The following items are required for this method of creating an icon:

• Adobe Photoshop
  
• Intel Texture Works Plugin for Photoshop[software.intel.com]
  
• Icon Maker PSD Template[drive.google.com]
  
• Installed Space Engineers Font (SpaceEngineersModSDK\Tools\Fonts\space_engineers.ttf)
  
• 3D Modelling Software (3DsMax, Blender, etc.)
  
• A finished 3D model.

I won't be able to speak for the render setup in different modelling software but whichever you use, render to 128x128 pixels, PNG, with transparent background and from either orthographic or normal perspective. I personally prefer the "normal" (non-orthographic) perspective but from what I can tell it varies in the vanilla icons. You don't need an elaborate lighting setup for the render - as long as the block is easily visible it's fine. The template includes a faked light source which looks pretty convincing with the icon's small size ingame.

For demonstration purposes I'll remake the icon of my Research Lab block. This is the render I start from:







The PSD is set up for easy use. Open it up in Photoshop and note its layer structure:






















Open your render and place it in the Render goes here-folder. As you can see from the layer structure, several effects are now applied to it. First off, a Blue tint filter is applied to the render. It converts the render to grayscale and applies a blue overlay to it. Second, a White gradient filter is applied - it simulates light coming from the top left. One layer up is a text layer - it can be used to add additional information to the icon and is set up for good visibility over the render behind it and with the right color and font to look like normal UI text within the SE GUI. Simply leave it off if you don't wish to use it. This is how it currently looks:






















Next we have to create the alpha information for the resulting DDS texture. Switch Alpha Maker Toggle to visible. It will color everything aside from the background pure white. Now use Merge Group to merge the folder called Merge for Alpha, then Ctrl+A and Ctrl+C to copy. Now revert back to before you merged the group, then switch from layers to channels and Ctrl+V into the Alpha1 channel.






















Now switch back to layers and disable the Alpha Maker Toggle. Don't forget to switch back into the RGB channels before that or things will still be white.

This is the icon pretty much done. Export to DDS with the following settings:

























Ingame, my Research Lab icon looks like this: