The Converging Technologies behind Emerging Themes: Novel Food, New Energy, and Space
Our TSG Global Innovation Survey draws a global innovation landscape based on answers from 400 executives. What makes the report stand out is the context delivered by our Singularity Think Tank members. Why does space mining resemble the Gold Rush in the Wild West? Which Advanced Materials enable the path to sustainability goals? What does cell-based protein have in common with the cell-phone industry in the 90s? And how do technologies converge to create better solutions, products, and services?
TSG specializes in evaluating applied innovation across sectors, time, and industries. Our core business is to understand value chains of underlying technologies, and with that, innovation cash flows. Our Singularity Think Tank stands at the basis of this process. As a result of our regular expert consultations, viable innovation appears on our radar, and can thus be monitored through our unique scoring methodology which assigns a Singularity Score to each company in our universe. With this metric, we continuously quantify companies’ and industries’ degree of innovation and make applied innovation in equity accessible for investors.
The TSG Global Innovation Survey provides both a retrospective and a future view on applied innovation, and paints a comprehensive innovation map. Respondents — C-level executives of listed and unlisted companies — agree on the increasing industry importance of applied innovation. Three key Singularity Sectors stand out: Big Data, IoT, and AI — technologies that drive progress individually and that convergence to spark innovation leaps in various fields.
Technology convergence as the key to sustainable progress
Convergence is described as the act of “moving toward union”. Innovation is often the result of combined technologies moving toward a common goal. Today’s innovation leaps are built on “micro-revolutions”, some of which transpire almost unrecognized. Our aim is to uncover the value chain elements and enablers behind the innovation happening today. We identify the current innovation leaders, weed out companies who lost their edge, and provide investors guidance where buzzwords blur their view. Our survey affirms what our data already tells us: that only a holistic view on technology can capture innovation themes. To illustrate, New Energy, Novel Food, and Space have all been accelerated by progress rooted in more than one technology. Let’s have a closer look.
The Internet of Energy and the commoditization of electric vehicle manufacturing
One-third of global executives plan to invest “extensively” in New Energy over the next two years. Some of the key technologies that underlie their interest when it comes to New Energy are Big Data, IoT, AI, Blockchain, and Advanced Materials. IoT, for example, has the potential to help in the smart distribution of renewable power and is closely linked to energy decentralization. As the energy transition advances, smart sensors, AI, and data management will enable the buildout of a smarter grid but also an ‘Internet of Energy’ where intelligent grid-devices can be combined with cloud high-speed communication, cloud technology, and real-time processing of data that will enhance decision-making. AI is applied in the forecasting of demand and supply, the management of distribution, and development of predictive maintenance models in the Energy and Utilities sectors. It ensures that power supply is matched with power demand and aids in reducing material waste.
In addition, “Advanced Materials play a key role in power generation and storage. Electrification needs enormous amounts of resources, and novel material technologies can reduce the usage of materials and increase the efficiency of transmission or extend the lifespan of batteries,” says Andres Gujan, Co-Founder of Carnot Capital. “Another example in this field is the development of recyclable composite materials that are rigid enough for wind turbine blades, addressing the current challenge of existing blades ending up in landfills at the end of their lifecycle.”
Innovation shifts in value chains: tracking down pricing power
Looking at the New Energy theme through a Singularity lens, we see an increasing commoditization of Electric Vehicle (EV) car manufacturing. As legacy Original Equipment Manufacturers (OEMs) make considerable inroads into the market, we believe the area of value-add has shifted more squarely towards battery cell development and manufacturing of batteries. Acknowledging this shift, we increasingly concentrate on the EV battery value chain and related infrastructure and not the car as the end product. We also increase our focus on companies involved in the production of battery energy storage systems (ESS). Such systems find growing demand as a solution for more efficient storage and distribution of renewable energy and play an important role in the energy transition.
Noteworthy innovators in this area include Contemporary Amperex Technology Co. Limited (CATL, 300750 CH, Singularity Score (SC): 82), the world’s largest producer of lithium-ion batteries for electric vehicles and energy storage systems, and LG Energy Solution (LGES, 373220 KS, SC: 100). LG Energy Solution has 20,000 employees, and holds roughly 20% of the global electric vehicle (EV) battery market, supplying over 20 OEMs across Europe, North America, and Asia, including Tesla, Volkswagen, and General Motors.
James Khedari, Singularity Think Tank expert and Portfolio Director of Low Carbon Fuels and Services at Viva Energy Australia, points out the importance of data management, AI, IoT, and storage in the shift to renewables:
“Building renewable energy capacity is not a solution in itself unless you can optimize and shift supply from periods of peak supply to peak demand during the day. Because many utilities also charge customers based on peak demand, battery electricity storage systems that can smoothen the demand profile can unlock large savings for end-users. Energy storage systems are an essential part of the energy transition,” says Khedari.
