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TU Munich Advanced Topics in Finance and Accounting ”Innovation Management How a Swiss high-tech company works on a sustainable future“ Prof. Dr. Michael Suess December 04, 2023 Information on the exam Page 81 Lecture examination Question example Information on the exam - Multiple choice ( one or se...

TU Munich Advanced Topics in Finance and Accounting ”Innovation Management How a Swiss high-tech company works on a sustainable future“ Prof. Dr. Michael Suess December 04, 2023 Information on the exam Page 81 Lecture examination Question example Information on the exam - Multiple choice ( one or several right answers) What belongs to Oerlikon’s Additive Manufacturing portfolio? - 60 questions a Powder production - Location: Tbd. by TUM b Post processing c AM printing service d All of the above are part of the Oerlikon portfolio - Time: 60 Min. Contact for further questions x Niklas Kurzmann [email protected] Page 82 Goals of the lecture Page 2 ▪ I understand the decision-making process of how companies deal with innovative and new disruptive technologies. ▪ I understand how companies develop new business models based on disruptive technologies. ▪ I am familiar with the technical and economic challenges of creating innovations and bringing them to market. ▪ I understand future trends in manufacturing and metal AM, the relevant market situation and technology trends. ▪ I gain detailed insights into real world applications of additive manufacturing and the economical principles. Oerlikon at a Glance Strong performance... CHF 2.9bn Sales... with two Market-Leading Divisions Surface Solutions Division A market leader with a broad portfolio of advanced materials, surface technologies and additive manufacturing solutions. Sales 2022 by Division 1 384 1 525 48% 52% 2 909 In CHF million 12 074 Employees (FTE) Surface Solutions 205 Sites globally Polymer Processing Solutions Division Sales 2022 by Region A leading provider of comprehensive polymer processing plant solutions and high-precision flow control component equipment. 507 808 17% 28% 2 909 CHF 113m R&D investments In CHF million 1 595 55% Europe Asia-Pacific Figures f rom December 31, 2022 Page 6 File Name Global Presence 205 locations in 37 countries 70 production and R&D sites 148 sales and service sites 45 locations in Americas 92 locations in Europe 68 locations in Asia Pacific Figures f rom December 31, 2022 Page 7 File Name There is Not a Single Day Without Oerlikon ”The car you drive, the next plane you take or the clothes you wear will likely have Oerlikon solutions inside.” - Michael Süss - … to outer space From the bottom of the ocean … Page 8 Long-standing Track Record of Innovation Leadership Surface Solutions with over 80 years experience ~4% of sales invested in R&D Polymer Processing Solutions with 100 years experience Page 9 >90 patents filed annually Innovation Management How a Swiss high-tech company works on a sustainable future Page 10 Polymer Processing Solutions Division – Key Metrics Sales by markets CHF 1.5 bn Sales 4 329 Employees (FTE) 36 Locations CHF 40 m Nonwoven & Plant Engineering 13% Industrial & Interiors 11% Flow Control 14% Filament 62% Sales by region Americas 12% Europe 13% R&D expenditure Asia/Pacific 75% Figures f rom December 31, 2022 Page 11 File Name Plastics are a global success story – Production ramped up from 1.5 Mio. t in 1950 to ~367 Mio. t in 2020 ▪ Continuous growth for more than 60 years ▪ Global plastics production fell by 0.3 % in 2020 as compared to 2019 due to the ongoing COVID -19 pandemic in Mio. t Europe 400 2019 2020 57.9 Million Tons 55 Million Tons World 2019: ~368 350 2015: ~322 300 2011: ~280 2009: 250 250 2019 2020 200 368 Million Tons 367 Million Tons 150 Includes thermoplastics, polyurethanes, thermosets, elastomers, adhesives, coatings and sealants and PP-fibers. Not included PET-, PA- and Polyacryl-fibers. An additional 65 Million Tons of polymer fibers. 432 Million Tons of plastics including polymer fibers. 2020: ~367 2002: 200 1989: 100 100 1977: 50 50 1950: 1.5 0 1950 1960 1970 1980 1990 2000 2010 2020 PlasticsEurope Market Research Group (PEMRG) and Conversio Market & Strategy GmbH https://www.republicworld.com/world-news/global-ev ent-news/w orldwide-pl astics-producti on-falls-in-2020-due-to-covi d-19-report.html Page 12 Oerlikon Manmade Fiber Solutions More than 35 Million tons of manmade fibers are produced on Oerlikon solutions per year. This is representing a Marketshare of 50% ! Page 13 MEDICAL AND FILTERS INFRASTRUCTURE APPAREL AND FUNCTIONAL WEAR FLOORING TRANSPORTATION PACKAGING Hotrunner technology for the injection molding industry Im Glas Injection molding process: Plastic raw material Hotrunner Mold Hotrunner Molten plastic Automotive Consumer Goods Source: https://commons.wikimedia.org/wiki/File:Hot_runner_x-section_open.png, November 2022 Page 14 Surface Solutions Division – Key Metrics ! Sales by markets CHF 1.4 bn Sales Tooling 28% 7 519 Employees (FTE) 167 Locations Autom otive 28% Aviation 13% General Industry 26% Energy 5% Sales by region Am ericas 24% Asia/Pacific 32% CHF 73 m R&D investments Europe 44% Figures f rom December 31, 2022 Page 15 File Name Surface Solutions Division - Integrated High-Tech Offerings ! Coating Services Coating Materials Coating Equipment Components Additive Manufacturing Coating for Tools and Molds Lightweight Mobility & Thermal Insulation Systems Materials & Equipment for Turbine Blades Printed Support Structure for Satellite Radio Antenna Luxury Goods > 30k active customers including industry leaders Page 16 File Name ! OSS – Share of sales Coating Services Additive Manufacturing Key sector experience from powders through Post-processing Coating facilities for PVD, PACVD, CVD, Thermal Spray coating including cutting edge R&D Oerlikon Surface Solutions Materials Coating materials produced using a wide range of manufacturing techniques Page 17 Innovation: When Innovation Meets Passion: Coating Solutions & Technologies Equipment coating equipment for thin and medium thickness coatings including after sales service Improved Performance With Sustainable Solutions 2 – 4% 160x 2.5x Fuel tool life reduced consumption Extension 5% Efficiency Efficiency Reduced fuel consumption increase increase 40% Energy saving completely new Design options Page 18 Oerlikon Corporate Presentation 50% Cost savings through reconditioning Innovation driver sustainability 100% of R&D in products to cover ESG criteria in 2030 Other 27% 2030 2022 73% Sustainable R&D 100% Sustainable R&D Oerlikon definition of sustainable innovation broadly follows: ▪ Same or better performance than the industry standard, predecessor product or best in class competitor product … ▪ … in terms of dimensions: energy consumption, water consumption, social impact, waste emissions, raw material impact, service time ▪ … taking into account principle: “better in one dimension without a negative impact on another” Page 19 On what basis do managers make decisions about Innovation and Strategic Management? Part 1 Page 20 Theory introduction – Innovation definition Part 1.1 Page 21 Introduction to Innovation and Strategic Management Overview Innovation Approaches to innovation ”Innovation" is derived from the Latin terms: ▪ novus ("new" or "new-like") Companies operate under the view that innovations are created by staff within the company innovatio ("something newly created") Different definitions “Innovations are qualitatively new products or processes that differ significantly […] from what existed before.” (Hauschildt) “A new way of doing things that is commercialized.” (Porter) “The adoption of ideas that are new to the adoption organization.” (Afuah) Source: Müller-Prothmann/Dörr (2009), pp. 7 – 12. Page 22 Closed Innovation model E.g.: Apple (because of its highly integrated and coordinated product range the company is more inclined towards closed innovation) ▪ Open Innovation model Companies source external knowledge for their innovation management strategies by making active and strategic use of the environment around them E.g.: Crowdsourcing (a wide range of customers, users, inventors and innovative people around the globe can be involved in the innovation process) ! Introduction to Innovation and Strategic Management Overview Innovation Management Innovation Controlling Innovation Management is the systematic promotion of innovation in organizations. It includes tasks of development and implementation of the innovation strategy, organization and role allocation in innovation management and the development of innovations. Innovation Controlling is a regularly and systematically searching for causes that disrupt innovation efforts. Furthermore it is the support of management in the planning and control of innovation projects through analysis, information supply and coordination of individual activities for ensuring both the efficiency and effectiveness of innovation. Source: Müller-Prothmann/Dörr (2009), pp. 7 – 12. Page 23 ≠ Introduction to Innovation and Strategic Management Types of Innovation Product vs. Process Innovation ▪ Product Innovation: Innovations in the way a new product is developed and marketed, such as its goods or services ▪ Process Innovation: Innovations in the way an organization conducts its business, such as in techniques of producing or marketing goods or services Note: Product innovation can enable process innovation and vice versa Source: Schilling (2013), pp. 46– 49. Page 24 Example ▪ Creates a new distribution service = Product Innovation ▪ Fully automated sorting of parcels in the distribution centres = Process Innovation Introduction to Innovation and Strategic Management Types of Innovation Radical vs. Incremental Innovation ▪ Radical Innovation: Innovations in the way of developing completely new systems, products or services that did not exist before ▪ Incremental Innovation: Innovations in the way of minor changes or adjustments to existing practices Note: The radicalness of an innovation is relative; it may change over time with respect to different observers Source: Schilling (2013), pp. 46– 49. Page 25 Example ▪ Invention of the iPhone = Radical Innovation ▪ Expansion of Storage = Incremental Innovation Innovation Strategy - ! Influence of innovations on company valuation Influencing factors of innovations on the company value ▪ Research & Development headcount/ budget as a percentage of sales, result compared to competing companies ▪ Production of intellectual property (e.g., patents, trade secrets, etc.) ▪ Number of active projects ▪ Number of ideas submitted by employees ▪ Percentage of sales from products introduced in the past X year(s) Example: Tesla Tesla Volkswagen ▪ Market Value (12/2022): 606 Billion $ ▪ Market Value (12/2022): 87 Billion $ ▪ Cars sold in 2021: < 1 Million ▪ Cars sold in 2021: 8.6 million ▪ Revenue 2021: 53 Billion $ ▪ Revenue 2021: 280 Billion $ McKinsey: 84 % of executives say that their future success is mainly dependent on innovation. Sources: https://companiesmarketcap.c om/autom