What did God do on the first day? He said: let there be light. Yes, even God started with light.
Light is everywhere in our lives. So much so that we might even forget its importance. You are currently reading this sentence on a screen that emits light. Your eyes process this light to send the right signals to your brain. The computer gets the data from a computer chip, that is – at its core – created through lithography: a technology that uses light to make adjustments to a wafer on an incredibly small scale. The data is sent to your computer through the internet, which may be using fiber optics: a wiring system that enables data to be transmitted through light. And I would almost forget: you are probably sitting in a house or room with numerous light bulbs to enable you to work when it is dark outside.
What’s more, light is even one of the core enablers of life on our planet. While light is not a requirement for life (as many creatures live in the depths of the ocean where hardly any sunlight can reach), plants do grow through photosynthesis. Without photosynthesis there would be no plants, and not enough oxygen for us to breathe.
“In the four elements of earth, wind, fire and water, light is represented by fire. The first human who mastered control of fire, did not realize what power he actually started to take control of.”BeursWolf
The omnipresence of light does not necessarily make it a good investment, but I still want to bring it forth as an investment theme, because light can be a great way to invest in both core value and future growth. In this post I will first (try to) describe what light exactly is. Then, I will give some examples of companies that derive their value from light technologies.
What is Light?
Light is electromagnetic radiation that travels at different wavelengths. These wavelengths can be mapped on a spectrum, where the range between 400 to 700 nanometers is visible to the human eye. Interestingly, colors originate across these wavelengths. Shorter wavelengths that we cannot perceive are known as ultraviolet light, and longer wavelengths that we cannot perceive are known as infrared. Other types of radiation that can also be classified as light in the scientific sense of the word are gamma rays, x-rays, microwaves and radio waves.
The previous section is a short summary of the introduction of the Wikipedia page on light, and it provides all information that is necessary to understand how some businesses in this area ended up where they are today, venturing from light bulbs to cameras and medical technologies.
Something that is interesting to know about a natural force such as light, is that it has some properties that help us understand the world around us. For example, the speed of light in a vacuum is constant across the entire spectrum. So constant, that a meter is now defined on the basis of the speed of light. But why would we define a meter using light? Well, because it is a natural constant. In the past, nations used to safekeep an iron bar of exactly one meter in length to make sure a meter remained a meter. With this new definition we no longer need to depend on such an artefact. Currently, there are seven natural constants defined in the International System of Units. Read more about the history of the metre (if you are interested) here.
Personally, after reading a lot of books about science, philosophy and nature, I am convinced that if we were to ever build a quantum computer, or ever manage to crack the code to time travel, it will start with light. Also, my personal conviction is that the first truly bionic part of the human body we will develop (except for limbs) is the human eye, which is a natural light processor.
Businesses Across the Light Spectrum
The possibilities of light are truly endless, but there are some examples that show how light technology can be transformed into profitable products.
The Light Bulb
While everyone is currently replacing old light bulbs with LED lights, the light bulb was a truly radical innovation. Imagine working next to a candle or real fire that you had to light up with a match every single time. Suddenly the light bulb arrives, a technology that – if you were to have access to electricity – would safely and instantly give you the light you need. Also think about the possibilities that came with the electrical infrastructure and the light bulb. Would you be able to drive a car (or a bicycle or any other moving vehicle at higher speeds) at night if it were not for headlights?
Some companies that are well-known for their position in the lighting industry are Thomas Edison’s General Electric ($GE) and Philips ($PHIA.AS). Both companies have spun-off their lighting divisions. Philips Lighting is now separately listed under the corporate brand name Signify ($LIGHT.AS) and General Electric recently sold its lighting division to Savant Systems.
The (Digital) Camera
In the past, a painting was something only the rich could afford. Just walk through a museum and imagine the work that went into a painting, where we currently can do (not artistically though) the same with a small digital device. The invention of the camera democratized the capability of an individual to put something that could first only be seen once with a human eye on physical paper.
The first cameras simply started out as systems that could alter materials in areas that were exposed to light. Eastman Kodak ($KODK) was the first corporation to commercialize the camera for public use. Today the most widely used cameras are digital cameras in smartphones that use highly sensible sensors to capture light and transform it into images on our digital screens.
The most relevant players in the professional digital camera market are Sony ($6758.T), Canon ($7751.T) and Nikon ($7731.T), with still many competitors in the space such as Fujifilm ($4901.T) and Olympus ($7733.T). Consumers currently mostly use smartphones produced by Apple ($AAPL) and Samsung ($SSUN.F) to take their pictures. However, these smartphone producers hardly ever make their own camera sensors (for example, Sony is Apple’s camera supplier).
Many home appliances are also built upon light technology. Think about a radio that receives radio waves, or a microwave that uses electromagnetic waves to heat food. These appliances were the first entries of more sophisticated light technologies making it into our homes. Later on, the television set was added to the portfolio, which connected the capabilities of the camera to the experiences of a viewer at home (with of course the projector with classic ‘film’ as an invention in between).
It is no surprise that companies such as Philips, General Electric and Sony also have a large and dominant position in the markets for these types of home appliances.
