Nanotronics – Microscopes that use AI and VR
Way back in 2003, the Black Eyed Peas were asking where is the love and George Bush was declaring victory over Saddam Hussein. In the same year, G Dubyah signed the 21st Century Nanotechnology Research and Development Act which committed somewhere around $771 million for nanotechnology R&D across 10 federal agencies. This captured the attention of investors, and we saw an incredible amount of public interest on “how to invest in nanotechnology”. One obvious investment theme was a picks-and-shovels play on microscopes. If you’re going to be dealing with the very small, then it only makes sense to invest in microscopes. At that time, the two main players were seen as Veeco Instruments (NASDAQ:VECO) and FEI Corporation (NASDAQ:FEIC). Let’s say you bought shares in both at the end of 2003. Here’s how you would have fared:
- Veeco Instruments (NASDAQ:VECO) – In October of 2010, Veeco completed the sale of their microscopes business to Bruker Corporation (Nasdaq:BRKR) for $229.4 million in cash. If you recall, Veeco was largely known for their Atomic Force Microscope (AFM) business. That left Veeco with a focus on providing thin film process equipment used to develop and manufacture LEDs, solar panels, hard disk drives, and other devices. Return-to-date: -27%
- FEI Corporation (NASDAQ:FEIC) – Investors in FEIC fared a whole lot better. If you bought shares in this stock in December of 2003, you would have sold them to Thermo Fisher Scientific (NYSE:TMO) in September of 2016 for an increase of about +345% (compared to a NASDAQ return of +165% over the same time frame). If you recall, it was rumored that Thermo Fisher was also sniffing around Illumina for a possible acquisition which means they’re touching on all kinds of technology themes we like to discuss. Return-to-date: +345%
If you bought equal amounts of stock in both companies, you would have realized a combined return of around +259% (assuming you sold FEIC when they were acquired). While we may be tempted to pat ourselves on the back and gloat about what genius stock picking skills we have, we actually didn’t do well at all. That’s because investing in a broad market NASDAQ ETF would have returned +241% over the same time frame. Sure, we made an extra 18%, but we took on a ridiculous amount of risk to do so.
While there may be other stocks out there to play this theme, we’re here to talk about an interesting microscope startup backed by Peter Thiel who sits on their board. Let’s take a look at some of the latest and greatest microscope technologies on offer from a startup called Nanotronics.
Founded in 2010, Ohio startup Nanotronics Imaging has taken in nearly $50 million in funding so far from Peter Thiel and the Government of Dubai. The startup describes itself as being at the cutting edge of technology when it comes to microscopes and the software used to run them. Before we get too far along here, we want to give you a quick refresher on some terminology:
- Metrology – The science of measurement and a way to label those companies involved in selling microscopes and everything that comes with them.
- Optical Microscopes – uses bog standard magnification to see all those granular details. The microscopes you used in high school were likely this type.
- Electron Microscopes – bombards the specimen with electrons to see at an extremely granular level of detail
- Scanning Probe Microscopes – uses a little probe to “feel” things and then display what is felt as a visual image
It’s useful to understand this terminology because each type of microscope has unique areas of usefulness and limitations. Intuitively, it would make sense that an optical microscope can’t achieve the same resolution as a microscope that uses electrons to visualize a specimen. This all becomes more interesting when we look at some of the Nanotronics products on offer – like these futuristic contraptions:
The nSPEC machines you see above are automated optical microscopes, and they’re capable of “seeing” at a resolution of down to 250 nanometers. The primary use cases for these machines are for quality control inspections in the following areas:
- Advanced Materials – used to inspect advanced polymers, films, graphene, batteries, coatings, and biosynthetics.
- Semiconductors – to inspect wafers at every step of production from bare wafers through post dicing and post-packaging.
- Automotive – used to inspect automotive displays, tires, batteries, sensors, LEDs, LiDAR, and power conversion chips.
- Consumer Electronics – used for inspection of displays, screens, casings on smartphones and wearables
The company has an entire automation division that focuses on using artificial intelligence algorithms to identify quality problems automatically. In one case, the machine was used across the entire supply chain of a smartphone across multiple factories and continents: the screen glass, the camera sensor, the LED, the battery, the processor chip, the phone casing, and the film backing for the screen.
The standard sample size that the microscope can examine is 7.87 inches by 7.87 inches which is a remarkably large area to be examining under such a high resolution. If you want to get even more granular, there’s an optional AFM probe that can be added to the tool which “sees” at resolutions of 1 nanometer. Even at that resolution, the system can scan a four inch sample in about 6 minutes.
At its core, Nanotronics considers themselves to be a software company:
Combining optical and atomic force microscopy with machine learning and artificial intelligence affords our products the capacity to learn in minutes what presently takes weeks to train for.
They’ve taken microscopes as a commodity and made them a specialty by introducing new technologies like artificial intelligence, robotics, and even virtual reality (VR). Yes, that’s right. They have a VR add-on that let’s you get down there at the nano level and then walk around looking at all the microscopic objects around you in an amazing 3D world. Talk about an engaging way to teach young people science. Maybe we can all put down our smartphones, tune out the Kardashians for a minute, and start promoting the use of cool technologies like this in our high schools so that we can actually do something meaningful to increase the number of kids interested in technology.
The ability to see at nanometer level resolution has all kinds of use cases aside from just quality control inspections. In one interesting case we came across, there’s actually a drug company called Recursion Pharmaceuticals that uses a microscope to see how cells react when exposed to drugs. They use this method to test drug compounds. For example, they’ll fill 384 wells on a plate with cells, and then introduce 384 different drug compounds. They then look at more than 1,000 different physical attributes of the cells to see how they’re responding. That might be one of the most incredible things we’ve ever learned about, and they’re doing about 100 plates a week. (On a side note, Recursion just closed a $60 million Series B funding round this past week). You can be sure that there will be even more uses for Nanotronics hardware and software as time goes on and innovative minds continue to explore things at the nanometer level where magic truly happens.
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