akers/largest-autom akers-by-market-cap/, CompaniesMarketCap / Dec. 2022 https://www.statista.com/statistics/272120/rev enue- of-tesla/, Statista / Dec. 2022 https://www.volkswagenag.com/en/news/2022/03/volkswagen-group-ac hiev es-solid-results-in-2021-and-drives-forwa.html#, VWAG, Mar. 2022 Page 26 → How can this be justified? Theory introduction – How do managers cope with new technologies? Part 1.1 Page 27 Different dimensions of Innovation Management A multi-layered construct Innovation Management Innovation Strategy Development of the innovation strategy Making strategic M&A decisions Planning of innovation activities, for example with an innovation roadmap Innovation Development ▪ Following the process of transforming an idea into a successful innovation ▪ Managing ideas from inside and outside the company Page 28 Innovation Organization ▪ Managing the portfolio of innovations within a company ▪ Ensuring a smooth implementation of new innovations in a company Different dimensions of Innovation Management A multi-layered construct Innovation Management Innovation Strategy Development of the innovation strategy Making strategic M&A decisions Planning of innovation activities, for example with an innovation roadmap Innovation Development ▪ Following the process of transforming an idea into a successful innovation ▪ Managing ideas from inside and outside the company Innovation Organization ▪ Managing the portfolio of innovations within a company ▪ Ensuring a smooth implementation of new innovations in a company Innovation Strategy Timing of Market Entry Pioneer Strategy vs. Follow-up Strategy ▪ Pioneer Strategy Innovations are effectively enforced on the market ahead of other companies resulting in a temporary quasi-monopoly. E.g.: Polaroid ▪ Follow-up Strategy Direct technological succession of a pioneer, if possible combined with an application-oriented further development of the innovation already introduced to the market. E.g.: Kodak Source: Schilling (2013), pp. 89 – 99. Page 30 (Science) Push vs. (Market) Pull Strategy ▪ (Science/Technology) Push Strategy The drive for innovation comes from the development of new knowledge or new technologies. E.g.: iPad (Market) Pull Strategy The drive for innovation comes from the market; the innovation is initiated by the needs of the customers, which can be satisfied by a new product. E.g.: Bread slicing machine Innovation Strategy - How do managers identify changes in new technologies? S - Curve Concept Maturity Performance/ Cumulative patent applications by Richard N. Foster Saturation Growth R&D/ Emerging New Technology Pacing Technology Key Technology Base Technology Cumulative R&D/ Time The S-Curve Concept is an instrument within the framework of the external company analysis of strategic innovation management, pointing out, in particular, the need for tailored strategic decisions based on the current state of technological development. Source: Schilling (2013), p. 50. Page 31 Innovation Strategy - How do managers identify changes in new technologies? General Aspects Structure ▪ S - shape of the curve refers to the relationship between the performance of technology and the associated research and development effort (time or sales volume are also possible) ▪ Gradient of the curve: describes the gain in performance due to additional research and development work, i.e. the R&D productivity ▪ It serves as an assessment support of how the technology can still develop ▪ Assumption: Technology always reaches technical performance limits regarding its potential for further development ▪ Four stages of S-Curve: (not all undergo all phases) R&D/Emerging – Growth – Maturity - Saturation Goal Set Identifies possible "technological discontinuities" that can contribute significantly to eroding market share if companies switch to a more advantageous technology too late. Source: Schilling (2013), pp. 50 - 55. Page 32 Innovation Strategy Performance S-Curve model: Spare Part Distribution @ UPS >1,000 Warehouses worldwide Traditional Spare Part Distribution Manufacturing game changer: USP launches 3D-printing network UPS Supply Chain Center in Louisville, Kentucky: 1,000 3D printers to produce on-demand prototypes and product parts for business customers On demand 3D printing Spare Parts 1907 1980 Source: https://news.sap.com/germany /2016/05/warum-ups-glaubt-dass-3d-drucker-die-logistikkette-v erandern-werden/. Page 34 2015 Time Innovation Strategy - ! Alternative S-Curve Consideration (including cash flow) Economic performance, cash flow consideration Significant relevance for the approval or non-approval of the innovation The curves can vary extremely. The prediction of these curves is part of innovation management Cumulative R&D/ Time Seh Ergener Break Er en Page 35 Innovation Strategy - How do managers identify changes in new technologies? Gartner Hype Cycle Garnter Hype Cycle Peak of inflated expectations Expectations by Gartner, Inc The Hype Cycle is a graphical curve model to represent the maturity, adoption, and social application of specific technologies. Plateau of Productivity Slope of Enlightenment Innovation Trigger Source: Gartner Hy pe Cy cle Page 36 Trough of Disillusionment Time Innovation Strategy - How do managers identify changes in new technologies? I. Innovation Trigger A potential technology breakthrough starts. Early proofof-concept stories and media interest trigger significant publicity. Often no usable products exist, and commercial viability is unproven. II. Peak of inflated expectation Early publicity produces a number of success stories — often accompanied by scores of failures. Some companies take action; many do not. IV. Slope of Enlightenment More instances of how the technology can benefit the enterprise start to crystallize and become more widely understood. Secondand third-generation products appear from technology providers. More enterprises fund pilots; conservative companies remain cautious. Source: Gartner Hy pe Cy cle Page 37 III. Trough of Disillusionment Interest wanes as experiments and implementations fail to deliver. Producers of the technology shake out or fail. Investment continues only if the surviving providers improve their products to the satisfaction of early adopters. V. Plateau of Productivity Mainstream adoption starts to take off. Criteria for assessing provider viability are more clearly defined. The technology's broad market applicability and relevance are clearly paying off. If the technology has more than a niche market then it will continue to grow. Innovation Strategy - Process of identifying strategic changes Porter‘s five forces by Michael Porter Supplier Power Threat of New Entry Competitive Rivalry Threat of Substitution Buyer Power The Porter's five-force model can be used to analyze the competitive market dynamics of an industry. Source: Schilling (2013), pp. 110 - 121. Page 38 Innovation Strategy - Process of identifying strategic changes General Aspects ▪ The five forces are the key sources of competitive pressure within an industry Structure ▪ Competitive Rivalry: Looks at the number and strength of a company’s competitors ▪ Threat of Substitution: Refers to products/services that can perform the same function as the product in the industry under consideration ▪ Threat of new Entry: Limiting of companies in the market by the existence of entry barriers and thus influencing the rivalry between existing competitors ▪ Supplier Power: Determined by how easy it is for a company’s suppliers to increase their prices ▪ Buyer Power: Determined by how easy it is for buyers to drive a company’s prices down Source: Schilling (2013), pp. 110 - 121. Page 39 Goal Set Guides a business strategy to increase competitive advantage and indicates what strategic changes need to be made to deliver long-term profit. Aircraft OEMs Innovation Strategy - Porters five forces in the aerospace industry Threat of New Entry: Low ▪ ▪ Facilities and equipment required to manage the designing, testing and production require a lot of investment All the major players in the industry have gained competitiveness through experience and obtaining important long-term contracts → The barriers to entry are significantly high Supplier Power: Medium ▪ Aircraft OEMs are dependent on the supply of material by first and second tier suppliers. Suppliers can influence the quality and cost of spare parts ▪ Power Due Supplier to the limited number of OEMs and the willingness to conclude longterm contracts with them, the supplier power is not extremely high Threat of Substitution: Low Although train journeys have become more comfortable and faster and the environmental debate has become more intense in people's minds, the demand for airplanes from the airlines has not diminished ▪ Fast overseas travel remains the unique selling point of aviation. There is only little threat of substitution Competitive Rivalry Buyer Power: Medium ▪ ▪ Few customers, but limited bargaining power dueBuyer to overall increase in demand, surpassing the production capabilitiesPower of aircraft OEMs Source: https://www.porteranaly sis.com/porters-f ive-forces-of-aerospace-industry /, https://exaltedvalue.com/index.php/1531-2/ Page 40 = High = Medium = Low Innovation Strategy - Porters five forces in the aerospace industry Competitive Rivalry: Medium ▪ Airbus and Boeing dominate the market as a duopoly ▪ The few large scale manufacturers compete for gaining longterm supply contracts with the airline, creating a moderate level of competitive rivalry among the OEMs ▪ This competition does take toll on the overall long-term profitability of the organization In order to comply with Airbus new A320 Boeing took risks when introducing the B737 Max Page 41 Innovation Strategy - Decision processes in the M&A sector Mergers, acquisitions and strategic alliances Do we have the resources and competences? by Gomes, Weber, Brown & Tarba No Yes Could those R&D become of critical importance to or future competitive advantage? Could someone else do it better, cheaper and faster? Yes No Internal development Yes Yes Is there enough time and potential capability to develop them internally? No No External development (M&A or alliances) This model helps determining whether a company should pursue external M&A activities or internal development. Source: Gomes, Weber, Brown, Tarba (2010). Page 42 Different dimensions of Innovation Management A multi-layered construct Innovation Management Innovation Strategy Development of the innovation strategy Making strategic M&A decisions Planning of innovation activities, for example with an innovation roadmap Innovation Development ▪ Following the process of transforming an idea into a successful innovation ▪ Managing ideas from inside and outside the company Innovation Organization ▪ Managing the portfolio of innovations within a company ▪ Ensuring a smooth implementation of new innovations in a company Innovation Organization Evaluation of market potential Total addressable market (TAM) Total addressable market Serviceable available market Overall market demand or revenue potential for a product or service Example: All tea drinkers in the world Serviceable available market (SAM) Portion of TAM that can be served by your company’s product or service Serviceable obtainable market Example: All tea drinkers in Germany Serviceable obtainable market (SOM) Market share of SAM that can realistically be obtained, given the competition Example: 15% of all tea drinkers in Germany Page 44 Innovation Organization Portfolio vs. Program vs. Project Management Source: Pratt (2023) Page 45 Innovation Organization Ansoff Innovation Matrix The ideal ratio for resource allocation differs for different companies Source: Nagji, B., & Tuff, G. (2012) Page 46 Innovation Organization ! Paired Comparison 1. List project ideas 2. 