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Once Booming, 3D Printing Companies are Now Contemplating Layoffs

November 20, 2015, 7:45 PM UTC
Courtesy: MakerBot

3D printing companies Stratasys and 3D Systems painted a bleak picture about their businesses earlier this month by reporting declining revenue in the latest quarter. It was a dramatic about-face compared to the buzz around the two giants from 2012 to 2014.

Even as projections about the overall 3D printing remain bright—it’s expected to be a $17 billion market by the end of this decade—the next year will likely be a rough one for Stratasys and 3D Systems. Both have promised to cut expenses while dealing with the serious challenges.

Potential customers are slowing their buying of 3D printing technology, a trend that Goldman Sachs analysts recently described in a note to investors as being “likely industry-wide more than company specific.” Meanwhile, makers of 3D printing technology are facing increased competition as newcomers enter the field, most notably HP Inc, which is expected to start shipping its own line of 3D printers next year.

“The two major companies, they wound up investing under the premise that growth was going to be fairly linear to the upside,” says Oppenheimer analyst Holden Lewis. “And when, at this point, that growth has stalled out, they find themselves largely overbuilt.”

Is it time to expect layoffs at 3D Systems and Stratasys? Judging from their recent third quarter calls with investors, the answer is yes.

“While we are continuing investments in new products … we are taking decisive steps to further reduce our cost structure and better prioritize our resources around near-term opportunities,” said David Styka, the chief financial and accounting officer at 3D Systems. And what are those steps? “These measures include additional facility consolidations and headcount reductions,” he added.

By mid-2016, 3D Systems plans to complete a phased closure of its facility in Andover, Mass., which is one part of the company’s effort to consolidate its manufacturing with its research and development. In an email to Fortune, a 3D Systems spokesman said the company has “offered to relocate many of our Andover-based employees to other facilities,” but how many of those workers will be laid off outright—the Andover facility employs 80 to 120—is unclear.

Stratasys CEO David Reis shared similar sentiments during his company’s earnings call, saying Stratasys would look to make adjustments in its “cost and operating structure.” Of course, Stratasys subsidiary MakerBot, the Brooklyn-based manufacturer of desktop 3D printers, has already weathered two rounds of layoffs since April.

Makers of 3D printing equipment and software are still having trouble getting customers to buy their products. Using the technology is still too complicated to reach the mainstream.

“It is becoming increasingly clear that the machines are somewhat difficult to use,” Lewis says. “That’s going to impact people’s ability to make an investment in these machines.”

Companies like General Electric have adopted 3D-printing technology in some of its businesses like GE Aviation, which produces airliner engine parts using additive technologies. General Electric’s new Leap engine incorporates a fuel nozzle produced entirely through 3D printing.

Where 3D printing can upend the manufacturing sector is on the factory floor by mass producing parts rather than merely the occasional prototype, one of the major uses today. That vision, however, has not yet panned out.

“There is a long-term future with these machines,” says Lewis. “There are things that you can do with additive manufacturing that you simply cannot do with subtractive manufacturing. And over time they are going to get adopted. It just requires an enormous amount of effort.”

For more about 3D printing, watch this Fortune video: