»The Complexity of Manufacturing is really underestimated«
Interview: Thomas Masuch; Photos: Materialise / Thomas Masuch — 2020/02/08
In the past 30 years, Materialise has developed from a start-up at the University of Leuven into one of the largest companies in the AM world and has also been listed on the NASDAQ stock exchange since 2014. In its Software, Medical and Manufacturing divisions, the company employs 2,000 people at locations around the world. To mark its 30th anniversary (June 28, 2020), we visited founder and managing director Fried Vancraen at Materialise’s headquarters in Leuven to talk about current trends and challenges for the future.
Fried, when you look back on the beginning of Materialise, what was your motivation as a founder?
VANCRAEN: I dare say I am passionate about applying research. And it’s not only me: Materialise as a whole, thinks it’s not only about technology – it’s about the meaningful applications that can make this world a better and healthier place. That was our starting point in setting up Materialise, it was the mission declared at our opening session, and it’s still what we’re pursuing today. We started from applications in the healthcare industry and those that make people healthier in general. In a nutshell, that’s the philosophy behind Materialise, and it’s still our philosophy today.
If you split these 30 years into three decades, how would you title the first one?
VANCRAEN: It was about making it work. We worked on connecting a 3D printer to a CT scanner, for instance. We had to make it work on a somewhat consistent basis. It was a time of big inventions. It was when SLS, FDM, and metal sintering were invented. And let’s not forget: We started at a time when the internet was not present. We were lucky that we were housed on the university campus, so there was some kind of e-mail system. Still, the market study for setting up Materialise was done by fax machine – state-of-the-art technology at that time.
»And it’s not only me: Materialise as a whole, thinks it’s not only about technology – it’s about the meaningful applications that can make this world a better and healthier place.«
And your first machine was an SLS A-5 from 3D Systems?
VANCRAEN: Yes, we bought it for about €250,000 at that time. The frame is still in use in our production. Of course, the computers have changed, the lasers have changed – everything inside has been upgraded and changed.
What were the boldest decisions in the history of Materialise that led to the development of the company we know today?
VANCRAEN: One of the deliberate choices that we made – and it was a tough decision, but one we were very happy with afterwards – was to commercialize our software. At the beginning, the only thing that brought us money was the service industry. Our competitors were model-makers who could 3D print models and also do the finishing. When we started, we’d never made such a model. Our competitive edge was that we were more computer-minded. We were young people used to working with the first generation of PCs; we were better at translating CAD data into a 3D printable model. And then we decided to start selling our biggest competitive edge to our competitors. It was a painful decision, but one that made sense.
What was your motivation for taking this step?
VANCRAEN: We started selling our software in 1992 based on our belief that this would become a bigger opportunity, although it was a very small market at that time. However, we also believed that we would never be able to maintain this software development just for internal use in the long term. After all, the software has allowed us to become a global company and not just a local service provider. But it took quite a few years for the software to become a profitable business because it was in such a small market.
How did going public affect the development of Materialise?
VANCRAEN: Well, it definitely meant that we had to go through some major changes. But I want to say that it was not the first time. If you are a growing company, you have changes at many steps – when you grow from one to two people, from two to 10 people, from 10 to 20, and so on. Each time, you have to restructure yourself. When we debuted on the stock market, we were a company with 1,000 people, and now we have twice that many. That change is important, and going public was part of it. It means that today, yes, we have to be much more rigid in our financial processes, we need to be SOX-compliant, and that’s not always a pleasant thing. But it’s also leading to opportunities to structure things in a better way. We now have much more structured processes that are required for all the certified applications Materialise is bringing to market, including in the aerospace and medical sectors.
To stick to the stock market issue: In contrast to most other listed AM companies, Materialise’s share price has performed exceptionally well over the past five years, having risen by almost 100 percent. What is Materialise doing differently?
VANCRAEN: I’ve tried, together with our team, to set realistic expectations. During the last few years, we thought it was feasible to grow our company at a rate of 20% over five years. Up until now, if you take our starting position in 2014, we have been able to meet that growth rate. I think that’s what the stock market is appreciating. In other words, we’ve always been pushing back against the growth expectations. At the beginning it was a struggle, though, including with the bankers who wanted to bring us to the stock market.
So, they wanted to improve your story?
VANCRAEN: They wanted to, yes. They wanted to market our story with enormous growth rates like they have done with other public AM companies. Some investor relations stories predict an average annual growth rate of 50% over five years. This is unmanageable. Maybe these kinds of growth rates exist in the purest forms of internet business, where you have a model that is very scalable. If you do this in machine development or manufacturing, the same scalability isn’t possible.
Moving on to the current situation, which challenges do you face in your daily work, especially regarding the fact that the AM industry is making even more progress in the process of industrialization?