1:1 comparison of each project 3. Prioritize most relevant projects A paired comparison is a good tool for a simple evaluation of competing ideas or projects. Page 47 Source: Schnurr (2023) – Template available under https://www.sixsigmablackbelt.de/ressourcen/ Innovation Organization Weighted Scoring Model 1. Define criteria 2. Weigh criteria 3. Rate each project A weighted scoring model is a good tool to compare projects and programs, where the weighting of different criteria is essential. Page 48 Source: Schnurr (2023) – Template available under https://www.sixsigmablackbelt.de/ressourcen/ Best practice in managing an innovation portfolio DO Foster an open discussion on new ideas Ignore ideas without evaluation Align innovation portfolio with corporate strategy Waste resources on unimportant projects Validate the market potential of your innovations Evaluate projects based on sunk costs Frequently review your innovation portfolio Involve only R&D for Idea Generation Track and measure project progress Ignore changes in customer demand Map out and understand project dependencies Page 49 DON’T Different dimensions of Innovation Management Innovation Development Innovation Management Innovation Strategy Development of the innovation strategy Making strategic M&A decisions Planning of innovation activities, for example with an innovation roadmap Innovation Development ▪ Following the process of transforming an idea into a successful innovation ▪ Managing ideas from inside and outside the company Page 50 Innovation Organization ▪ Portfolio management ▪ Implementation management Innovation Development - How to determine customer needs and find suitable solutions? The House of Quality by Yōji Akao Relationships Among Responses Supplier Measurable “Responses” Objective Customer Requirements * = Requirements Characterization and Verification * Relationship Matrix Competitive Analysis Targets & Technical Analysis Importance The House of Quality is a quality method for determining customer needs and for immediate transformation and implementation into the necessary (technical) solutions. Source: Schilling (2013), pp. 245 – 247. Page 51 Innovation Development - How to determine customer needs and find suitable solutions? Structure 1 Determination of customer requirements 7 Evaluation of the requirements-solution relationship: determination of the solution with the highest degree of fulfilment 2 Prioritization of individual requirements 6 Multiplying of the customer importance rating of a feature by its relationship to an engineering attribute 3 Identification of the engineering attributes that drive the performance of the product 5 Formation of a correlation matrix, in which all possible solutions will be linked to the requirements 4 Entering of the correlations between the engineering attributes to assess the degree to which one characteristic may positively or negatively affect another Goal Set 8 Determination of the target values for each of the design requirements Source: Schilling (2013), pp. 245 – 247. Page 52 9 P Creation of Product design based on those design targets Allows comprehensive ideas and project evaluation to be realized as well as the conception, creation and sale of products and services that the customer wants. Innovation Development - How to efficiently manage the innovation development process? The Stage Gate Model - by Robert G. Cooper Discovery: Idea Generation Gate 1: Idea Screen Stage 1: Scoping Brief, preliminary scoping of the project, utilizing easy-to-obtain information that enables narrowing the list of potential projects Gate 2: Does idea justify more research? Stage 2: Building the business case Gate 3: Is the business case sound? Stage 3: Development More detailed research (both market and technical) to build business case: product definition, project justification, and plan for project Detailed product design, development, and testing, Plans are also developed for production and launch Gate 4: Should project be moved to external testing? Stage 4: Testing & Validation Testing of proposed new product and its production and marketing; may include production trials and trial selling Gate 5: Is product ready for commercial launch? Stage 5: Launch Post-Launch Review Source: Schilling (2013), pp. 243 – 244. Page 53 Full production, marketing and selling commences How did we do compared to projects? What did we learn? Innovation Development - How to efficiently manage the innovation development process? General Aspects Structure ▪ Stages and gates break the innovation process into defined stages, each consisting of a set of defined, parallel and cross-functional activities ▪ Gates = entrance to each stage, serve as quality-control and Go/Kill checkpoints to help filter out bad projects Companies using the ”Stage-Gate-Model” Example Checkpoint Question: Is there a market for the product? ▪ Each gate has three components: deliverables (results of the previous stage), criteria (questions or metrics used to make the go/kill decision) and outputs (results of the gate review process, include decisions and action plans) ▪ Stages = a cross-functional team undertakes parallel activities designed to drive down the risk of a development project; they gather vital technical, market, and financial information to use in the decision to advance the project to the next gate Goal Set Allocates resources efficiently on most promising projects and minimizes risks. Source: Schilling (2013), pp. 243 – 244. Page 54 Innovation Organization – Use Case Oerlikon S3P Part 1.2 Page 55 Different dimensions of Innovation Management A multi-layered construct Innovation Management Innovation Strategy Development of the innovation strategy Making strategic M&A decisions Planning of innovation activities, for example with an innovation roadmap Innovation Development ▪ Following the process of transforming an idea into a successful innovation ▪ Managing ideas from inside and outside the company Innovation Organization ▪ Managing the portfolio of innovations within a company ▪ Ensuring a smooth implementation of new innovations in a company How to gain market share with new coating technology and equipment Market share, 2021 In % (OSS Market Share) 100% 3 3 Insourced Others 80% Insourced Insourced 3 60% Ionbond Tocalo Eifeler Cemecon 40% Cemecon Ionbond TOYO Hauzer Bernex (Hauzer) Kobleco Eifeler HOT 2 3 OSS Others Nanofilm Ionbond HOT HEF TOYO Yuken 2 OSS 2 Page 57 1 TF EQ Sen Fung Hanomag Kern Liebers 3 OSS 0% ▪ New coating technology and equipment helps to gain market share in three ways: 1▪ Direct: Selling more equipment (TF EQ) to the external market 2▪ Direct: Sell more in the job coating market (Cutting Tools, Forming Tools and PrC) with competitive coatings 3▪ Indirect: Customers which buy our equipment (Insourced) are bond to our technology and will request our job coating service in other locations or for reconditioning Richter Precision HEF Others* Cemecon Eifeler Platit In many application fields Oerlikon already today the biggest player Others* Others 20% Insourced Insourced ▪ Cutting Tools Forming Tools Innov ation: When Innov ation Meets Passion: Coating Solutions & Technologies OSS PrC 3 Ionbond Bodycote HEF HOT OSS TF Auto *Other tool competitors include the players with sales below 10mCHF revenue in the market Process to define and review NPV and Payback ▪ Definition of Top Line Top Down by Global product management / business Development ▪ Definition of Top Line Bottom Up by local Head of Sales ▪ Alignment on a common top line goal ▪ Definition of engineering and development costs as well as potential capex and & timeline until market launch of the finale product Def. of development costs Top Line ramp up Page 58 Alignment between global function / local head of sales and local finance on profitability goals Based on total sum and strategic impact different management levels up to division CEO and CEO have to approve Management Approval Process Utilize Oerlikon NPV sheet Profitability CM1 & GP ▪ ▪ ▪ Enter Data into Oerlikon standard sheet over 10 year: Top Line, CM 1, GP, Capex and depreciation period, project costs, potential efficiency gains Innov ation: When Innov ation Meets Passion: Coating Solutions & Technologies Yearly Management review Development & Product Launch ▪ Review assumptions vs reality and define action items if required Coatings – thinner than a hair Page 60 0.1mm 0.005mm Human hair Thin-film coatings from Oerlikon Balzers Coating solutions and serv ices f or cutting tools PVD (=Physical Vapour Deposition) Technology Benefits of arc technology Arc evaporation + ✓ High ionization of the deposition flux (not as smooth = droplets) ✓ Dense coatings ✓ Good adhesion Benefits of sputtering technology Magnetron sputtering + ✓ Smooth coatings (deposition with virtually no droplets) ✓ Low density, lower hardness ✓ Moderate adhesion Page 61 Scalable pulsed power plasma Technology Very smooth coatings are required for micro-drilling Ø 1-3 mm 2000x S3p® based 2000x Arc evaporation post-treated 2000x Arc evaporation Page 62 Source: Oerlikon Balzers S3P – Perfect for micro-machining Example iPhone Production Ø 2 mm Page 63 Pictures: https://y outu.be/6_xu5ycqTnM?si=pbLIf Un2wY 2WPy pD and: www.apple.com Innovative coating based on S3P for dental prostheses and implants Page 64 Pictures: Oerlikon Balzers and: https://www.quintessence-publishing.com/deu/de/news/zahntechnik/-/f raeswerkzeuge-f uer-zirkonoxidbearbeitung-im-test Innovation Development – Use Case Hyperganic Part 1.3 Page 65 Different dimensions of Innovation Management Innovation Development Innovation Management Innovation Strategy Development of the innovation strategy Making strategic M&A decisions Planning of innovation activities, for example with an innovation roadmap Innovation Development ▪ Following the process of transforming an idea into a successful innovation ▪ Managing ideas from inside and outside the company Page 66 Innovation Organization ▪ Portfolio management ▪ Implementation management Innovation Organization Use Case: Hyperganic Hyperganic Hyperganic is a Munich-based start-up founded in 2015 with the mission to enable their customers to build objects as complex as nature; automate these design and engineering processes; ensure that the resulting objects can be easily printed and thus realize the full potential of today's 