Ideas in Equity: New Companies, New Technologies
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I am not a huge fan of the changes in the Wall Street Journal. The publication has not regressed to the level predicted by the cartoonists—“Girls of Wall Street Gone Wild” with glossy centerfolds—but neither has it improved much, in Technicolor.
Yet some of its sections retain the old luster and, for the equity lovers, I review some of the companies recognized in its 2010 Technology Innovation Awards. My choice of six companies out of fifty-something prizewinners and runners-up reflects only my own preferences and my ability to understand the underlying technology, with an expertise borrowed from the days of my misspent physics youth. In particular, I exclude software and biotech companies from my list because I cannot exercise anything close to professional judgment on the advantages and shortcomings of their achievements.
Not all technologically sound companies are competently run or have workable business models. Sometimes, competitors or “second movers” (remember Google versus Yahoo) have a better shot at exploiting a technological breakthrough. The semiconductor industry provides a prime example of this. A substantial portion of modern semiconductor technology was developed in the early 1950s by a startup in Northern California (an area that would become known as Silicon Valley) led by the future Nobel Prize laureate William Shockley. Shockley’s company, Shockley Semiconductor Laboratory, was not a commercial success and was soon overtaken by Fairchild Semiconductor, which at the time was prominent in military electronics; however, the technology and its creators marched on (Shurkin 2008; Lécuyer and Brock 2010).
Shockley invented the metal–oxide–semiconductor field-effect transistor (MOSFET), the basis for all modern electronics. At the time, silicon competed against germanium as the preferred material for electronics, with no clear winner emerging. Contemporary manufacturing technology favored the p-n junction transistor, which was developed by Shockley’s Bell Labs colleague John Bardeen, over the MOSFET.
We now see a return to bipolar Si-Ge alloy devices (think bipartisanship!) as a component base for portable electronics. After their defeat by FETs as electronic components, arrays of p-n junctions resurged as a mainstay of the semiconductor lasers that are now ubiquitous in electronics, found in CD and DVD players, security systems, and construction measuring equipment—to name just a few items.
Shockley earned a Nobel Prize in Physics; Bardeen is the only person to have received the Nobel Prize in Physics twice. Robert Noyce and Gordon Moore founded Intel and created the first microprocessor. Many more engineers from an original Shockley project became stars in their own field. Shockley went on to advocate eugenics through lectures, essays, interviews, and even by soliciting his fellow Nobel Prize winners to donate their sperm. By the time of his death in 1989, he was more infamous than famous.
One can even imagine a “Shockley curse,” a situation in which a company develops a technology that has the potential to revolutionize the field but that is too expensive and advanced to be brought to fruition by any single paying customer. It is only realized when a large number of people start using it, sometimes by infringing on the original patents. For example, integrated circuits (ICs) were funded by the Apollo Moon Program; since then, they have transformed the computer industry.
THE REVIEWS
1) Lightfleet Corp. (Winner, Computing Systems). The idea of using optical interconnects between computers is something which appeared (almost) simultaneously with lasers. Light provides incomparably larger bandwidth and, hence, information capacity, than channels provided by electric connections. The bottleneck that developers faced for decades was the integration of optical signals with the rest of computer hardware. In particular, silicon, the flesh and blood of modern electronics, does not have a direct band gap and cannot absorb or emit coherent radiation in a straightforward way. (Current literature on solid-state optoelectronics is prodigious. See, e.g., Chuang 2009.) Lightfleet provides optical modulators using micromechanical technology in which tiny oscillating mirrors introduce controllable phase shifts into the beams of light. This idea is also not new but its exploitation for commercial technology has been lagging.
The company believes that the best application of its technology is “free-space” or “open-air” transmission, but I am not so sure. Propagation in free space is influenced by dust, secondary reflections, and other intermittent factors. Portability of the server interconnects beyond the room scale does not seem to me to be a terribly important application. On the contrary, using propagation in optical fibers rather than free-space propagation could dramatically increase multiplexing of channels and the density of channels per unit surface area of the device.
2) Cambrios Technologies Corp. (Runner-up, Materials and Other Base Technologies). Cambrios’ silver nanowires remind me of the sponges made of silver threads that are a hundred thousand times thinner than a human hair. While small-scale manufacturing of nanowires existed for scientific needs, Cambrios developed a technology that can produce meshes made of nanowires in industrial quantities. Potential applications are legion: flat-panel displays, high-efficiency solar panels, optical detectors, chemical filters and purifiers, molecular sieves for the sorting of biomolecules, etc.
The last application requires some comment. One possible way to bulk-sort biomolecules is selective excitation of the goo by laser. Molecules in excited states usually have different transport properties in porous media and may stick in the sieve; the same may be true for viruses.
Exemplifying the Shockley curse, Cambrios has not yet secured a single application. The company is too far ahead of the curve with respect to the manufacturing of silver nanowires, which have yet to find a commercial application.
