Table of contents

• Key takeaways
• Funding
• Partnerships
• Product updates
• M&A
• Regulations
• Appendices

Key takeaways

• Funding
  • Q2 volumes fell in AM, DT, and Mining Tech, but Smart Factory recovery continued: The sector saw overall funding fall 11.9% YoY to USD 550 million due to the absence of Mining Tech funding rounds and a decline in fundraising for DT (down ~86% YoY) and AM (down ~12% YoY).
  • Like Q1, Smart Factory saw an uptick (up ~124% YoY to ~USD 392 million), as companies attracted funding to develop AI- and GenAI-based solutions and expand workforces. The most notable Smart Factory round was Bright Machines, which raised USD 126 million for product developments and software portfolio expansion.   
• Partnerships 
  • Siemens continued to drive activity; considerable focus on metal-AM solutions, mobility adoption, and GenAI: Product partnerships accounted for ~60% of all Advanced Manufacturing partnerships in the quarter. Incumbents claimed ~54% of partnerships, with Siemens alone making up nearly a quarter. Industry-wise, AM led the way with ~46% of the partnerships; several startups entered partnerships to enhance metal-AM solutions, while others sought to expand their geographic presence.
  • Overall, we observed several trends continuing from the last quarter, including 1) continued mobility adoption of DTs driven by Siemens, 2) Microsoft entering partnerships to embed GenAI into DT solutions, and 3) the development of AI-based smart factory solutions. 
• Product updates
  • AM was the main driver of product updates from new printer and material launches; AI took center stage in Smart Factory updates: Product updates were largely driven by the AM industry (17 out of 20) during Q2. Notably, more than three-quarters of these were centered on the launch of new materials and printers (most relating to metal-AM), as studies have indicated that material availability, design accuracy, and higher costs per part were among the main challenges for adoption.
  • Embedding AI for advanced robotics and analytics into solutions continued to take center stage for Smart Factory product developments this quarter, as it did in the last. Meanwhile, the DT industry continued to see developments that boosted DT accessibility. This quarter, Invicara launched an open-source software to develop DT applications (similar to ScaleOut’s launch last December), while NVIDIA launched several new APIs during the last quarter. 
• M&As
  • DT and AM acquisitions accessed emerging technology, while Smart Factory activity prioritized horizontal integrations: We counted six major M&A activities in the Advanced Manufacturing space during the quarter, evenly split among the three hubs. Smart Factory activity was driven by Hitachi and Hexagon engaging in acquisitions to boost their existing smart factory solutions (horizontal integration).
  • Meanwhile, DT (which had no acquisitions in the past few quarters) activity was driven by companies in other industries (real estate and engineering solutions), leveraging DT technology through acquisitions. This was also seen in AM, where a metal parts manufacturer (Greene Group Industries) made an acquisition to incorporate metal-AM technology into its offering.
• Regulations
  • The US Government launched a USD 285 million support program for DT semiconductor research; military adoption of AM continued: Government funding for Advanced Manufacturing industries continued; most notably, the CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act’s USD 285 million funding program to research DT.
  • Meanwhile, several US government organizations also funded AM developments and project calls, including the Office of the Secretary of Defense Manufacturing Technology Program (OSD ManTech); the Office of the Under Secretary of Defense, Research, and Engineering Manufacturing Technology Office (OSD [R&E]); and The US National Science Foundation (NSF). Moreover, military adoption of AM continued, with 3YOURMIND partnering with Phillips Corporation to offer defense solutions. 
• Outlook 
  • AI and GenAI adoption is expected to continue, primarily in Smart Factory: Smart Factory has seen a steady inflow of AI-based developments through partnerships and product updates. Over the past year, we have seen AI commonly leveraged for analytics, advanced robotics, and defect detection. Meanwhile, GenAI has been used to help users develop automation code using natural languages, generate insights from operational data, create collaborative robots, and for predictive maintenance. Although the impact of GenAI has been somewhat subdued for the other two industries, we saw it used by to create a more immersive DT experience and for remote operations controls. Meanwhile, AM has also benefited from using GenAI to offer advanced design capabilities and greater user support. Accordingly, we are likely to see similar developments going forward, as companies partner and enhance their products to realize the full potential of AI.
  • Expansion in the metal-AM space: Metal usage in AM can be hindered by manufacturing speed, cost, and scalability. Over the past year, we have seen several companies engaging in product developments, partnerships, and M&As to address these concerns through new materials, printers, and manufacturing techniques. Given the importance of metals in several industries (steel is reportedly the second-most consumed raw material in the world), it is likely that this trend will continue and we see more metal-AM developments and capacity expansions.
  • AM demand in defense and funding from military organizations to continue: We saw several US government organizations investing in defense-based AM solutions consistently throughout the past year. For instance, institutions like OSD (R&E) and OSD ManTech have funded multiple AM projects over the past year. Moreover, disruptors such as JuggerBot 3D, 6k Additive, and Materion Corp have received funding from military-affiliated organizations. Meanwhile, companies such as 3YOURMIND, AML3D, NUBURU, and Velo3D entered partnerships and/or met compliance requirements to offer defense-related AM solutions. Continuing this trend should benefit players developing defense-based AM solutions by enabling them to access funding and expand their operations.   

