3D printers are one of the most fascinating high-tech products out there.

The technology was a star at this year’s Consumer Electronics Show, and printers like 3D Systems’ (DDD) Cube have begun making their way on the shelves of big box stores. Hobbyists love 3D printers for their versatility, and consumers are being primed to buy them thanks to an endless stream of cool 3D-printed objects being posted online. But a real explosion in the industry remains tantalizingly out of reach.

Are we still at a point where it makes sense to invest in 3D printing companies, or has the big money for investors already been made? 3D Systems stock gained 103% in the past year, while Stratsys (SSYS) is up 32%, so 3D printer investors have had plenty of opportunity for big growth, but continued momentum at that pace seems dicey to me.

However, I’m still a fan of 3D printing and see it taking off in a big way … eventually.

Obstacles

It wasn’t until I had the opportunity to spend some time playing with a Cube 3D printer that I got a firsthand look at the challenges that are holding back the technology. When we solve them, I expect a consumer stampede that will result in big gains by 3D printer manufacturers. You can read the full piece here if you’re interested, but the problems that today’s consumer-level 3D printers face include:

• Slow results (it can take hours to print a single model).
• Lack of 3D plans for objects and the potential for repositories of plans to dry up as copyright owners move to stop people from printing copies of their products.
• Costly supplies. If you think inkjet cartridges are expensive, 3D printers aren’t for you.
• Expensive printers ($1,200 is still above the level that most consumers are willing to pay).
• Rough appearance of finished models

I’ve compared 3D printing to inkjet printers in the past (a printing technology that went from commercial to consumer level and took off), but what it’s really reminding me of at the moment is the video game industry circa the early 1980s.

Video game consoles had recently made the leap from garages to store shelves and were the stars of the Consumer Electronics Show. A bunch of companies were rushing consoles to market to take advantage of the hype, consumers were pumped and anticipating being able to play arcade-quality games in their homes. Instead, they got crappy 8-bit graphics and expensive games that hardly resembled their arcade counterparts (even if you squinted).

The result was a massive crash in the industry. North American video game and console sales dropped from over $3.8 billion in 1982 to just $800 million in 1985 leading to some of the biggest companies in the industry — including Atari — going bankrupt or being snapped up as bargain basement acquisitions.

If you’d seen the video game hype building in the late 70s or early 80s and invested then, chances were good you took a beating.

But the industry did recover. A decade later, Nintendo (NTDOY) — the same company that’s in such dire straits now — and Sony (SNE) were selling 16-bit consoles with much better graphics and a stronger lineup of games. The video game industry was well-established and in growth mode.

Many of the same troubling signs are present in today’s consumer 3D printer market. Even if 3D Systems and Stratsys — the company that bought garage startup and 3D printer darling MakerBot last month — manage to move a ton of 3D printers this holiday season, I suspect the honeymoon with consumers may be short-lived as the reality of the limitations sets in. Despite the hype around 3D printing, I wouldn’t buy into it today, either as a consumer or an investor.

The Death and Life of 3D Printing

If 3D printing suffers a crash like the video game industry did, there is an opportunity for it to experience a similar resurgence. An article on the future of 3D printing published in Quartz points out two key factors that are likely to change the equation in coming years.

First is the fact that Chinese manufacturers are beginning to pile on the 3D printer bandwagon. That’s going to have the effect of lowering prices for the devices, which could help boost adoption (but would hurt companies like 3D Systems that will be forced to cut prices to compete).

The more important fact is that key 3D printing patents are set to expire in 2014. Current consumer level 3D printers use a layering process that results in those rough printed models, but a process called “laser sintering” allows for much more detailed and polished end results. The expiration of those patents is expected to lead to consumer-level 3D printers that employ the superior technology being used by much more expensive, commercial-grade printers.

On top of that, 3D scanners aimed at consumers are currently under development. Combine a 3D scanner (which makes a three-dimensional copy of an object) with a higher quality 3D printer, and many of the obstacles to widespread adoption are taken care of.

And then things could get interesting.

Interesting enough that current printer giants like Hewlett-Packard (HPQ), Canon (CAJ) and Samsung (SSNLF) — who makes everything else and might as well give 3D printing a shot too — could make a move to challenge the dominance of players like 3D Systems and Stratsys. Especially if the 3D printing market bottoms out in the short-term and they can pick up one of the many independent companies like Printrbot on the cheap, or simply partner with a Chinese manufacturer.

Wait for the Crash

Personally, at this point in the 3D printer market, I’d wait for a crash or at least a softening to see who’s still a player afterward. Look for companies in position for a mass-market relaunch and that have marketing/distribution muscle.

The first wave of mass-market consumer 3D printers might end up sputtering, but, like the home video game market, I suspect version 2.0 won’t be far behind.

And that will be the point at which it truly explodes.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.