Yesterday I talked about semiconductors and their growing importance in global trade.
More specifically, I talked about how localised production of these semiconductors is exploding in plans and investment. Never before have we seen so many governments go so hard to secure their own supply chains of microchips.
But, as with any technological product, these semiconductors require raw materials.
The most obvious example of this is silicon…
As the second most abundant element on Earth, after oxygen, silicon has always been relatively cheap and accessible. That’s why it is used so readily in electronics design and production.
But even silicon has its limits.
As our technology has improved, the weaknesses of silicon are beginning to show. It can no longer support the levels of conductivity and energy output that we need to advance computing even further.
That’s why researchers have been looking for alternatives for years.
And while there are plenty of contenders, one, in particular, has always stood apart from the rest. The only issue is that it isn’t particularly cheap and is far scarcer than silicon.
But that is changing…
China’s chip gamble
The material I am talking about is graphene.
If you haven’t heard of it before, it is a single layer of carbon that is incredibly thin yet durable. However, derived from graphite, it hasn’t been particularly easy to get your hands on the stuff.
Because of this, the cost is estimated to range from US$67,000 per tonne up to US$200,000 per tonne. This is due to the varying degree of quality and the expensive process of actually making graphene.
As we speak, though, teams are hard at work reducing this cost and improving efficacy. They know that a cheap and reliable graphene product will likely be worth billions.
Back to semiconductors for now, though. What I want to bring your attention to is China.
As I said yesterday, the rest of the world is doing everything it can to separate its semiconductor supply chains away from China. As a result, the Middle Kingdom’s local industry is already starting to fall behind.
Seeing the writing on the wall, the nation’s industry is now hoping that graphene can turn their fortunes around. By 2025, it is planned to transition manufacturing over to graphene technology. As one industry commenter notes:
‘The move to shift towards graphene-based chips is a much-awaited change. The Chinese semiconductor manufacturers have been the victim of outdated technology, which limited their chances of competing on the world stage. However, with cutting-edge graphene technology at the helm and the direct support of Chinese government, China’s chip manufacturing industry is expected to reach new heights.’
It certainly could be the edge that China needs to stay competitive.
But they’re definitely not the only region looking to commit to graphene.
European aspirations
First discovered at Manchester University in 2004, graphene has been a fixture of European fascination for years. But despite high initial hopes, getting the material out of the lab and into commercial applications has proved difficult.
As NextWeb reports:
‘In 2013, the bloc launched the Graphene Flagship, an initiative to commercialize the material. Backed by a €1 billion budget and nearly 170 academic and industrial partners spanning 22 countries, the project raised hopes of Europe becoming a graphene powerhouse. The early “graphene gold rush,” however, didn’t immediately lead to riches. But a promising sector is slowly emerging on the continent.
‘…The Graphene Flagship is not without its critics. Pundits have questioned the value of the EU’s immense investment, and the slow process of developing real-world applications. The speed, however, should not be too surprising.
‘“Science is the easy part,” said Konstantin Novoselov, one of the Manchester University scientists who won a Nobel Prize for isolating graphene. “To develop a technology, you should know what products you are aiming at, and this should be coming from the industry.”
‘Taking a novel material from discovery to commercialization frequently takes decades.’
Despite these challenges, there is little doubt of graphene’s potential.
There is no denying that it could still deliver a major disruption to the semiconductor industry. And with the tech arms race heating up, I expect we’ll start to see a lot more graphene development in the years to come.
That is why investors should be keeping an eye out for investment opportunities. Because beyond the chipmakers, graphite suppliers could become an integral component of this graphene boom too.
It is just another factor in this emerging trend that will continue into 2023 and beyond.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