Earlier I mentioned x-rays as a type of light. If you haven’t guessed, this is one of the most well-known imaging technologies that made it into our hospitals. Medical technology is a lot about making images of the human body for doctors to observe and explain illnesses and pains.
The x-ray is just an example of a large range of appliances built on light technology that are used by medical professionals around the world. For example, microscopes and optometric equipment also use light technologies (through the glass that is used) to enlarge images or to alter our eyesight.
The largest medical technology companies with their roots in early light technologies are the healthcare divisions of, again, Philips and General Electric, but also Fujifilm.
The Birth of the Semiconductor
There are still not many people who know how unique some technological capabilities are that we need to build our everyday technological appliances. A computer chip starts with a semiconductor, and a semiconductor starts with a wafer. Put very simply, a wafer is a clean slate on which the design of the semiconductor is ‘written’. However, as we need to go smaller and smaller to make faster computer chips, these machines need to become more and more precise. This is where we arrive at Moore’s Law: the law stating that the number of transistors on a computer chip will double every one to two years.
How do we make adjustments on such a small scale? With light. And how many businesses have the technology to make adjustments on such a small scale? Three (ASML ($ASML.AS), Nikon and Canon). And how many businesses have the technology to make adjustments on a scale small enough to enable the next generation of computer chip technology? One. This is where we arrive at ASML, which is currently the only company that is capable of successfully building extreme ultra-violet (EUV) lithography machines. Nikon, for example, is still stuck with immersion lithography systems. I won’t go into the technical details too much from here, but I can recommend you to watch this video to see how incredibly sophisticated this technology is (and why there are currently still disputes ongoing as to whether AMSL will be allowed to export such a machine to China).
By the way, I was going somewhere with this sequence of examples. This sequence simply comes full circle right now, because the history of ASML goes back to the innovation lab of… Philips. ASML, short for ASM Lithography, once started as a collaboration between Philips and Advanced Semiconductor Materials International ($ASM.AS) in 1984. Today it is a highly priced stock and a company that should be on the watchlist of every technology investor. However, the path towards this position has not always been that rosy, which further showcases how hard it is to develop this type of technology.
To understand how small the scale of operation is when talking about wafers and semiconductors, it is worth checking out Nikon’s universcale page.
The Future of Light Technology
We have come a long way in manipulating light and using it for the benefit of our society, but there are still areas in which light technology can become more significant, and it is hidden in the innovation portfolios of some of the companies that are mentioned in this post:
- WiFi through light: Signify developed LiFi, a technology where data can be transmitted through infrared light signals at a speed somewhere between 4G and 5G. Alphabet ($GOOGL) has an X project called Taara that is also exploring internet through light beams
- Autonomous vehicles: self-driving cars are coming and there are two technologies that will enable this breakthrough. One is LiDAR and the other is computer vision. Both use different light technologies, of which especially the first one is not yet applied on a large scale
- Agriculture: plants grow faster when exposed to certain types of light. Agricultural lighting solutions can be an enabler of food production on a larger scale to serve the ever growing population on our planet. In the context of food production, it can also be applied to Aquaculture, as Signify demonstrated in Australia
- Regenerative medicine: cell cultures can be used to grow human organs or parts of human cells that can replace damaged tissue. These cultures can be monitored with highly precise camera systems. Both Fujifilm and Nikon are developing products for the regenerative medicine industry
- Solar Energy: solar panels use technology to turn sunlight into electricity. The more efficient this can be done, the more energy from the sun we can harness for our personal use. Tesla ($TSLA) and many start-ups focus a lot on the development of new and visually pleasant designs
- Quantum Computing/Photonic Computing: an area I am going to admit I am not smart enough to explain: light technology is possibly the enabler to make quantum computing feasible through photonic computing. Simply put, where current computers use electrons, photonic computing uses photons for computations
Photonics is one of the key enabling technologies (KET’s) identified by the European Union.
My Current Holdings in the Light Space
I currently own two stocks in the space of light technology, but I have many of these stocks on my watchlist. Whenever the leaders in the space of light will be at a point where I think they are interesting from a valuation standpoint, I will take a position in them.
The two stocks I currently own are Signify and Nikon. Whenever I have finished my posts on these two stocks, I will post a link to them right here. For now, I think I can best show why I like these stocks through the visions of these companies as stated in their respective annual reports:
- Signify: “Our purpose is to unlock the extraordinary potential of light for brighter lives and a better world”
- Nikon: “Unlock the future with the power of light. Unleashing the limitless possibilities of light. Striving to brighten the human experience. Focused, with purpose, on a better future for all. THIS IS THE ESSENCE OF NIKON”
I likely missed some light technologies, developments, and promising companies in the list above. Please add your remarks and contributions in the comments.
Light is boring and simple. Light is entertaining and innovative. In the four elements of earth, wind, fire and water, light is represented by fire. The first human who mastered control of fire, did not realize what power he actually started to take control of.
Light is something we will always need and something we will always use. Light brought us to the present, and light is likely going to bring us to the future. That is why I think light is an investment theme to always look out for.