3-D Printing Is (Almost) Ready for Prime Time

The Consumer Electronics Show was a parade of innovation this year, as always. The show has become a coming-out party for exciting technology, and this year, 3-D printing had its turn on the dance floor. The devices have thus far been confined to professional manufacturing and niche hobbyists, but some manufacturers are very eager to get into the home market. Growth investors should take note, as 3-D Systems (NYS: DDD) made all the right moves at CES to push its products toward eventual (and probably inevitable) popular adoption.

Flat is old hat
Not long ago, I predicted that 3-D printing would take off for home use in the next five years, with some caveats that still need to be addressed. 3-D Systems took major steps toward that goal at CES, demonstrating a stylish-looking printer called the Cube that's now on sale for $1,299. While this isn't under the $1,000 barrier I was looking for, the suite of ease-of-use apps and developer community paired with the Cube at Cubify.com are necessary prerequisites to mass adoption. Think of the Cube as an iPhone, and Cubify.com as a 3-D printing App Store. The device is important on its own, but becomes a transformative force when paired with a wide variety of useful software.

Another printing superstar in the making?
Hard as it is to imagine now, there was a time in the not-too-distant past when consumer printers of any kind were almost nonexistent. Hewlett-Packard (NYS: HPQ) offered one of the first commercial laser printers in 1984 for $3,600, nearly three times the cost of the Cube. But the home printer market didn't really start to take off until after 1988, when HP's DeskJet broke the $1,000 cost barrier. Here's how the company did in the decade after the release of the first DeskJet:

Hewlett-Packard Total Return Price Chart by YCharts

Despite being that rare fairly valued tech company for much of the 90s bubble years, HP stock still managed to nearly quadruple. Its first-mover advantage and aggressive pricing early on has paid off for decades, as HP still controls over 40% of the global printer market. Although HP is more than a printer company, that segment today accounts for about 20% of its revenue and almost 30% of net income. 3-D Systems competitor Stratasys should make note of this, as the longer they sit out the consumer push, the harder it will be to capture market share later.

A material world
The three greatest challenges I see for 3-D printing's wide adoption are material diversity, resolution, and ease of use. I think it's clear that manufacturers are committed to major cost reductions, and we'll see prices continue to drop going forward.

The Cube offers 10 different colors, but all are printed in the same type of hard plastic, and only one color can be used at a time. This limited material and color palette is common to inexpensive 3-D printers. Costlier 3-D printers already have multi-material capability, so this is sure to be addressed in time. The only question is when. This will be the best source of revenue for popular 3-D printer makers, much as print cartridges are for printer makers today.

Kodak (NYS: EK) chief Antonio Perez pegged much of his company's future to the printer market. But without a broad user base, neither Kodak nor any other printer manufacturer can really cash in on cartridge sales. Did Kodak fail because it took too long to catch the printer bug? That thought should be in the back of every 3-D printer maker's mind as they continue to improve their machines. Material diversity will be essential, not to mention profitable. We want more than plastic parts.

Sharp like a razor blade
The resolution of low-end 3-D printers leaves something to be desired. Completed objects often appear somewhat jaggy or unfinished, particularly when made in low-end machines. The Cube's resolution, for example, is about 20 times worse than a $30,000 Stratasys model. Good 3-D printers have already proven incredibly precise, but now they have to be precise and cheap. The battle between resolution and cost might hinder faster price cuts, but Lego-style blockiness of any sort will hinder adoption as well.

Easy like Sunday morning
If you want to print this article, all it takes is control-P and a quick tap of the enter key. Imagine doing that with a fully rendered 3-D object. What if the size is wrong? What if there's a hole in the wrong place? What if the flicker doesn't flick or the spinner doesn't spin?

A lot of thought goes into the design of most objects you interact with. Some companies have built their fortunes on designing everything in exactly the right place and not a micron off. That takes serious skill, and while I'm hopeful that a strong design and app-development community will help push 3-D printing to the masses, it's going to take a lot of work to bring it anywhere close to the printing we're used to.

Cubify.com is a great step forward, but it's only a first step. The other two challenges can't be ignored if 3-D Systems wants to make the Cube and its eventual descendants must-haves. I still believe it can be done within five years, but it'll take a lot of innovation and creative talent to get there.

It's well worth it to keep an eye on this market going forward. If you're looking for another great opportunity with a stock poised for explosive growth, there's a brand new free report just for you. In it, you'll find everything you need to know about another company with an amazing machine that's changing its industry. Find out more about this once and future multibagger -- reserve your free copy now.

At the time thisarticle was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter for more news and insights. The Motley Fool owns shares of 3-D Systems. Motley Fool newsletter services have recommended buying shares of Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.