If you're unfamiliar with the link, semiconductors have been likened to the 'picks and shovels' of the AI boom. In other words, the necessary tools are needed to expand the penetration of AI throughout the global economy. There is no doubt that this is a sector that offers vast opportunities for growth. For better or worse, corporations are increasingly adopting AI into their workplace. This is an unstoppable trend.
The AI revolution promises major disruption, especially in white-collar fields like law, accounting and finance. This can be disastrous for many professionals who may lose their jobs in this new AI era.
Still, it is poised to be a boon for corporations to leverage greater productivity. From the graduate to the seasoned practitioner, no one is immune to the threat of AI.
But as they say… 'If you can't beat 'em, join 'em!'
The resources sector does not seem like an obvious choice to do this. But remember the explosion in gallium and germanium supplies last year. Two minerals are important in semiconductor manufacturing.
China has a strong grip on global supply and has used its dominance to retaliate against Western trade pressures as early as 2023. Market.
A handful of explorers rose on the back of these geopolitical upheavals. But are there any other key minerals to play a key role in semiconductor manufacturing?
Demand for HPA is diverse and driven by two major growth drivers: renewables and artificial intelligence.
A true 'future facing metal.' Yet, few people understand or know about the important role of high purity alumina. According to Grandview Research, the global HPA market is expected to be worth approximately $3.2 billion in 2022.
However, it is expected to grow at a compound annual growth rate (CAGR) of around 22 percent from 2023 to 2030. HPA is a highly refined form of aluminum oxide with a purity of over 99.99%! Unrefined aluminum contains small amounts of trace elements such as silica and iron, which give it quite different properties from HPA.
But once these 'impermissibles' are removed, the magic of HPA begins to emerge. High transparency, chemical inertness, high thermal conductivity and resistance to thermal shock… are some of the properties that make HPA ideal for semiconductor manufacturing.
This material is used to make small wafers and insulating layers around the chips. However, this is not the only market for this unique item.
It is as transparent as glass but its strength is very high. This means it is used for optical lenses, medical devices and certain windows. In fact, purified alumina is so strong that it is used as 'transparent armor' for the military.
Meanwhile, it is perfect for making scratch-resistant camera lenses and smartphone screens. But the applications are still vast.
HPA plays an important role in lithium-ion batteries. Here, it acts as something called a 'separator'.
A thin, porous membrane that separates the positive and negative electrodes (anodes and cathodes) in a battery cell. Separating the electrodes also allows free flow of ions during charging and discharging battery cycles.
This is crucial for preventing short circuits in EV batteries, thus eliminating the problem of spontaneous explosions that can cause electric vehicles to explode. Nevertheless, the largest demand for high-purity alumina comes from the LED sector.
According to a report by Grandview Research, this is 49 percent of the total demand.
You can see the full demand breakdown below:
Two things are worth noting here: 'phosphor' refers to the light emitting region, while 'sapphire' refers to the specific glass derived from HPA.
A changing landscape in the resource sector
Commodity markets offer enormous opportunities, particularly those associated with minerals that have unique properties and broad technological applications.
That's a big change from the late commodity boom of the early 2000s. Here, the focus was on bulk tonnage iron ore and base metal operations, which rapidly expanded Chinese infrastructure.
However, I believe investors will need to be much more targeted with their investment choices in the coming years.
The coming resource boom may not be a tide that floats all boats as it did during the previous cycle. Certain commodities will feature prominently, just as lithium has over the past few years.
And it's the companies that can add value and find a niche in the market that can benefit the most.
James Cooper runs the commodities investment service Diggers and Drillers. You can also follow him on X (Twitter) @JCooperGeo.