VANCRAEN: Something we have to accept is that in quite a lot of product lines, people keep thinking that the cost of a product is the pure, actual production cost. But they are totally wrong. You have all your planning, as well as the quality system around it that ensures you always produce the same medical device or aerospace part that works and doesn’t make the plane crash. That costs much more than the actual production.
That reminds me of the traditional automotive industry, where the suppliers of the big OEMs are really pushed to produce their parts for less every year.
VANCRAEN: There is absolutely a tendency toward this in 3D printing, and it’s accelerating. Even in the »old« manufacturing industry, a supplier had protection in the sense that it had the tools and know-how necessary to operate them. Since the supplier had the tools, the OEM was linked to it (at least for the entire series of a car), and it was not so easy to find a replacement. Now companies – and there are examples in the 3D-printing sectors themselves – offer one-year contracts. After that year, they put you back in a competitive situation. For the 3D printing industry, this is a dangerous evolution because it means the service providers are making less profit. And they have to be careful about how their machines will pay for themselves.
That sounds like a business that isn’t really enjoyable, at least for one side…
VANCRAEN: It’s really a challenge protecting our intellectual property and effort. At the same time, the reason why manufacturing is not going faster in 3D printing and not being adopted more is because it’s so difficult, and it takes so much investment to turn a prototype into a manufacturable product. It really does take months to fine-tune your machine, stabilize your process, make the documentation, and much more.
But how can you secure your expertise as a service supplier?
VANCRAEN: We believe it’s very important that industrial users of the systems are protected, and that they can put some process know-how into their software systems so their manufacturing cannot be copied by everybody. That is, I would say, the battle between the closed and open systems.
At the headquarters in Leuven, a large number of 3D-printed designer lamps can also be seen. Picture: Thomas Masuch
That sounds like the battle between Microsoft and Apple during the 1990s and the early 2000s…
VANCRAEN: To some extent, it is. The manufacturer of the machine controls all the parameter settings and standardizes everything. But that means if you, as a manufacturer, use that machine, and tomorrow your competitor wants to print the part, they can – so it’s a race for the bottom. Or you have a machine with which you can optimize the product yourself, and somebody else with the same machine will at least have to make the same effort in optimizing that production process. But if you use the closest system, you don’t need any specific knowledge anymore. You just need a machine and push the button.
How do you want to solve that?
VANCRAEN: Well, luckily, the good thing is that 3D printing is much more complicated than most people think, in that you really have to develop and invest in quite a lot of know-how in order to produce parts in a consistent way. Also, we try to automate to make things efficient. We don’t want to close our ecosystem, but we also recognize at Materialise that giving a lot of openness to users has a couple of pitfalls – for example, the risk that users will get lost in a huge number of variations or different parameters. We have to take more than just the printing conditions into account. During your print, you also determine the starting conditions of the post-processing, which is also a very important element to consider. So the complexity of the manufacturing is really underestimated, and many people run into problems because they believe the story that is told and sold – that you 3D-print an entire series like you would a prototype.
So, AM is not as mature in every field as the media, sales, and marketing departments tell us?
VANCRAEN: I think the experienced companies, like us and EOS and Concept Laser, and others have noticed that. But there are a lot of new entrants to the market that keep claiming they have solved the problem. They make very bold statements that seduce quite a lot of customers, but later, they can’t deliver on their promises. We are in a transition phase where there are indeed a lot of promising announcements, but they sound like they have already arrived.
In our experience, there are still a couple of miles to go before we get there. Having started with the history of the last three decades, the only thing missing is your outlook for the next 10 years.
VANCRAEN: Today, 3D printing still needs to conquer many more products and markets because the technology is still rather new and has to compete with the traditional technologies. And it’s not just the 3D-printed piece that is considered in the price; entire companies are built around the best processes for these traditional technologies, which makes them efficient. This means that a digital backbone is lacking. You have to create it, and it has to be paid for. These days, it is paid for by high-end applications, but I see that equilibrium shifting. Once you are in the right environment – like here at Materialise, where we have made the investment, established that digital backbone, and fine-tuned our production to it – it becomes cheaper to introduce your next project on that backbone. That is when many new applications become possible. It opens up a new world.
Fried, thanks you so much for talking to us
Fried Vancraen und Materialise
After working for a Belgian research center for four years, Fried Vancraen started Materialise in 1990 at the age of 28. The founding team also included his wife, Hilde Ingelaere, as well as Bart Van der Schueren (now CTO), Johan Pauwels (now vice president international), and Phillippe Schiettecatte, (currently one of the lead design engineers in additive manufacturing). Together with his wife, Fried Vancraen is still the main shareholder of Materialise. The Leuven-based company now employs around 2,000 people and has subsidiaries on five continents.