Funding: Fall in funding despite continued growth in Smart Factory investments 

Analyst Take: Funding in Q2 2024 dropped 11.9% YoY to ~USD 550 million, continuing a trend of YoY funding declines in Advanced Manufacturing. However, investments in the Smart Factory space rose 124.3% YoY, following last quarter’s strong YoY funding recovery. Companies have commonly attracted funding during the quarter to invest in product developments (including AI- and GenAI-based solutions) and expand their workforce. Although Advanced Manufacturing funding was down on a YoY basis, quarterly funding topped the USD 500 million mark for the first time since Q3 2023.

Advanced Manufacturing Q2 2024 funding summary

• In Q2 2024, Advanced Manufacturing companies raised USD 549.6 million across 20 funding rounds. The total was 11.9% lower YoY, while the number of rounds dropped 39.4% YoY (USD 623.6 million across 33 rounds in Q2 2023). The decline was primarily due to the absence of funding rounds in the Mining Tech industry (which raised USD 201 million in Q2 2023) and lower funds raised by startups in the DT (down 86.4% YoY) and AM (down 12.0% YoY) industries. 

• Despite the downward trend in funding, Smart Factory saw upticks in investment, as companies attracted funding to invest in product developments and workforce expansions. Funds raised during Q2 2024 increased 124.3% YoY to USD 392.1 million, as the average deal size rose 57.0% YoY, owing to Bright Machines and Collaborative Robotics raising over USD 100 million per round during the quarter. The funding growth was supported by a higher number of funding rounds (10 in Q2 2024 vs. 7 in Q2 2023), as several companies also raised seed and early-stage funding. 

• The Advanced Manufacturing industry’s overall average deal sizes rose 45.4% YoY, driven by the average deal sizes in growth- and other-stage funding rounds rising 101.8 YoY, and their share of total funding rounds rising to ~35% in Q2 2024 (from ~30% in Q2 2023). 

Notable funding rounds and investors

• Apart from the Bright Machines and Collaborative Robotics rounds discussed above, Divergent’s USD 47 million debt financing (AM) was the largest funding round during the quarter. Notably, the top 10 funding rounds for the quarter had a combined value of ~USD 483 million (~88% of the funds raised). 

• Meanwhile, inHEART’s USD 11 millionround in May was the only funding round among DT players during the quarter. 

Partnerships: Product partnerships dominate Advanced Manufacturing; AM sector remains most prominent 

Analyst Take: Siemens was the most active among Advanced Manufacturing partnerships, accounting for ~24% (9) in Q2 2024. The AM industry accounted for ~46% of the partnerships, mostly centered on metal-AM-related activities (about a third of the AM partnerships), a trend we also saw in the last quarter. AM partnerships were driven by disruptors and included multiple partnerships from Materialise and Stratasys (similar to what we saw in Q3 2023). In the DT space, product partnerships were primarily driven by incumbents developing solutions for industrial automation, mainly for IoT and robotics solutions. This should help address the lack of internal robotics expertise, a common constraint for robotic adoption. Meanwhile, we observed several trends from the last quarter, including 1) continued mobility adoption of DTs driven by Siemens, 2) Microsoft entering partnerships to embed GenAI into DT solutions, and 3) the development of AI-based smart factory solutions.

• We observed 37 partnerships in Q2 2024, with incumbents like Siemens, Microsoft, and NVIDIA accounting for ~54%. AM saw the most partnerships (17), followed by DT (14) and Smart Factory (6). Meanwhile, product partnerships (22) were the most common, followed by customer partnerships (11) and sales partnerships (4).

