Investing in Innovation: Nanotechnology

A common theme across technology is making things smaller and faster, typically with the goal of enhancing the user experience. Whether it be the smartphone or any number of connected or smart gadgets, all of these products require the steady progression of Moores Law. Coined by one of Intels founders Gordon Moore, it claims the number of transistors per unit area doubles approximately every two years. What this allows is the decrease in cost per transistor with each successive process technology that is currently at 10-nanometers (for certain feature sizes of transistors). The ongoing pursuit of faster and cheaper has democratized computing and will usher society from the smartphone world into the age of artificial intelligence and ubiquitous connectivity.


Key applications


There are myriad possibilities for the application of nanotechnology, but prominent areas include technology, medicine, and materials. Ever smaller feature sizes for microprocessors help improve performance and energy efficiency of electronics. As new AI-centric applications arise, such as self-driving vehicles, the semiconductor space will need to continue innovating at the bleeding edge of integrated circuits. Once we hit the physical limit of Moore‟s Law, new materials for building transistors will enable future advancement. Current projects include flexible electronic circuits for lower power requirements, silicon photonics for higher speed data transmission, carbon nanotubes to enable smaller transistors, and a host of others dealing with new materials and structures at the nanometer scale.


In medicine, common applications of nanotechnology include gene therapy or manipulating DNA to treat diseases, DNA-based nanoscale robots to imitate biological processes or target cancer cells, and other ways to help revolutionize the delivery and efficacy of drugs. Advances in nanomaterials have the potential to disrupt almost any industry. By strengthening the properties of materials at the nanometer level, we can create lightweight aircraft with better fuel efficiency, superior fabric to withstand harsher conditions, or cheaper energy sources via greater efficiency of batteries or fuel cells.


Nanotechnology innovators and beneficiaries


Technology is one of the easier sectors to identify nanotechnology innovators and beneficiaries. Innovators normally reside at the manufacturing and equipment level, as these companies help actually create the semiconductors with critical dimensions at the nanometer level. Major equipment vendors that supply the tools capable of such precision include Applied Materials (AMAT US), ASML (ASML NA), Lam Research (LRCX US), KLA-Tencor (KLAC US), and Tokyo Electron (8035 JP). Meanwhile, the manufacturers utilize these tools to actually make leading-edge chips found in the likes of Apples iPhone or servers at cloud vendors such as Amazon (AMZN US), Microsoft (MSFT US), and Google (GOOGL US). Key firms include Intel (INTC US), Taiwan Semiconductor Manufacturing - TSMC (2330 TT), and Samsung (005930 KS).


The beneficiaries of these innovations include firms that simply design chips and outsource the physical production to foundries such as TSMC (2330 TT). The most notable chip designers include ARM Holdings, Qualcomm (QCOM US), Nvidia (NVDA US), and AMD (AMD US). Taken one step further, the users of these advanced chips help enable cloud and mobile computing as well as future Artificial Intelligence applications, including the hyperscale cloud vendors, smartphone OEMs, software and internet titans, among others. Without advances in nanotechnology, many of the apps and web services we've come to enjoy wouldnt be as robust or useful, if possible at all.


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