3D printing machines. Internal Obstacle: Design “Engineers and designers stick with what has worked in the past and try avoid reinventing the wheel. This is an enormous roadblock to innovation.” – Lin Kayser, CEO of Hyperganic, 2019 “Today's software tools are designed for traditional manufacturing - a world where simplicity is a priority.” – Markus Finke, Director of Business Development of Hyperganic, 2019 Source: Hy perganic Page 68 Solution: Usage of artificial intelligence Geometries and shapes are not defined in CAD models by engineers or designers, but are created by artificial intelligence using algorithms. The designers create the algorithms by means of the necessary core characteristics. The algorithm can then depending on the input, create lots of different objects and explore a large design space. Innovation Organization Use Case: Hyperganic - The software: Hyperganic works with their own geometry kernel based on a powerful voxel engine that works at printer resolution or higher. The voxels provide a safe and reliable way to automate design processes and control printing parameters at the finest level. Since printing requirements are part of the input data, it can be ensured that the objects created are always printable. The Process: Example of a heat exchanger Visualization of an automated workflow for the generation of objects for mass customization Heat Map, Heat Exchanger Geometry Source: Hy perganic Page 69 Modulated Pattern Heat Exchanger Innovation Organization - Use Case: Hyperganic – Rocket Engine Use Case: Rocket Engine Model Components: A combustion chamber in which fuel and oxidant are burned and surface channels through which the fuel circulates to cool the chamber and protect it from overheating. Problem: Cooling ducts are typically welded to the combustion chamber, which can lead to failures and explosions due to wear. In traditional designing, these components are developed separately. Solution: The prototype engine is printed as one part. It is a light weight design and has an extremely effective cooling system, which gives the rocket a very high power output. The light weight is due to the integration of a porous geometry to the outside of the motor. Inside, the structure remained strong and dense. The Process: The core characteristics of the rocket engine initially defined by the developers (including shape of the combustion chamber and required cooling capacity) are expressed in formulas instead of CAD files. The Hyperganic algorithm reads information from an Excel spreadsheet and uses the data to generate the geometry of the entire piece from bottom to top. Source: Hy perganic Page 70 Rocket Engine Prototype (Nickel alloy, Inconel 718) Innovation Strategy – Shaping the Oerlikons Portfolio from 2015 today Part 1.4 Page 72 Different dimensions of Innovation Management A multi-layered construct Innovation Management Innovation Strategy Development of the innovation strategy Making strategic M&A decisions Planning of innovation activities, for example with an innovation roadmap Innovation Development ▪ Following the process of transforming an idea into a successful innovation ▪ Managing ideas from inside and outside the company Innovation Organization ▪ Managing the portfolio of innovations within a company ▪ Ensuring a smooth implementation of new innovations in a company Real Case Study Oerlikon – Strategy Project: building blocks 1 Definition of cores 2 Inside-out: expansion of cores 3 Outside-in: search of the unknown 4 Portfolio priorities 5 Path to value creation Potential 20% multiple uplift due to improved equity story EBITDA growth of new portfolio incl. synergies EV impact of divestment & acquisition TSR potential: ~15-20% p.a. ▪ Relatedness and economic distance of businesses activities ▪ Definition of Oerlikon’s cores ▪ Differentiating capabilities of cores (e.g. value proposition; business model) Page 74 ▪ Core(s) expansions, step change opportunities (e.g. M&A to expand OSS, OMF, OLV) ▪ Strengthen differentiating capabilities ▪ M&A targets to expand cores Focus of the lecture ▪ “Search of the unknown” to find adjacencies to existing cores, linkages between existing cores or a new sizeable, sustainable, value accretive core ▪ Parenting advantages and fit with existing cores ▪ M&A targets to build adjacency or new core ▪ Prioritization of existing portfolio and identified options ▪ Long-term target portfolio, capital allocation priorities ▪ Tradable assets in portfolio ▪ Concrete portfolio scenarios incl. sequence of divestments and investments ▪ Financial impact and capital needs per scenario ▪ Equity story and valuation impact ▪ Value creation - TSR impact ▪ Transformation path – portfolio and Role of the Center Oerlikon is a multi-core conglomerate of mostly unrelated businesses in 2014 1 Economic distance of cores Comments ▪ 19 different business activities identified in Oerlikon’s four segments, with specific model of value-add (equipment, svc, materials, components, systems), capabilities, cost, and customer structure ▪ Economic distance defined by the degree of cost, customer and capability sharing between business activities ▪ Analysis confirms four distinct cores of unrelated businesses Methodology: Estimation of relatedness ▪ For each pair of business activities (“bubbles”), estimation of degree of sharing in: – – – Page 75 Cost Customer Capabilities Calculation of economic distance Plotting ▪ Economic distance between 2 pairs calculated as average of three degrees of sharing ▪ Economic distance plotted in two-dimensional matrix above, using least square regression between all pairs – OSS – strong core around TF and TS Service and Equipment and close adjacency TS Materials – Eldim and Friction Systems clear adjacencies – OMF – strong core in filament spinning and texturing equipment, nonwoven and staple equipment, carpet systems and services, plant engineering a close adjacency – OLV – core around vacuum components and systems – ODS – core around gear components, drive assemblies and HPA systems Broad range of portfolio options considered 2 Oerlikon point-of departure and vision Comments “Option A – building global leader in surface technologies with single core” OC OSS OSS OMF OC ODS OSS OC OMF “Option B – becoming strategic architect for up to two cores” OSS OMF OC ? “Option C – staying high-performing multicore conglomerate” ? Source: OSS: Surf ace Solutions; OMF: Manmade Fiber; OLV: Ley bold Vacuum; ODS: Driv e Sy stems Page 76 – Mostly unrelated businesses – mostly different markets, technologies, business models – Portfolio heterogeneous and hard to understand – Some businesses are “remainders” of past M&A strategies – Businesses with mixed performance, diverging strategic imperatives and different sustainability outlooks ▪ For tomorrow, we aim to become more focused around one or two cores OLV “Today, Oerlikon is a multi-core conglomerate” ▪ In 2014, OC is a conglomerate of mostly unrelated businesses – Group as global leader in surface technology with single core – Group as strategic architect for related businesses of up to two cores (reinforcing and complementing) 2 OSS and OMF most attractive growth platforms Expansion opportunities of segments Comments ▪ OSS – invest to double-down on leadership in attractive markets – Multiple opportunities to strengthen and expand surface solutions exist – Potentially move into attractive direct adjacencies ▪ OMF – invest to expand core or hold – Consolidation opportunities in core – Need to move outside “melt-to-yarn” to build larger core in polymer processing equipment ▪ OLV – imperative to scale to be sustainable, e.g. in process industries – Few opportunities to scale remain – If targets not feasible or unattractive, divestment would be an option ▪ ODS – imperative to restructure and transform business – Strategic options currently under review – If no attractive/sustainable target state can be achieved, divestment would be an option Source: OSS: Surf ace Solutions; OMF: Manmade Fiber; OLV: Ley bold Vacuum; ODS: Driv e Sy stems Page 77 Real Case Study Oerlikon – Transformation: Streamlining the portfolio and focus on Surface Solutions Acquisitions Surface Solutions: Citim DMX Polym er Processing: Trützschler Staple fiber Surface Solutions: Eicker KG, DiSanto Technology DIARC Technology, Sucotec AG Surface Solutions: TeroLab Surface GmbH, Page 78 Leybold Vacuum: Segment sold Surface Solutions: TIS (Thermal Insulation System) AMT AG, Polym er Processing: Teknow eb Nonw oven 2017 Surface Solutions: Surface Solutions: SAS Coeurdor Riri Group D-Coat GmbH Polym er Processing: INglass S.p.A. 2018 2019 Divestments 2016 Surface Solutions: Recentis, Scoperta Primateria, DiaPac Drive Systems: Segment sold 2020 2021 2022 Acquisitions in AM Strategic re-focussing of the Group portfolio towards higher return and long-term growth potential 2015 Transformation of portfolio Fragmented Group with ambiguous strategy – two divisions with low profitability and challenging growth outlook * EBITDA: 16% Sales: 3,031 OLV 360 648 ▪ Re-focusing to two divisions with strong market positions (#1-2) and profitable growth aligned with megatrends ▪ OLV and ODS proceeds re-invested in portfolio transformation and distributed as special dividends (total of 434mCHF paid in 2019 and 2020) Sales: 3,081 * EBITDA: 17% (incl. pro-forma RIRI sales) OSS ▪ OSS/OPP sales growth by ~1bnCHF, Group margin improved 22% ▪ M&A re-shaped portfolio towards higher growth/profitability  OPP: Diversification into non-filament, e.g. HRSflow  OSS: Expansion into luxury, e.g. Coeurdor, RIRI Page 79 Focused Group with more targeted strategy – industrial technology leader in sweet spots with high entry barriers 1,229 8% 16% OMF 2022 OPP OSS 11% ODS (MCHF) 794 1,525 16% 18% 1,556 What’s next? Lecture 1: Innovation Management Lecture 2: Applications & Showcases of AM in AM Institute in Garching January 22, 2023 - 08:00 a.m. - Freisinger Landstraße 52, 85748 Garching Lecture 3: Theory of Advanced & Additive Manufacturing Lecture 4: History & Future of AM @Oerlikon January 29, 2023 - 08:00 a.m. – Arcisstrasse 21, 80333 München - 0506.EG.602 February 05, 2023 - 08:00 a.m. – Arcisstrasse 21, 80333 München - 0506.EG.602 Backup Page 84 AM Market Oerlikon AM Sales by Key Market 18% Power Generation Energy 4% Global AM Market Market by material: Polymers and filaments: ~ 80 % Metal AM: ~ 18 % Other: ~ 2 % Aerospace 40% General Industry/ Tooling 13% Automotive Metal AM market: Growth rate expected between 2021 and 2026 averaging 25.5% per year. Others 25% Page 85 Source:Oerlikon / AMPOWER Report 2022 / Wohlers report 2020. Oerlikon AM: Offering along the entire value chain 3 3 Metal Powders ▪ 80+ years of experience ▪ Broad portfolio of AM-ready metal powders ▪ Design and optimization of new and custom alloy chemistries ▪ Computational materials development Page 88 Design & Application Engineering ▪ Best possible combination of materials, design, production methods, and post-processing ▪ Design for AM engineering support for various industries and applications Production & Post-processing ▪ Rapid prototyping and small or large volume series production ▪ End-to-end advanced component manufacturing ▪ Extensive AM equipment options ▪ Post-processing technologies Innovation Organization Innovation Funnel New ideas are a valuable asset and need to managed! Idea Generation Managing the Idea Portfolio Conceptualization Development Commercialization Page 89 100 ideas Long-list of potential sectors 40 concepts 10 prototypes 1 product Coatings Improve Efficiency and Durability, Driving Sustainability Oerlikon enables the modern world Uncoated Older standard Coating Unique value proposition Oerlikon Coating 160x lifetime extension of a metal tool through coating… equaling metal saving of 13.7kg per tool, which is the weight of 2 bowling balls 5% efficiency increase in aero turbines through coatings… equaling ~26 mt of CO2 reduction annually or 80% of Swiss CO2 emissions Coatings protect tools after >4500 holes drilled corrosion protection | environmental protection | strength | abrasion protection | hardness | chemical stability | conduction control | permeability control | anti-sticking | color flexibility | decorative enhancement | thermal stability | antibacterial | bio-compatibility | magnetism control | anti-reflection | easy cleaning | safety | wear resistance | insulation control | thermal protection | thermal protection | clearance control | erosion protection Page 90 Coatings enable lightweight materials… 10% less weight extends car driving range by 57%...for a 650 km EV this is equivalent to a marathon Oerlikon AM is a metal additive manufacturing solutions and service provider Page 91 File Name Real Case Study Oerlikon – More than 100 years’ history of trendsetting innovations and world records Delivery of the first embroidery machine 1869 First generation of electrolocomotives build in 1927 in Oerlikon Oerlikon factory 1930 1906 1906 1957 1957 Oerlikon enters the vacuum business Launch of BALINIT® A PVD hard coating for tools 1978 1988 First Ariane 4 carrier rocket, equipped by Oerlikon Oerlikon Graziano moves into automotive market 1996 1999 World longest ring spinning machine Oerlikon Graziano presents prototype of a dualclutch transmission system 2006 2007 P3e revolutionizes Coating Launch of the Autocoro 8 at the ITMA in Barcelona 2012 2013 Focus on growing and less cyclical manmade fibers market Oerlikon Balzers launches BALINIT ® ALTENSA 2015 2016 Oerlikon Graziano introduces hybridpower Real Case Study Oerlikon – Strategy Project was launched in 2014/2015 The goal of this Strategy project is to define a value maximizing portfolio strategy for the group and outline the transformation towards … ▪ … a portfolio built around attractive businesses, with strong business models (e.g. service), well positioned in respective markets, and resilient against downturns ▪ … a portfolio with high relatedness and similarities, as basis for a compelling equity story that can be easily understood ▪ … portfolio leveraging Oerlikon core assets, differentiating capabilities, and cultural heritage ▪ … a portfolio with substantial scale beyond the current mid-cap range, to attract a broad set of investors Page 93 We want to be positioned as Nr. 1 or Nr. 2 in the market or have a clear strategy to achieve this position. We want to allocate capital to value accretive opportunities and lay-out a transformation roadmap of buy- and potentially sell-side measures Oerlikon with unique set of differentiating capabilities 1 OSS Main differentiating capabilities ▪ Industry-leading in material properties (esp. metals, ceramics) and deposition technology ▪ Resilient business model built on applications engineering, coating materials and service Comments ▪ High-level assessment of differentiating capabilities, in each segment and in the “Pfäffikon” center: – Management capabilities OLV OMF – Operating capabilities ▪ Polymer technology leader with unique end-to-end process engineering skills ▪ Strong management team with track record of industryshaping innovation ODS ▪ Critical input for estimation of the sustainability of current businesses, as well as evaluation of potential growth options ▪ Strong technology in fore, high vacuum, with application know-how in selected segments – Evaluation of “Ability-to-Win” and sustainability of competitive differentiation ▪ Leybold brand with high recognition and market value – Identification of platforms for growth or repeatability ▪ “Pockets of competence” in high-torque applications Page 94 – Proprietary assets ▪ Flexible production of low-volume, customized components/ systems, high customer intimacy – Evaluation of “Fit-to-Oerlikon” for potential options in Search of the Unknown 3 “Search of the Unknown” – broad assessment Sources and screening process N>1000 Sectors (e.g. ISIC codes) Companies (e.g. “Tech 500”) Trends M&A deals (e.g. Techn. (e.g. highgrowth funds) Quarterly) Comments ▪ Screen and filter based on : ▪ Sector attractiveness – Size/ growth/ profit – Avg. EBITDA multiple ▪ Fit-to-Oerlikon – B2B (vs. B2C) – Driven by technology (vs. scale/ costs) – Match in capabilities and risk profile Potential Oerlikon sectors (long-list) ▪ Screen all relevant economic sectors to identify potentially attractive segments – With high EBITDA multiple, as proxy for expected profit growth – With high Fit-to-Oerlikon business Long-list of potential sectors n=~100 sectors ▪ Objective: complement inside-out identification of growth options with outsidein list of opportunities close to our competencies ▪ Breakdown into 5-15B market segments ▪ Ensure comprehensiveness and specificity through successive rounds of breakdown ▪ Individually review, specify, and prioritize in workshops n=~60 segments (more granular) “Oerlikon-worthy” segments ▪ Select for drill down based on specific investment thesis n=~3-5 Investment Thesis Page 95 Short-list Identify unknown market segments and businesses with potential to strengthen or redefine current businesses or to “link” two segments of Oerlikon, around our competencies Goal: Position Oerlikon as Nr. 1 or Nr. 2 in the market Initial findings: three market segments to be explored further 3 Attractive and potentially synergetic segments ▪ High-performance materials (esp. technical ceramics and composites) with strong growth (~2-4x GDP) ▪ ‘Search of the Unknown’ process now focused on three market segments ▪ Attractive entry opportunities via acquisitions of mid-cap technology leaders ▪ Segments characterized by high attractiveness and high relatedness to Oerlikon ▪ High relatedness to Oerlikon (OSS) with similar capabilities (advanced materials), business models (application engineering) and end-industries ▪ Aero engine components & services growing and profitable segment driven by underlying industry and constant technological innovation ▪ Attractive entry opportunities due to largely fragmented market structure (esp. in tier 2) ▪ Strengthening of position in aviation to elevate OSS to next level, by combining coatings with other critical components and services ▪ Additive manufacturing a paradigm shift in the manufacturing industry with still distant, but very promising technology penetration and growth perspectives ▪ Options for Oerlikon to re-define Metco’s materials and/or Balzers service business currently under evaluation Page 96 Comments ▪ Relatedness defined by economic distance, as proxy for synergies – Similar capabilities (technology, business model, management) – Similar end-industries and/ or customers (go-to-market, industry access) – Similar cost drives (purchasing, sales and delivery operations, G&A) ▪ Focus on sources of value in combination with Oerlikon ▪ Ongoing development of investment theses Real Case Study Oerlikon – Entering Additive Manufacturing: We investigated two key dimensions 1 What are our key competencies What are major industry forces 2 External view Internal view Backup Key industry trends influencing Oerlikon's future business model Oerlikon can leverage existing competencies in AM A Strong presence & know-how in thermal spray materials (metals&alloys, wires, carbides, ceramics, abradables) Access to global OEMs in aero, oil & gas, automotive and general industry B C Technology leader in equipment for surface solutions Capabilities Global service network with over 100 locations and customers worldwide sweet spot D E Strong brand recognition as global player in high-end surface solutions Complete offering of surface solutions (materials, equipment, services) (PVD and TS) Source: OC Oerlikon, BCG F High growth market: Expected CAGR of 40-50% in 2015-2020 period – growth will be fueled by industrialized systems and broader adaption of AM technology across various industries Main industries & applications: Today's AM metal market mainly driven small series production for aero/medical and prototyping applications across industries Multiple routes to market: OEMs are building up capabilities and will keep significant in-house capacity for critical and competition-relevant components, other parts will be manufactured by dedicated service centers (make or buy decision) Application engineering: System providers integrating backward & forward to expand value chain coverage; application engineering for holistic optimization of powder, fabrication and post-processing parameters becomes critical factor Capacity constraints: Current demand exceeds availability of machines, powder and qualified personnel, key players are investing heavily to increase capacity New system manufactures: Change from today's innovative R&D companies to traditional machine tool manufacturers - established players expected to enter and dominate AM system space for metal materials (TRUMPF market entry in 2015) Source: Expert interviews, BCG DRAFT—for discussion and evaluation purposes only. This is not a company valuation Define the winning AM business model for Oerlikon Page 97 DRAFT—for discussion and evaluation purposes only. This is not a company valuation “Melt meets Surface” Superior know-how in polymer processing OPP Division OSS Division OMF Manmade Fibers Solutions OFC Flow Control Solutions OSS Global Business Organisation OBA | ONE | ONW HRS | PU balzers | metco | am Spinning melt piping meets hotrunner layout. Different scale but same engineering characteristics ▪ ▪ ▪ ▪ Broad polymer melt knowhow Uniform melt distribution Balancing Uniform pressure drop ▪ ▪ ▪ ▪ Controlling shear rates Even temperature distribution Avoiding dead spots Wide range of viscosities Surface solutions for polymer processing technologies Homogenous melt meets engineered surfaces Competence for the entire polymer processing chain Page 98 ▪ ▪ ▪ ▪ Improving wear resistance Friction reduction Controlling shear rates Uniform surface properties Innovation Organization - Use Case: Boeing’s AM approach The pressure on Boeing from the market is constantly increasing Individual interior Increasing safety standards Less maintenance necessary Higher range Faster production Source: Boeing Page 99 More flexibility Less weight AM as solution for high customer demands to Boeing Innovation Organization - Use Case: Boeing’s AM approach F15 Pylon Rib Additively Ti replacement (LAM) Implemented on 15 Aircrafts 2001 2003 MAI Satellite Components ARCAM - supplied to L-M under MAI Launched August 5th, 2011 2004 2011 787-9 Passenger Floor Galley Diagonal Fittings First Flying TiWire Feed Additive Manufacturing Part 2016 2017 X37-A C17 Pylon Panels 702 MP Satellite First Flying Laser Additive Manufacturing Part (LAM) Additively Ti replacement (LAM) 41 Articles installed Receive Antenna Deployment Actuator (RADA) Cage Source: Boeing Page 100 Innovation Organization - Use Case: Boeing’s AM approach Potential Application Areas Structure Services Major assembly Body selection Movable wing sections Doors Flight Control Surface Fuselage Systems Avionics Flight systems Hydraulics Wheels and Brakes Passenger Seats Cabin Systems Source: Boeing Page 101 Spares Technical & Engineering services Customer Support Internal Non-production Common Commodities Landing gear Electrical Systems Control Systems Interiors Machined parts Sheet metal parts Assemblies Tubing Wiring Tooling Raw materials Propulsion Galley inserts Interiors Cargo Systems Engines Struts Nacelles TU Munich Advanced Topics in Finance and Accounting ”Additive Manufacturing – Applications and Showcases“ Dr. Marcus Giglmaier January 22, 2023 What is new with Additive Manufacturing? Conventional (subtractive) manufacturing process Top-Down-Process Buy to fly ratio: ≈ 10 to 100 (Definition: weight of raw material / weight of product) Additive manufacturing process Bottom-Up-Process Buy to fly ratio: ≈ 1-5 (potential scrap: surface treatment, support structures, failed builds, …) Page 3 Oerlikon at a Glance Strong performance... CHF 2.9bn Sales... with two Market-Leading Divisions Surface Solutions Division A market leader with a broad portfolio of advanced materials, surface technologies and additive manufacturing solutions. Sales 2022 by Division 1 384 1 525 48% 52% 2 909 In CHF million 12 074 Employees (FTE) Surface Solutions 205 Sites globally Polymer Processing Solutions Division Sales 2022 by Region A leading provider of comprehensive polymer processing plant solutions and high-precision flow control component equipment. 507 R&D investments 808 17% 28% 2 909 File Name CHF 113m Polymer Processing Solutions In CHF million 1 595 55% Europe Asia-Pacific Americas Figures from December 31, 2022 Page 4 Oerlikon AM – Locations and global industrialization approach 1 2 Powder development & production Oerlikon AM Powder Powder Atomization Facility [Plymouth, Michigan] Status: Operational Q2, 2018 1 Material, Process & Technology Development  300 Dedicated AM Employees  200,000 sq ft of manufacturing floor space  Full vertical integration  Aerospace / Automotive / Oil & Gas / SemiCon 3 Serial production Oerlikon AM Manufacturing 3 Oerlikon Advanced Materials Scoperta Advanced Material Design [San Diego, California] Status: Operational Q4, 2005 Europe Production Facility [Magdeburg, Germany] Status: Operational Q1, 2010 TISAX Oerlikon Innovation Hub for AM and Digitalization 1 2 R&D [Munich, Germany] Status: Operational Q4, 2017 R&D Oerlikon AM Manufacturing US Production Facility [Charlotte, North Carolina] Status: Operational Q4, 2017 TISAX Oerlikon Centre of competence Laser Cladding & DED 2 3 Oerlikon AM Manufacturing Page 5 Asian Production Facility [Shanghai, China] [Zurich, Switzerland] Status: Operational R&D 3 Oerlikon Innovation Hub Munich – Growing R&D ecosystem for Advanced Manufacturing Advanced Manufacturing Institute Oerlikon AM founded the AM Institute together with TU Munich To physically collaborate with researchers from TUM, Oerlikon AM moved to the “Science City” onto the campus of TUM. Confidential Bilateral basic research along process and value chain Interdisciplinary and cross-functional research divisions Information exchange across process chain Promotion of the non-professorial staff do lead research divisions Materials Sim ulation Process Autom atization Applications Materials Science PhD-Project PhD-Project PhD-Project PhD-Project PhD-Project Engineering PhD-Project PhD-Project PhD-Project PhD-Project PhD-Project Chem istry / Physics PhD-Project PhD-Project PhD-Project PhD-Project PhD-Project Com puter Science PhD-Project PhD-Project PhD-Project PhD-Project PhD-Project Division leader (PostDocs) Future Advanced Manufacturing Campus Multilateral applied research with partners under one roof Bavarian Additive Manufacturing Cluster External competence partners from academia First stage of development Completion in 2023 Page 6 Second stage of development >2024 External competence partners from industry Oerlikon Innovation Hub Munich – Research interests along the AM value chain Alloy & powder development Process development & process control Heat treated In-process monitoring & data analysis Production Atomization & Materials Process- & Applications Engineering Material data and qualification Page 7 As-built Powder Management Manufacturing Engineering Heat Treatment CNC Surface Treatment Powder management and reuse Quality Assurance & Certification Surface treatment, surface modification & surface cleaning Showcase 1: RF Antennas Airbus – an economic success Page 8 Oerlikon AM – Strategic partnerships with space industry Antenna cluster for satellites AM R&D Part for rocket launcher Oerlikon at Paris Air Show 2023 Page 9   After years of joint development:  Antenna clusters used in communication satellites  Oerlikon and ArianeGroup signed an order (~€1 Mio.) for the production of 3D printed sets of heat exchangers for the new Ariane 6 rocket launcher  Ariane 6 is expected to play a key role in Europe's space activities Airbus and Oerlikon signed €3.8 Mio. contract for complex serial AM production of antenna clusters 10 Advantages of additive manufactured RF antenna Less drawings and documents needed Minimized AIT effort No tests on component level No barrier for thermal conductivity due to monolithic design Mass reduction by a factor of 10  Competitive, resource-saving and sustainable solution Manufacturing flow milestones © Gensun Precision Machining Co © Swissto12 Additive Manufacturing Etching CNC Milling Ultrasonic Cleaning Wire Insert Assembly © Blum-Nov otest GmbH Quality Assurance Review cost structure of OAM Europe, Product cost analysis Manufacturing costs vs sales, e.g. Airbus, satellite antenna 2.0  Target Manufacturing costs are 49% of revenue 1.84 1.8 68%  The other 51% shall cover overhead costs like Salesforce, Building & 63% 1.6 Infrastructure, General & Administrative expenses 1.4  For all years, target manufacturing costs are 906k€ (=49% of revenue) 1.2 Million € 45%  Real production costs < target manufacturing costs  Successful project 1.0 0.83 0.8 0.71 0.69  Real production costs = 833k€ are split into: 0.6 0.45 0.44 0.4 0.30 1) Material costs = 323k€ (39%), e.g.: Powder, Raw material, External service providers 13% 0.2 0.09 2) Production costs = 510k€ (61%), e.g. Printer, Machining Tools, Labor 0.0 2021 Revenue Page 12 2022 Production Costs 2023 YTD10 Sum all years Production Costs / Revenue costs Showcase 2: Impellers for Oil & Gas – economic struggle Page 13 Ormen Lange Gas Field Natural gas field west of Norway 120km west from Norwegian coast 800 – 1100m under water – installation on the floor of the ocean Additional equipment on land has a size of ~ 100 football fields  Oerlikon manufacturing parts for the wet gas compressor that consists of 25 components with 9 different geometries  AM part printed in Inconel 718  The special slot geometry of the blades enabled by 3D printing have a significantly higher performance than previous solutions Page 14 Page 15 ! Process chain Prototypes & serial production Prototyping process chain 2019 AM process Stress relief HT Wire EDM CNC machining Wire EDM Hirtisation Internal Qualification process chain 2020 AM process Stress relief HT Internal HIP Solution annealing + ageing Internal External CNC machining CT / UT / PT testing External Series process chain 2021 AM process Stress relief HT Internal Page 16 Wire EDM Hirtisation External HIP Solution annealing + ageing Internal CNC machining External CT / UT / PT testing Coating Internal Project timeline  Test OSS 2019 Prototyping 1 Impeller 2 months Page 17 2020 Qualification 2021 Series production 25 Impeller 150 Impeller 1 Stack 6 Stacks 8 months 18 months 2022 Series production Review cost structure of OAM Europe, Product cost analysis Manufacturing costs vs sales, e.g. Energy, OneSubSea, impeller  Target Manufacturing costs are 49% of revenue  The other 51% shall cover overhead costs like Salesforce, Building & Infrastructure, General & Administrative expenses  For all years, target manufacturing costs are 3.9M€ (=49% of revenue)  Real production costs > target manufacturing costs  Unsuccessful project  Real production costs = 6.8M€ are split into: 1) Material costs = 6M€ (88%%), e.g.: Powder, Raw material, External service providers 2) Production costs = 0.8M€ (12%), e.g. Printer, Machining Tools, Labor costs Challenges in the project were high scrap rates in printing and post-processing and decreasing customer demand in 2023. Material costs were impacted by unsuccessful outsourcing to external service provider. Page 19 TU Munich Advanced Topics in Finance and Accounting ”Advanced & Additive Manufacturing – Definition, technologies, markets, industrialization“ Dr. Marcus Giglmaier January 29, 2023 Advanced Manufacturing – The future of manufacturing Part 1 Page 3 Advanced manufacturing I - Page 5 Source: WEF (WEF_Advanced_Manufacturing_A_New_Narrative_2023.pdf (weforum.org)) ! Building Blocks of Advanced Manufacturing Advanced Materials Advanced Robotics Artificial Intelligence & Machine Learning Augmented Reality Smart Factory & IoT Workforce Transformation Nanotechnology Additive Manufacturing Enabling a more efficient and intelligent production and a more effective workforce organization. Page 6 New technologies are enablers for further productivity & efficiency improvements Technology Advanced Materials Enabling Software supported rapid alloy development shortens the development time of new materials Revolutionary material compositions can be identified Simulation of material properties enables fast results for multi-parameter optimizations Example: Oerlikon Scoperta Artificial Intelligence & Machine Learning Big data collection paired with AI and ML supports in identifying bottlenecks and improvement potentials Machine learning can be used to train algorithms to identify defects (e.g. from images) to reduce costs for quality control Conclusions and predictions from AI can be used for predictive maintenance that helps to avoid expensive production downtime Smart Factory & IoT Manufacturing hardware can be linked together, enabling communication with each other and automatically adjusting production depending on current demand Sensor data and automated quality inspection can indicate problems in production very early Digital twins enable simulation of the production process to optimize factory layout New technologies are enablers for further productivity & efficiency improvements Technology Enabling Additive Manufacturing New part geometries and higher design flexibility Fast iteration cycles in prototyping and early development projects -> Faster time to market More Sustainable production with reduced waste Advanced Robotics Automation reducing the need for manual labor Robots can operate 24/7 with only minimal supervision Cobot (collaborative robots) enable a more efficient and safer workplace supporting humans in repetitive tasks Nanotechnology Essential for all manufacturing achievements in electronics (e.g. smaller transistor size, flexible displays) Nanoocoatings (e.g. ALD) are enabling functions like better corrosion protection, antibacterial properties, etc. Nanotechnology has enabled the development of completely new materials (e.g. Nanotubes, Graphene) Nanoparticles in lubricants are essential for friction reduction New technologies are enablers for further productivity & efficiency improvements Technology Enabling Workforce Transformation Future workforce is highly skilled and flexible Focus shifting from manual labor to creative problem solving and innovation Augmented Reality Efficient training of new employees and upskilling existing employees using interactive visual guides Increased efficiency and limiting mistakes by visual instructions developed for the task at hand replacing paper instructions Remote support of employees by virtually calling experts - eliminating costs for sending support and allowing for fast problem solving OerliEye as an example from Oerlikon for automated quality control in Additive Manufacturing Page 10 Robotic Process Automation as an example of process improvements within Oerlikon HRSflow Page 11 Oerlikon Digital Hub 2023 Oerlikon Digital Hub Accelerating our digital tomorrow Sales Operations R&D The Digital Hub is Oerlikon's key transformation driver and partner for product and process digitalization to foster data driven decisions. In close cooperation with our business partners, we strive to introduce new technologies, streamline digital initiatives and we motivate our stakeholders to realize the full potential of digitalization. Page 12 Automation Additive Manufacturing – Definition and history Part 2 Page 13 What is new with Additive Manufacturing? Conventional (subtractive) manufacturing process Top-DownProcess Buy to fly ratio: ≈ 10 to 100 (Definition: weight of raw material / weight of product) Additive manufacturing process Bottom-Up-Process Buy to fly ratio: ≈ 1-5 (potential scrap: surface treatment, support structures, failed builds, …) Page 14 AM is at the core of future manufacturing in discrete industry Data based manufacturing process through whole production Page 15  Design / Scan  Production process  Part inspection  Part field service  Digital twin  3D Printing  Data verification  Digital twin update  CAD file creation  In situ monitoring  Modeling and simulation  Post processing Source: Deloitte University Press History of 3D printing First steps and technological development, started with polymers 1981 1986 Photo-hardening plastic model described by Hideo Kodama of Nagoya Municipal Industrial Research Institute, Japan 1987 Patent for stereolithography: Charles W. Hull (US) Founding of 3D Systems (producer of 3D printers) The principle of selective laser sintering was published by Carl Deckard, University of Texas. 90´s: Starting metal AM 1997 Frank Herzog (Concept laser) develops the technology for powder bed-based laser melting of metals (GER) Page 16 2008-2009 First patient walks on a prosthesis made by a 3D printer Printers are offered as kits 2012 Printing of gold and silver jewelry First printed lower jaw is implanted 2013-2016 3D-printed weapons Glass can be printed in 3D Source: https://3dprintingindustry.com/news/insights-founding-metal-3d-printing-company-concept-laser-115204/ A Brief History of 3D Printing | Cad Crowd / Wikipedia Metal AM machines of today  AMCM M4K – a customized EOS M400 (2017): Heat source: 4x 1kW Laser Build volume: 450x450x1000 mm Machine height: 3,5 m Source: und Page 18 Additive Manufacturing Customized Machines | AMCM Your Partner in Selective Laser Melting | SLM Solutions (slm-solutions.com)  SLM NXG600 XII E (2022): Heat source: 12x 1kW Laser Build volume: 600x600x1500 mm Machine height: 6m Additive Manufacturing – Market analysis Part 3 Page 19 Total AM market split into Polymer and Metals Polymer AM market is larger but… (Sums in € bn) Metal AM market is growing at a higher rate 11.92 Part Manufacturing 9.66 Part Manufacturing CAGR 12.9% Material (Sums in € bn) Material System CAGR 26.1% System 6,14 3,08 10.3% 13.4% 6.50 2,84 5.83 5.14 2,54 1,66 2,82 1,92 23.2% 3,09 2,09 2,69 0,94 1,09 1,33 2020 2021 2022 Source: AMPower Report, 2023 Page 20 17.5% 3,08 2027 2.03 0,50 0,64 3.03 2.50 0,76 0,75 0,90 0,95 0,89 0,99 1,18 2020 2021 2022 3,74 2027 Metal feedstock use by alloy: double digit growth of all alloys expected Yearly growth rate of feedstock: 44% vs. CAGR of Metal AM: 26% Difference explained by: 42’207.00 1. Future material prices expected to adjust downwards 2. Consumption expected to shift towards less favorable mix in terms of revenue (steels growing faster than titanium) (Sums in tons) Aluminum alloys +44% Stainless steel alloys Yearly growth rate Tool steel alloys Alloy Price (€/kg) Use in tons (2022) (2022-2027) Aluminum 10-100 699 39% Titanium alloys Stainless steel 90-120 1155 64% Cobalt alloys Tool steel >75 655 46% Copper and bronze Nickel based 50-100 1445 38% Other Titanium 200-550 1787 35% Cobalt n/a 851 24% Copper and bronze ≈120 172 60% Other n/a 87 53% Nickel based alloys 4’790.00 Material costs can highly differ depending on the specific alloy and printing method! They also fluctuate depending on raw material prices. Page 21 Source: AMPower Report, 2023 2020 5’600.00 2021 6’851.00 2022 2027 Forecasts are hard to make, especially about the future! Forecast in 2019: Total AM market to be ≈ $43bn in 2027 Source: Smartech Report, 2019 Forecast in 2022: 21.58bn€ in 2027 Source: AMPower Report, 2023 21.58 Part Manufacturing Material System 9,22 (Sums in € bn) 9.53 8.33 7.17 3,04 Page 22 5,93 3,98 3,58 3,04 2,30 2,67 1,83 2,08 2,51 2020 2021 2022 6,43 2027 Additive Manufacturing – A technical overview of 3D printing technology Part 4 Page 23 Production steps in 3D printing Steps 1 Digital design of the 3D model (eventually including simulation of part performance properties, etc.) 2 Preparation of construction process 2.1 Conversion of 3D model into 3D printing format 2.2 Build strategy of the 3D-Part (e.g. orientation and nesting, support structure, slicing, scanning strategy) 2.3 Preparation of printer (e.g. calibration, preheating, filling with printing material) 3 Construction process 3.1 Physical construction (Printing) 3.2 Extraction (Removal of powder, removal from printer, cutting from build plate) 4 Possible post-processing 4.1 Eventual heat treatment 4.2 Removal of support structures 4.3 Surface treatment and machining 5 Page 24 Inspection and use of printed object Source: Additive Manufacturing with polymers – Three main technologies Fused Depositing Modeling (FDM) Stereolithography (SLA) Selective Laser Sintering (SLS) Other printing technologies  Multi Jet Modeling (MJM) = PolyJet Modelling (PJM)  Laminated Object Modelling (LOM) Commonly used for metals but also applicable for polymers: Fused Deposition Modeling (FDM) or Fused Filament Fabrication (FFF) The parts are created by liquefying a wire-shaped plastic or wax material by heating it in a nozzle, extruding it via the nozzle and then hardening it by cooling it down at the desired position in a grid on the build plate. Page 25 Stereolithography The separate layers of a 3D model are projected with a laser onto the surface of a liquid polymer, under which a movable build platform is positioned. The first layer hardens and attaches the object to the underlying build platform. Selective Laser Sintering (SLS) or Selective Laser Melting (SLM) A powder material (typically nylon or polyamide) is layer wise locally sintered via a directed local heat source (laser). After one layer has been exposed, the building platform is lowered, a new layer of powder is applied and exposed again.  Binder Jetting (BJ)  Direct Energy Deposition (DED) Additive Manufacturing with metal powder Powder Bed Fusion (PBF) – Step by step ! Product examples Dental prostheses MEDICAL Page 27 Knee implant MEDICAL Cylinder head AUTOMOTIVE Nozzle holder ENGINEERING Source: Siemens/Oerlikon Additive Manufacturing with metal powder – Powder bed fusion (PBF) – Pro and Contra Powder Bed Fusion (PBF) Nozzle holder ENGINEERING Pro  High geometric freedom  Smooth surfaces  Thanks to closed construction chamber (high temperatures, gas treatment) different material combinations are possible Page 28 Knee implant MEDICAL Teeth MEDICAL Contra      Limited overhang angle possible / Support structure necessary Limited build volume (up to 600x600x1500 mmm) Low Build rate (20-80 cm³/h per laser) High costs Long printing time -> Failure at the end = waste of time & money Source: Wikipedia / DMG Mori / Oerlikon AM / 3yourmind Additive Manufacturing with metal powder – Direct Energy Deposition (DED) Direct Energy Deposition (DED) Tools Energy source: Typically laser, plasma arc or electron beam Feedstock: Typically powder or wire Pro     Drill Head OIL & GAS Contra Fast build process (up to 2-3000 cm³/h) Cost almost competitive with castings Large sizes (up to 2 square meters) possible Ideal for the production of blanks Source: DMG Mori / Oerlikon AM Page 30 Rocket engine AEROSPACE  Rough surfaces  Lower deposition efficiency (down to 20-50 %)  Limited re-usability of powder Additive Manufacturing with metal powder – Binder Jetting (BJ) ! Binder Jetting (BJ) Hard materials (e.g. gears, Medical tools Pro Contra  High surface quality  No (or less) support structures necessary  Higher nesting efficiency Source: Metal Binder Jetting: Vom Prototyp zur Serienfertigung (fraunhofer.de), MicroCare/ Page 32     De-binding (removal of binder) and sintering step necessary Complex Binder Chemistry Shrinking of part size while sintering (~16-20%) Typically limited part size (380 Cost reduction Reduction of inventory by 10.000 parts per year caused cost reduction in warehouse (reducing working capital) Quality Availability of spare parts for new trucks at least 15 years Greater variety in new models amplifies the issue Source: EOS ; Mercedes Trucks&Buses Page 57 Same standards in quality as serial production but more economic Benefit 5: Flexible, decentralized spare parts supply – Life cycle of a Truck or Bus 1 10 - 12 years 2 Central Europe Eastern Europe 3 Source: EOS Page 58 10 years ! 