Notable incumbent partnerships in Advanced Manufacturing during Q2

• AM partnerships were driven by metal-AM-related product partnerships; sales and customer partnerships used for geographic expansion 
  • Product partnerships accounted for most of the AM partnerships during the quarter, as disruptors predominantly drove activity (nearly 90% of the product updates, while Materialise and Stratasys entered multiple partnerships). Metal-AM-related developments remained prominent (accounting for about half of the product partnerships) primarily to
    1. Offer end-to-end metal-AM solutions by AM materials providers partnering with complementing AM solutions providers (such as equipment and software players: Materialise partnering with ArcelorMittal and 3D Systems partnering with Oerlikon)  
    2. Launch an AM robot work cell that enables large metal part manufacturing (Meltio partnering with Accufacture and FANUC America)
    3. Enhance metal-AM solutions by leveraging software and solutions from leading players such as Siemens (to enhance material development) and Materialise (to improve AM systems). 
  • A notable partnership was Materialise and nTop to develop a platform for complex, high-performance parts by enabling better data integration and sharing between design and manufacturing teams. While most product collaborations were industry-agonistic, we saw a few companies partnering to deliver industry-specific solutions. This includes SprintRay partnering with Ivoclar to offer AM solutions for the dental industry and Stratasys partnering with AM Craft to offer 3D-printed parts for the aviation sector. 
  • Partnerships were also leveraged to expand disruptors’ geographic footprint. This mainly included sales partnerships by US players to expand their reach in Europe (Xact Metal partnering with 3Dees and Meltio partnering with 3D Solutions). However, Nigerian company RusselSmith partnered with German AM software provider 3YOURMIND to use the latter’s part identification software (customer partnership) and offer AM solutions to the Nigerian upstream oil and gas industry.  

• DT partnerships were driven by developments to support industrial automation and mobility industry adoption
  • Incumbents led DT partnerships activity, comprising nearly all partnerships. They were primarily driven by product collaborations, with several developments supporting industrial automation and boosting the adoption of IoT and robotics. These included 
    1. NVIDIA partnering with Vention to offer AI-based DTs for robotics solutions development (such as generative designs for robot cells, co-pilot programming, simulations, and autonomous robots) in SMBs
    2. Simsol partnering with Siemens to offer DT solutions for factory automation simulation to help industrial users integrate robotics, control, motion, and safety
    3. Microsoft and Siemens reducing IoT fragmentation by converging the Digital Twin Definition Language (DTDL) with W3C’s (international standards organization) “Thing Description” standard. 
  • We also saw product collaborations developing solutions for healthcare (to develop DTs of the brain to detect and combat cognitive decline and diseases) and logistics (to digitize maritime operations) sectors. 
  • Meanwhile, Microsoft partnered with Hexagon to integrate GenAI into the latter’s manufacturing software. The companies aimed to offer DTs that leverage Azure Compute for simulations that draw on Hexagon’s data capture and information without complex integrations. 
  • Customer partnerships were primarily driven by Siemens’ solution in the mobility industry (i.e., automotives) for several purposes, including product design and development (Energica Motor Company), improving energy usage (Mercedes-Benz), and product testing (Emotors). 

• Incumbents collaborated to deliver AI-based solutions, driving Smart Factory partnerships
  • Incumbents drove smart factory activity, with several product partnerships aiming to develop AI-based solutions. This included
    1. Siemens and Schaeffler partnering to advance AI usage in manufacturing, including leveraging GenAI through Siemens Copilot to develop automation code using natural languages
    2. Microsoft partnering with Rockwell Automation to offer AI-assisted design, connected data, and production optimization solutions. Notably, the two companies collaborated last October to accelerate industrial automation design and development through GenAI. 
    3. NVIDIA partnering with Instrumental to offer Vision AI solutions for defect detection in manufacturing processes. 
  • Several partnerships targeted the electronics manufacturing industry. One example was the Hon Hai Technology Group (Foxconn) and Siemens signing an MoU to adopt smart factory technology. 

