Advanced Manufacturing (1H 2023): Partnerships and product development stay strong despite funding dip

This Edge Insight focuses on the notable activity from January 2023 through June 2023 (1H 2023) relating to four SPEEDA Edge industries under the Advanced Manufacturing vertical: Smart Factory, Additive Manufacturing (AM), Digital Twin (DT), and Mining Tech.

Key takeaways

Partnerships

Heavy incumbent activity led by Siemens, ABB, and NVIDIA; Big Tech also active via AM product collaborations: Incumbents accounted for the majority (~60%) of partnerships in advanced manufacturing, with the exception of the Additive Manufacturing (AM) industry, where partnerships were less concentrated. The Digital Twin (DT) industry saw several customer and product partnerships between incumbents and global companies such as Daimler Truck, BMW, Helixx Industries, and Quest Global. Meanwhile, AM saw several product collaborations, including with Big Tech companies Microsoft and Alphabet.

Product updates

Launching improved products, embedding generative AI (GenAI), and combining advanced manufacturing tech at the forefront: Several companies launched new AM printers and materials, as the industry looks to address constraints of material availability and design accuracy, which plague AM adoption. Moreover, companies have also looked to embed GenAI into their products to improve customer experience and product development. Meanwhile, Litmus Automation launched a new solution that embeds DTs to improve its smart factory technology solutions.

M&A

AM acquisitions aimed at expanding operations drove M&A activity: We counted eight major transactions in 1H 2023, while the AM industry led M&A activity, as several players looked to expand operations via horizontal integrations. Unlike the partnerships, these transactions were driven by startups (such as Stratasys, 3D Systems, and Nexa3D), with incumbent Hexagon being the only player active in advanced manufacturing M&As during the half.

Funding

1H volumes fell significantly for Smart Factory and DT, but Mining Tech saw an uptick: The sector saw overall funds raised falling 48.3% YoY to USD 0.8 billion, primarily due to funds raised by startups in the Smart Factory industry falling ~79% YoY. Despite the downward trend, however, Mining Tech saw upticks in investment, with funds raised during 1H 2023 increasing 44.7% YoY to ~USD 353 million. This was driven by major funding rounds for material exploration provider KoBold and autonomous vehicle developer Oxa. Overall, the sector saw an increased share of seed rounds (~25% vs. ~18% 1H 2022), as early- and growth-stage funding rounds slowed.

Regulations

Export controls may hinder expansion; however, governments continue to offer incentives to drive advanced manufacturing adoption: Market expansion can be hampered by tightening regulations on exports and the need for export licenses for military-related products. This mainly impacts AM players. For instance, 3D Systems agreed to pay up to USD 27 million owing to allegations of exporting to China without obtaining necessary approvals. However, the US and UK Governments have also introduced programs to boost the adoption of advanced manufacturing tech, which could enhance market demand.

Outlook

Partnerships and product developments likely to continue: As incumbents have shown keen interest in investing in the DT and Smart Factory spaces and their solutions continue to be adopted, we should see more partnerships in these industries. Meanwhile, innovations are likely to continue in advanced manufacturing, as industry players look to address concerns hindering adoption and embed complementary tech such as GenAI.

Funding may continue to be strained, indicating potential M&A activity: As interest rates are expected to continue rising, access to funding may become more exclusive, favoring well-established and promising companies. This could make smaller companies attractive M&A targets and lead to more horizontal integrations.

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