Advanced Materials technologies for greener solutions
Another “theme” we naturally capture with our innovation focus is sustainability. In our view, innovation is the catalyst for circularity. According to our survey, the technologies at the forefront of building more sustainable global systems in the future will be IoT, Big Data, and Advanced Materials (see chart).
“Advanced Materials are extremely important not only for energy efficiency but especially for the upcoming circular economy. Advanced Materials can reduce material consumption and waste, increase recyclability, enable biodegradation, and prevent pollution — all decisive factors for a successful circular economy,” explains Andres Gujan, “One major technology trend is the move away from fossil-based chemistry to other, more sustainable biology-based materials. Examples include the substitution of Polyvinyl Chloride (PVC) with more environmentally friendly alternatives or bioplastics that are produced from biomass sources such as vegetable oils or wood.”
In the infrastructure sector, Advanced Materials technologies contribute to greener, on-site, and more recyclable construction. In industrial processes, Advanced Materials enable the reduction of waste, efficiency of resources, and substitution of critical raw materials. Contributions in clean energy range, for example, from next generation photovoltaics and advanced ceramics to corrosion-resistant coatings and phase-change materials. In the consumer sector, Advanced Materials address customer demand for lighter, stronger, and greener packaging such as biodegradable polymers and nanocomposites. In addition, Advanced Materials help to control pollution of air and water.
Cell-based food is just a matter of time
Novel Food encompasses the development of new proteins, e.g. fermentation-, plant- or cell-based proteins and the manufacturing processes, products, and services associated with it. Robotics, 3D Printing, and AI will play a key role in this market. Almost one-third of respondents want to invest extensively in the next two years.
Sandhya Sriram, Co-Founder, Group CEO and Chairman of Shiok Meats Pte. Ltd, thinks that “in the short-term, the industry will expand in the next five to eight years into ten to fifteen countries globally, with at least ten cultivated meat products in supermarkets. The cultivated meat industry should be able to displace factory farming in the next thirty years.”
HonMun Yip, a highly experienced investor in the alternative protein industry, adds: “I foresee the cultivated food industry going through a similar transformation like the cell-phone industry. When the time comes, cultivated food will be so accessible and so well-accepted that nobody will have any doubts about it.”
Feeding into customer acceptance, innovative ingredients and flavor solutions will support the growth of the alternative protein segment. Some of the most transformative innovators in the food additives space include Givaudan (GIVN SW, SC: 54) and International Flavors & Fragrances Inc (IFF US, SC: 74) — the latter being a new addition to the Singularity Strategy as per our most recent May 2022 rebalancing. Further beneficiaries are biotech companies and bioreactor producers.
Space cowboys pioneering the infrastructure
One-fourth of the companies in our survey show interest in extensively investing in the Space industry. Our Think Tank provides some compelling context to this finding:
“There are a lot of opportunities in Space and the commercial sector is starting to invest in new technologies more heavily than governments,” says Collin Lee, Director of Frontiers, General Dynamics Corporation. “However, commercial investments are sometimes less focused — they can be driven by fear of missing out in search of a ‘killer app’ and lacking a long-term strategy. The situation is similar to the Gold Rush in the Wild West where at the beginning, only a few people made money by mining gold while the railroad companies profited greatly from facilitating transportation, providing an infrastructure, and services to tap into the opportunity.”
Future Space trends for the next decades — in the commercial and government sectors — include, for example, refueling of rockets in orbit, waste collection and recycling, resource extraction with robots on the moon or on asteroids, as well as equipment repair on satellites and space stations in orbit with the help of 3D Printing and Robotics.
Lee adds: “Getting into space in search of resources is the easy part. Getting extracted resources back to earth and maintaining a cost curve will be the hard part. However, this story is certainly going to unfold.”
A precondition for space mining is the development of an ecosystem in space with internet-like capabilities (e.g., network of satellites, mesh communication). The connections in space are intermittent, disrupted, and latent and do not yet have predictable paths like on earth, where there are clear data centers, regional spokes, and undersea cables. Real-time performance needs to be achieved so that many applications can succeed. So — in line with the Singularity mindset of applied innovation — what is already possible for the space cowboys of today?
“Once the costs of launch dropped precipitously, early business cases for new space companies focus on remote sensing from orbit, things like listening and taking pictures of the earth’s surface with radio-frequency, electro-optical, and infra-red sensors,” recaps Lee.
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