Product updates: AM dominates with several new printer and material launches

Analyst Take: Product updates were driven by the AM industry, as several players continued to launch new materials and printers. This was likely to address common constraints in AM adoption, which include a lack of material availability, design accuracy, and higher cost per part. Metal-AM remained a consistent theme in product updates, as evidenced by this quarter’s partnerships. Notably, FormLabs, which launched two materials each last January and September, remained active by launching a new printer this quarter. Embedding AI for advanced robotics and analytics into solutions continued to take center stage under Smart Factory product developments this quarter as it did in the last. Meanwhile, the DT industry continued to see developments that boosted DT accessibility. This quarter saw Invicara launching an open-source software to develop DT applications (similar to ScaleOut’s launch last December), while last quarter saw NVIDIA launching several new APIs. 

• We observed 20 new product updates in Q2 2024, driven by disruptors (around three-quarters), primarily in the AM industry (~85%). 
• AM product updates centered on launching new materials and printers
  • Over 80% of the AM product updates this quarter focused on the launch of new printers and materials. Of these, nearly two-thirds related to metal-AM developments, as companies primarily engaged in product developments to
    1. Offer printers that can develop intricate and finely detailed components (ADDiTEC) and materials to create more complex structures through better tensile strength and hardness (XJet) 
    2. Reduce the investment risk and cost of AM adoption through materials that reduce the cost of printing titanium alloys (Colibrium Additive) and printers that offer cost-effective entry packages and scalability by letting users change build area on demand (Additive Industries)  
    3. Provide solutions that can handle different sizes of metal components. This includes HP upgrading its HP Metal Jet S100 printer to handle larger parts and WAAM3D launching miniWAAM to develop small and medium-sized metal parts. 
    4. Rapidly produce high-density metal parts on-site through a mobile AM solution launched by SPEE3D.
  • Other AM materials and printer launches (non-metal-AM-focused) included solutions to
    1. Improve the speed, capacity, and efficiency of AM. This included 1) Azul 3D launching OCEAN, reportedly the world’s largest and most productive area-wide 3D-printing solution, to produce high-volume parts and 2) FormLabs launching a new printer that enables more parts to be built simultaneously compared with previous versions, thanks to its faster curing speeds and a 30% larger build volume 
    2. Improve the precision of 3D printing while lowering the footprint and initial investment needed (3D Systems launching the “EXT Titan Pellet” 3D printer)
    3. Enhance AM solutions for the healthcare industry: 1) Stratasys launching a 3D printer to develop anatomical models and 2) SprintRay launching a printer and two new resins for dental care (retainer and dental model development). 
  • In addition to new materials and printers, AM product developments were also directed at enabling AM adoption through better post-processing solutions (DyeMansion), enhanced support (AddUp), and end-product customization (Stratasys). 
• Embedding AI drove product updates in Smart Factory, while the launch of open-source DT software aided adoption
  • Smart Factory product updates were directed at embedding AI into solutions. This included ABB launching an advanced robotic automation platform integrating AI (among other emerging technologies) and EthonAI introducing an AI-powered analytics solution. 
  • Meanwhile, DT adoption should benefit from Invicara launching an open-source software to develop DT applications. This aims to speed up innovation, facilitate connections between DTs, and reduce the investment needed to establish DT solutions. 

M&As: Companies look to access emerging technologies and horizontal integration 

Analyst Take: We counted six major M&A activities in the Advanced Manufacturing space during the quarter, less than the eight in the last quarter, but more than the four in Q2 2023. Activity was evenly split between the three main hubs, with Smart Factory acquisitions driven by incumbents (Hitachi and Hexagon) looking to enhance existing smart factory solutions through horizontal integration. Meanwhile, DT (which had no M&As in the past few quarters) activity was driven by companies in other industries (such as real estate and engineering solutions) leveraging DT technology through acquisitions. This was also seen in AM, where a metal parts manufacturer (Greene Group Industries) engaged in an acquisition to incorporate metal-AM technology into its offering. In addition, we noted a disruptor (Vision Miner) leveraging an acquisition to expand its AM offering, a trend we witnessed during the last quarter.  

