Material Question
Comment of the Day

March 13 2015

Commentary by Eoin Treacy

Material Question

This article by John Colapinto for the New Yorker offers an interesting history of the potential and challenges represented by graphene. Here is a section: 

Friedel offered a broad axiom: “The more innovative—the more breaking-the-mold—the innovation is, the less likely we are to figure out what it is really going to be used for.” Thus far, the only consumer products that incorporate graphene are tennis racquets and ink. But many scientists insist that its unusual properties will eventually lead to a breakthrough. According to Geim, the influx of money and researchers has speeded up the usual time line to practical usage. “We started with submicron flakes, barely seen even in an optical microscope,” he says. “I never imagined that by 2009, 2010, people would already be making square metres of this material. It’s extremely rapid progress.” He adds, “Once someone sees that there is a gold mine, then very heavy equipment starts to be applied from many different research areas. When people are thinking, we are quite inventive

Samsung, the Korea-based electronics giant, holds the greatest number of patents in graphene, but in recent years research institutions, not corporations, have been most active. A Korean university, which works with Samsung, is in first place among academic institutions. Two Chinese universities hold the second and third slots. In fourth place is Rice University, which has filed thirty-three patents in the past two years, almost all from a laboratory run by a professor named James Tour.

Eoin Treacy's view

The intersection of graphene, solar innovation and concern for the environment suggest that the greatest application of the material will be in the energy sector. The issue is that a number of issues with mass production and just getting graphene to perform as hoped remain to be solved. There is no reason to believe they will not be solved but the lead time to getting marketable products and earnings is an unknowable. 

Companies that have attempted to survive solely on the marketability of their graphene production are languishing. For example Graftech has collapsed from its 2011 peak near $24 to $4. It has at least paused in the region of the 2008 lows but a sustained move above the 200-day MA will be required to signal a return to demand dominance beyond short-term steadying. 

Samsung Electronics has rallied over the last four months to test the progression of lower rally highs evident since the 2013 medium-term peak. Some consolidation is possible in this area but a sustained move below the 200-day MA, currently near KRW1.3million, would be required to question medium-term scope for additional upside. 

Samsung Electro Mechanics represents the company’s lower margin components manufacturing business. The share trended lower between its 2010 peak and October 2014 when it found support in the region of KRW40,000. It continues to extend its rebound and while overbought in the short-term a sustained move below KRW 60,000 would be required to question medium-term recovery potential. 

The fact that the Won, which had been one of the strongest currencies in Asia, hit a medium-term peak around the same time as the above shares found support is unlikely to be a coincidence.

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