Does 3D Printing Exclude China?

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In the last several years, the concept of 3D printing has shown significant promise and even actual execution. 3D printers have existed, at least according to Wikipedia, since the 1980s. However, the combination of reduced cost of printer, increased flexibility, and expanding number of materials which can be shaped using a 3D printer has brought 3D printing closer to the regular end-user.

I do not know if 3D printing will ever be a desktop experience. Unlike desktop 2D printers, which at most require 8x10, A4 or Legal sized paper and a few standard ink cartridges, 3D printers require raw materials of varied enough types to make it likely prohibitive for a home or small business user to stock them, even if the printer price itself drops to the point of being mass-market affordable.

I do, however, believe that many items which we now purchase online and have sent UPS, or purchase from our local corner store (any of those left?), Target or other big box retailer, will be purchased from a local 3D printer. Even if Amazon can buy those mugs in bulk, such that its landed cost is $5, and its shipping is as low as $1, it still has inventory costs, and shipping of the product and its raw materials to Amazon are built into that $5. Raw materials can be densely packed, usually far more so than manufactured goods, such that the $6 cost to Amazon to have it delivered to your door (plus whatever profit margin it requires), may still be more expensive than a local or regional 3D printer having the raw materials shipped and stored near you, ordering it custom online, and picking it up (or local delivery) later that day or the next day.

What I find most interesting is the macroeconomic impact. Currently, a very large number of products, both high-value/high-complexity like iPhones and Lenovo laptops, and low-value/low-complexity like mugs and stuffed animals, are manufactured in China. While China is becoming a global manufacturing centre for excellence, its primary value-add is in providing labour at a fraction of the cost of target market nations like the US, Canada, the UK and Germany. For fully or nearly fully automated manufacturing, China provides little to no value-add; indeed, there have been numerous cases of fully automated manufacturing firms choosing to stay in developed nations, rather than offshore to China, since China provides no value-add, especially when shipping times and costs and offshore management costs are taken into consideration.

The current value chain, then, looks something like this:

  • Raw materials are acquired and purified, mostly in developing countries but also in fully developed ones - petroleum, bio-goods, aluminum, etc.
  • Raw materials are shipped to manufacturing centres such as China
  • Raw materials are turned into finished goods using relatively low-cost labour in China
  • Finished goods are shipped to market countries
  • Finished goods pass from importer to retailer (and some others on the way)
  • Retailer sells and ships finished goods to end-consumer

Putting China in the value chain is actually quite expensive. However, the labour cost-savings (as well as regulatory overhead for running a labour plant, as Jobs told Pres. Obama in early 2011) are so enormous for labour-intensive manufacturing that they more than make up for the added steps, cost and time.

What happens if 3D printing is able to manufacture many low-complexity goods directly near end-consumers?

  • Raw materials are acquired and purified, mostly in developing countries but also in fully developed ones - petroleum, bio-goods, aluminum, etc.
  • Raw materials are shipped to 3D printing facilities relatively near the end-consumer
  • Raw materials are turned into finished goods automatically using 3D printing
  • Finished goods are sent to end-consumer

3D printing not only allows for greater customization. It may also allow significant cost and time savings in the value chain by removing China from the entire chain. China's relatively low-cost workforce will still be necessary for high-labour manufacturing that is difficult to automate. I do not expect to see iPhones manufactured by 3D printing in my lifetime (although I may live to eat those words, and would not complain if I do so). However, China's position as critical juncture in most manufacturing lines may be supplanted, and, given the inefficiency, probably should be.

The geopolitical and macroeconomic ramifications are something to seriously consider.