• Smart Factory incumbents engaged in horizontal integration through M&As
  • We observed two key M&As in Smart Factory this quarter, where incumbents chose to enhance their existing solutions through acquisitions. This included
    1. Hitachi acquiring robotics and automation solutions provider (for EUR 71.5 million [~USD 77 million]) to expand JR Automation Technologies, Hitachi’s advanced automation and digital technologies provider for robotic system integration
    2. Hexagon acquiring asset performance management software provider Itus Digital to complement Hexagon’s HxGN EAM platform (its enterprise asset management solution). 
• DT and AM acquisitions leveraged emerging technology to complement existing offerings
  • There were two notable acquisitions in the DT space, where incumbent businesses acquired disruptors to embed DT into their offerings. This included
    1. Real estate technology company CoStar Group announcing its intent to acquire Matterport (to be completed within 2024) for USD 2.1 billion; CoStar intends to use Matterport's DT technology to enhance its online real estate solutions through a more immersive property viewing experience
    2. Engineered products and solutions provider Curtiss-Wright (CW) acquiring WSC (for USD 34 million) to integrate WSC’s simulation platform with CW’s digital safety systems and advanced condition monitoring technology. 
• Similarly, metal parts manufacturer Greene Group Industries acquired Holo to incorporate the latter’s metal-AM technology into its offering. 
• Additionally, AM saw Vision Miner (a disruptor offering 3D printers, materials, and services) acquiring 3D printer manufacturer AddWise for USD 14 million to enhance the former’s in-house manufacturing capabilities and expand its global footprint.

Regulations: Government funding and military partnerships drive advanced manufacturing

Analyst Take: The US Government has continued to fund and encourage advanced manufacturing technology developments, with the CHIPS and Science Act’s USD 285 million funding program for research into DT being the most notable during this period. Meanwhile, America Makes (a national AM innovation institute) continued to launch project calls for AM, which led to repeated AM funding from organizations such as the OSD ManTech (as in Q4 2023) and the OSD (R&E; as in Q1 2024 and Q3 2023). Meanwhile, similar to Q4 2023 and Q3 2023, the US military continued to enter partnerships for AM adoption; for instance, 3YOURMIND partnered with Phillips Corporation to offer defense solutions (resembling AML3D’s partnership in April 2023. However, the export of military-related AM solutions continued to face restrictions. This quarter saw the UK impose restrictions akin to actions taken in the US in February 2023. 

• The US and UK Governments invested in DT development
  • The US Department of Commerce launched a USD 285 million funding program for research into DT for the semiconductor industry as part of the CHIPS and Science Act. This aims to improve the efficiency of semiconductor manufacturing, including advanced packaging, assembly, and testing, and supports the Biden Administration’s goal of onshoring at least 20% of leading-edge chip production by 2030.   
  • The UK Government announced plans to a GBP 37.6 million (~USD 48 million) Digital Twin Centre in Northern Ireland. The center is supported by Thales, Spirit AeroSystems, and Artemis Technologies and focuses on DT applications in the maritime, aerospace, and defense sectors. It aims to increase DT adoption by providing access to technology, reducing DT development costs, and creating a skilled workforce while fostering innovation by improving collaboration between industry, academia, and the public sector.  
• US government institutions funded initiatives to boost AM development
  • The US Government announced funding for two open project calls (through America Makes) for AM developments.
    1. IMPACT 2.0: Worth USD 6.6 million and funded by OSD ManTech, this focuses on leveraging metal-AM to improve lead time, productivity, and yield for casting and forging manufacturing operations. 
    2. Improve AM sustainability and operational practices: Worth USD 2.1 million and funded by the OSD (R&E), this project looks at two main areas: 1) industrialization of AM through cost-effective operating models and practices and 2) developing and demonstrating sustainable AM practices and products.  
  • The US NSF granted USD 1 million in funding to the Kentucky Science & Technology Corporation (KSTC; a science and tech nonprofit) to advance AM throughout Kentucky. Notably, the initiative has been authorized by the CHIPS and Science Act.   

• AM was adopted in military applications; however, export of military-related AM solutions faced restrictions
  • The US Army Combat Capabilities Development Command (DEVCOM) Ground Vehicle Systems Center (GVSC) partnered with 3YOURMIND and Phillips Corporation Federal Division for AM part identification. Through the partnership, 3YOURMIND’s software will identify parts that can potentially leverage AM to sustain legacy systems. 3YOURMIND will initially evaluate around 10,000 parts on technical feasibility, lead time, and cost. 
  • The UK Government introduced export controls on emerging tech (and related software), including metal 3D printers that use lasers, electron beams, or electric arcs (including WAAM printers) classified as “military” and “dual-use” goods (for military and civilian applications). Owing to the new regulations, companies would need to obtain a license to export these technologies outside the UK. 

Appendices

01. Notable partnerships across advanced manufacturing

02. Startups that raised external funding for the first time during the quarter