3) InVisage Technologies, Inc., and 4) Nanosys, Inc. (Winner and Runner-up, Semiconductors). My comment above that silicon does not possess properties that would make it a natural material for optical components has a caveat: if one makes sufficiently small structures confining electrons, semiconductor bands can shift in a predictable direction. This technique has been nicknamed “bandgap engineering.”
The most obvious form of confinement is to produce nanometer-sized dots. This concept has been in the air since the late 1980s, but so far nobody has been able to make a practical, cost-competitive optoelectronic device out of it. Both of the companies mentioned above developed competitive versions of the technology. InVisage markets its Quantum Film quantum-dot application for the improvement of the time resolution of photographic devices, i.e. ultimately, for the detection of light. Nanosys engineers think that the best application of their Quantum Rail technology is for the improvement of the quality of optical displays. In particular, with the saturation of our society by the portable video devices, deeper colors and better angular resolution of small displays seem to them as a path to commercial success.
When the quantum-dot technology finally becomes practical, two extant technologies—charge-coupled devices (CCD) and CMOS (complementary metal-oxide-semiconductor) detectors—will be appended to quantum-dot-detection technology. This would open up numerous possibilities. For instance, infrared night-vision devices, which currently need cryogenic cooling to prevent images from being swamped by ambient thermal radiation, could be redesigned without bulky and capricious nitrogen-cooled containers. The technique could also be applied to terahertz detectors, which are a rarity at present. Development of the terahertz region of the electromagnetic spectrum could facilitate medical imaging, surreptitious detection of explosives, and satellite-based astrophysics. Finally, with detectors based on quantum dots or competing technologies, one could have a single sensor with ultra-high bandwidth, which could be adapted to different spectral regions simply by replacing filters, instead of a number of sensors for a particular spectral region (near ultraviolet, visible light, infrared, terahertz, or microwave).
5) Aribex, Inc. (Runner-up, Medical Devices). Aribex is a near-monopolist in the field of hand-held X-ray machines for medical applications. While several companies produce portable X-ray detectors for industrial applications—for example, the sorting of scrap metal—Aribex has used a similar technology to create a compact medical device. Applications include dentistry where large machines are superfluous, field clinics within war zones and natural disaster areas, and forensic medicine. To the best of my understanding, Aribex generates X-rays using a conventional method that has changed little since Wilhelm Roentgen’s discovery of X-rays. The company’s successes in miniaturization are due to the new generation of compact high-voltage electric transformers, a technology that has existed since Nikola Tesla’s time.
The current manner of producing X-rays through bremsstrahlung radiation is wasteful and dangerous and requires expensive materials such as molybdenum and tungsten for targets. Only a tiny fraction of an electron beam’s energy is transformed into X-rays. There are much more efficient techniques for the conversion of electric energy into X-rays, but they necessitate enormous accelerator-type installations. Companies such as Aribex would do well to invent compact, low-energy X-ray sources and integrate them into existing medical technologies.
6) STMicroelectronics (Runner-up, Semiconductors). ST, is a mid-sized, diversified conglomerate that emerged as a joint venture of the Italian firm Finmeccanica (known for its Agusta helicopters) and the French company Thomson (most commonly associated with professional TV equipment). Currently, Areva is the main shareholder through its holding company. ST was honored by the Wall Street Journal for its suite of sensors.
ST advertises its ability to produce “sensors on a chip.” This approach replaces a diverse arrays of sensors (temperature gauges, motion detectors, touch sensors, etc.) with devices using ICs and, occasionally, micromechanics components, which can be assembled into a sensor suite in a routine way that is similar to the way in which a personal computer is constructed.
In additional to the most obvious applications in the defense and security fields, one can envision industrial or even household uses: an electronics suite that utilizes TV monitors or motion detectors to spot intruders in the house; temperature sensors to warn of inside or outside fires; and short-range radar to identify incoming vehicles, along with a “black box” to dump this information securely for further processing. This architecture could be adapted to different areas: for instance, a house-monitoring suite could feature an earthquake sensor for California and a weather station for Kansas.
I wish well all the inventors and investors who provide these and others masterpieces of ingenuity to our world that is often absorbed in more superficial pursuits.
REFERENCES
Chuang, Shun Lien. 2009. Physics of Photonic Devices (Wiley Series in Pure and Applied Optics)
Lécuyer, Christophe, and David C. Brook. 2010. Makers of the Microchip: A Documentary History of Fairchild Semiconductor
Shurkin, Joel N. 2008. Broken Genius: The Rise and Fall of William Shockley, Creator of the Electronic Age
Disclaimer. The author does not endorse any particular investments. He has neither monetary nor other tangible interest in the companies reviewed above, nor does he represent their competitors.
–Peter Lerner, PhD, MBA is a semi-retired financial researcher who lives in Ithaca, NY. Last semester he taught Business Statistics in one of New York’s MBA programs.
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