesses to become global manufacturers – the set-up costs for production fall, the costs of shipping supplies evaporate, and inventory costs are zero.

Costs will be cut further as the market for designs of 3D printed products globalizes and suppliers of designs will compete harder against one another. Imagine suppliers installing 3D printers at customer sites for free, and then providing designs for parts and products to be printed and made on demand. Designers reach places without printers: a New York company Shapeways helps the maker movement – independent inventors, designers, and tinkerers – to quickly to turn digital designs into products that Shapeways prints and ships globally.

3D printing is accelerating innovation and experimentation: even smaller companies can now design and print a variety of rough-and-dirty prototypes at a rapid pace at low cost in-house, test them out with buyers, and go back to the drawing board to hone their product.

3D printing produces two major leaps in global production: digitizing goods, it enables production and trade of large volumes at minimal cost; allowing for constant adjustments, it makes it possible to easily perfect and individualize products. Of course, raw materials are needed. High costs for the special types of metals, plastics, composites or ceramics can overwhelm the 3D printed product’s ROI. This prospect is refuted by nanotechnology, the manipulation of extremely small materials between one nanometer and 100 nanometers (the width of human hair) so as to convert inexpensive raw materials into sturdy materials. Nanotech is a perfect younger sister to 3D printing: industry people are already envisioning a “molecular fabricator” would use tiny manipulators to position atoms and molecules to build an object as complex as a desktop computer, much like the “replicator” that in Star Trek produced everything from a cup of tea to space age guitars.

Mecca of technology and innovation, the United States has an offensive trade interest to export product designs and sophisticated manufactured goods with 3D printed parts. But 3D printing can also fuel entrepreneurship in emerging markets and connect especially Latin American and African countries better into supply chains. Imagine a small, creative firm in Rio now able to design and assemble customized goods for the massive local market – or make custom designs for a Madison Avenue shopper armed with a 3D printer. Makers of 3D printers are seizing this opportunity. For example, Gigabot has created industrial-sized cheap printer designed to work in developing countries, and enlisted StartUp Chile, a Chilean government program that empowers local tech entrepreneurs, to carry out projects on manufacturing clothing and printing using recyclable materials. It should be only a matter of time for the World Bank will back such efforts.

Few would argue with these gains. But thorny obstacles stand in the way. The main one is intellectual property of digital designs – it is not a leap for the Chinese and Indians, leading IP violators, to pirate 3D designs. Another problem is lack of industry-recognized standards for the materials, processes and testing methods for 3D printed products, a target for consumer advocates. Still another is local content rules are bound to be tightened as governments set out to protect local suppliers fearing to be sidelined by foreign heavyweights. International trade rules offer very little guidance, and trade policy is falling increasingly behind.

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