3 15 years Asia 15 years Africa ∑ 30 – 40 Additive Manufacturing – Materials for 3D metal printing Part 6 Page 59 Powder – A wide range of alloys possible  Titanium alloys  Aluminum alloys  Nickel base alloys  Cobalt base alloys  Stainless steels  Tool steels  Other Fe-based alloys  Copper-based alloys  Precious metals  Others Source: EPMA Page 60 ! Powder – Titanium alloys and Aluminum alloys  Titanium alloys – aerospace bracket or other aerostructure components Titanium has a very high strength-to-weight ratio, so is used to lightweight components. This natural property of the material in combination with the design freedom of AM allows manufacturers to remove material via clever designs. However, titanium can pick up impurities very quickly and this raises risk of failure in service. This has limited or slowed the adoption in aerospace.  Aluminum alloys – heat exchanger for specialist markets Aluminum has a low density, good thermal conductivity and corrosion resistance Heat exchangers for specialist markets such as motor racing and space require light-weighting, so using the design freedom and ability to print thin walls allows significant reduction in weight and volume. Source: Titanium 3D Printing – All3DP Pro / Ansys Page 61 Powder – Nickel base alloys and Cobalt base alloys  Nickel base alloys – nickel-based superalloy for turbine components such as combustion chambers and burners. Nickel-based superalloys are designed for high temperature performance (>900 deg C) They are also designed to maintain their strength and creep resistance. The use of AM allows designs for better mixing of the fuel and air, raising efficiency. The primary nickel-based superalloys used now are those that are seen as readily weldable, such as 718 and 625. The next stage of development will likely go into more difficult to weld alloys.  Cobalt base alloys – combustion chamber or dental alloys Some cobalt-based alloys are designed for high wear resistance and impact toughness. These properties make them ideal for dental crowns. The wear resistance in combination with heat resistance also makes them suitable for things such as fuel nozzles, e.g. the famous GE fuel nozzle, the first flying metal AM part was printed with CoCr. Source: Oerlikon AM / Metal 3D Printing Solution in Dentistry - Eplus3D Tech Co., Ltd. Page 62 Powder – Stainless steels and Tool steels  Stainless steels – manifolds Stainless steels are excellent for general purpose applications, where a combination of strength, ductility and moderate corrosion resistance are required. One example of such an application are manifolds for fluids. Such manifolds can be used in the fluid power industry to reduce or increase pressure.  Tool steels – plastic injection molding tooling Tool steels are generally harder steels with higher carbon and other alloying content. They are typically hard wearing and have a high fracture toughness. One area of application is in tooling for plastic injection molding, a process that is used to make most consumer products such as water bottles, toys, etc. The tool products can carry molten plastic and are resistant to the high chemical and physical attack of the molten plastic. Source: Oerlikon AM Page 63 Powder – Other Fe-based alloys and Copper-based alloys  Other Fe-based alloys – surgical instruments An example of Fe-based alloys are precipitation hardened steels. Examples are alloys such as 15-5PH and 17-4PH. These alloys have low additions of carbon, but are high in nickel and chromium content, which makes them very corrosion resistant. The lack of carbon also means that they can be put through severe forming processes. Applications range from surgical instruments through to landing gear components.  Copper-based alloys – induction coils Copper has a very high reflectivity and conductivity, which makes them ideal for applications such as induction coils. Traditional induction coils during processing can lose their dimensional tolerance and therefore lead to uneven induction. By printing such parts, complex geometries and tight dimensional tolerance can allow for more efficient induction. Source: AMCM.com Page 64 Powder – Precious metals and Others  Precious metals – jewelry Precious metals such as gold and platinum can be printed, although the application space so far is limited to jewelry. A specially designed printer from EOS has typically been used for such applications due to concerns over yield and powder loss.  Others – refractory metals for rocket components and collimators for medical imaging. Page 65 One potential application could be the printing of tungsten to manufacture collimators for medical imaging. https://www.wolfmet.com/applications/radiation-shielding-and-collimators/ The advantage is that by printing tungsten, which is not straightforward to machine, one can create complex shapes for collimators. AM - Powder For Additive Manufacturing, metal powders should have:  Spherical shape to ensure good flow and coating ability  Particle size usually below 50 μm or below 150 μm depending on machine type and surface finish required  Tailored particle size distribution to the application & properties  Controlled chemical composition High cost for AM materials:  75-90€/kg for AlSi10Mg to up to 550€/kg for specific titan alloys  Optimizing Yield Rate is essential in AM powder production Page 66 Sources: EPMA, Why Does My 3D-Printed Part Cost So Much? | Additive Manufacturing Metal AM powder Production process of AM metal powder Inputs Output Process Feed metals (powder, ingots) Spherical, fully alloyed metal powder Molten Metal Melt chamber High velocity Inert gas (argon) Molten stream Slag formers Atomization chamber Vent gas and fines collection Inert gas Vacuum Powder collection Atomized powder particle size distribution Plasma Spray Weight % HVOF Cold gas PBF 10μ Page 67 MetcoAdd™ 718A gas-atomized powder Laser Cladding (DED) PTA Combustion Spraying 60μ 150μ Additive Manufacturing – Printer manufacturers Part 7 Page 68 Worldwide suppliers of AM printers – Focus on Powder Bed Fusion  Family-owned, founded in 1989 by Dr. Hans Langer  A General Electric Additive Company  Global market player  Founded in 1997  A General Electric Additive Company, since December 2016  Represented in all market segments  Only commercial EBM (Electron Beam Melting) printer manufacturer  Founded in 2000 by Frank Herzog, Lichtenfels, Germany  Advantage of EBM: High density, high temperatures, thus different materials can be combined with each other  Konkurrent zu EOS  Market: Medicine, Aviation  Change direction to Aviation industry  Many printers installed  Active in both: Metal AM and Polymer AM Page 69  Established in Automotive industry (many printers installed) Worldwide suppliers of AM printer technology – Focus on directed energy deposition  Founded 2006 in Germany  Formerly foundation 1998  Former partner of the first SLM patent with Trumpf  Open system architecture.  Strong in multi-laser systems  Founded in 1923, Ditzingen, Germany  Founded in 1870 in Bielefeld, Germany  Focus on machine tools, lasers and electronics for industrial applications  Since 2009, cooperation with Japanese firm Mori Seiki  First printer manufacturer for Metal AM  High horizontal value chain integration  Strong in Laser Metal Fusion (LMF) and Laser Metal Deposition (LMD) Page 70  Worldwide leader for CNC lathes and milling machines  Strong in Hybrid process (Milling and printing)  Strong in LMD process Additive Manufacturing – Applications in different markets Part 8 Page 71 Benefit of AM for Space Applications  Roughly 60’000 satellites expected to orbit earth by 2030 (≈8000 end of 2022) Low Volume, High Value High Manufacturing & Qualification Costs  Satellite weight (1-3000kg) is always mission critical!  The space market has grown from 257bn€ in 2010 to 410bn€ in 2022 and is expected to grow to 920bn€ by 2030  Complex designs lead to high manufacturing cost  18 months to 60 months manufacturing times due to long component lead times  High qualification costs due to low production volumes.  Due to challenging engineering requirements, components must be as strong and light as possible Exotic Materials Page 72  Exotic Superalloys to improve a components efficiency and life time under the challenging conditions of space but may lead to long and difficult manufacturing processes. Sources: Bitkom Research, / A giant leap for the space industry (mckinsey.com) Scientists call for legally-binding treaty to protect Earth’s orbit. Here’s why (downtoearth.org.in) Oerlikon AM – Strategic partnerships with space industry Antenna cluster for satellites AM R&D Part for rocket lancher Oerlikon at Paris Air Show 2023 Page 73   After years of joint development:  Antenna clusters used in communication satellites  Oerlikon and ArianeGroup signed an order (~€1 Mio.) for the production of 3D printed sets of heat exchangers for the new Ariane 6 rocket launcher  Ariane 6 is expected to play a key role in Europe's space activities Airbus and Oerlikon signed €3.8 Mio. contract for complex serial AM production of antenna clusters Possible applications of AM components – Survey among aircraft companies ! Airplanes can come from a 3D printer in the future How widespread will the following scenarios be in 2030?* 91% 70% Digital simulation of prototypes Manufacture of small parts in 3D process directly at airports 51% Manufacture of airplanes and airplane parts in 3D process 64% Smart production, in which the production of aircraft parts is organized by itself and largely automated with the help of digital technologies Basis: All interviewed aerospace companies (n=102) | *Answers for “very widespread" and “largely widespread" Source: Bitkom Research Page 74 Airbus – AM fields of application today The AM Benefits in our Product Lifecycle New Product Serial Production In Service Functional Prototyping Mitigate Supply Disruption Repair Solutions Long Lead Time Items Optimised Parts Production Spare Parts Ease of Design Evolution More Integrated Structures Supplier Obsolescence 1. Low Volume / High Mix - Development Time & NRC Driven  AGILE MANUFACTURING 2. HIGH VOLUME - Product Cost & Performance Driven Source: Airbus Page 75 Automotive applications today Battery technology Personalization New technology innovation Unique parts Airframe nodes Weight optimization Spare parts Supply chain optimization Exhaust collector Sensor integration Smart components Interior parts Crash structures Design freedom Energy absorbing design Rotating and moving parts Weight reduction Suspension triangles & wheel carrier Weight optimization Alternative for castings Source: Oerlikon Page 76 Low volume series First AM-made serial parts for trucks luggage shelf end piece Floor air duct Source: Mercedes-Benz Page 77 spray nozzle covers (left & right) Driver‘s cab air duct Seat heating switch cover Head-up display Examples of applications in the medical sector Implants & Surgery Page 78 Prosthesics & Orthotics Dentristy Open Discussion and Questions Part 10 Page 79 What’s next? Lecture 1: Innovation Management Lecture 2: Applications & Showcases of AM in AM Institute in Garching January 22, 2023 - 08:00 a.m. - Freisinger Landstraße 52, 85748 Garching Lecture 3: Theory of Advanced & Additive Manufacturing Lecture 4: Advanced & Additive Manufacturing @Oerlikon January 29, 2023 - 08:00 a.m. – Arcisstrasse 21, 80333 München - 0506.EG.602 February 05, 2023 - 08:00 a.m. – Arcisstrasse 21, 80333 München - 0506.EG.602