IBM to Use Graphene in PCs

Information technology giant International Business Machines Corp. ( IBM - Analyst Report ) recently made a significant breakthrough in silicon replacement, when its researchers developed the first integrated circuit (IC) from wafer-size graphene. IBM intends to use graphene in semiconductors and computers, according to a latest report from Bloomberg.

Graphene is a member of the class of two-dimensional materials discovered by Professor Andre Geim's research group at the University of Manchester. Graphene is an allotrope of carbon and is the thinnest and toughest material ever produced in the world.

As computers are getting faster day by day, silicon is getting closer and closer to its physical limits, and graphene provides a promising potential replacement as it allows faster movement of electrons compared to silicon.

In a recent study funded by IBM along with Samsung Electronics Co. and the U.S. Air Force and Navy, physicists found that the bi-layered graphene can conduct electricity 30 times faster than silicon -- approaching the speed of light.

Bi-layered graphene forms when two layers of graphene bond in a certain manner. Both graphene and bi-layered graphene possess a number of unique properties, such as extremely high electron and thermal conductivity due to very high velocities of electrons and high quality of the crystals, as well as mechanical strength.

Researchers and companies such as IBM, Samsung and Nokia Corp. ( NOK - Analyst Report ) believe that graphene may be the key to developing revolutionary devices, with faster processors that will potentially operate near the speed of light.

Till now, grahene’s utility was limited to the development of more-efficient batteries and foldable touch screens. The new findings support the development of a new species of transistors, which can be used for building computer chips. IBM can use these chips to build fast processors for computers going forward.

According to an earlier estimate provided by BCC Research LLC, the global market for graphene-based products may reach $675.0 million by 2020. However, analysts believe that if companies such as IBM began to successfully use graphene in semiconductor devices, its market would grow significantly going forward.

Moreover, graphene has garnered significant interest in the defense and medical sector. IBM, funded by the U.S. Defense Advanced Research Projects Agency, is researching the material’s ability to create more efficient mobile phones, clearer wireless signals and better radar sensitivity.

Researchers also believe that the material’s magnetic traits may enable IBM to utilize high frequency waves for medical devices that would help in diagnosing diseases quickly.

In May 2011, nine European organizations including the University of Cambridge and Nokia formed a partnership to research graphene. Nokia is reportedly using graphene to build its upcoming mobile device known as Nokia Morph.

Recommendation

The industry-specific innovations and initiatives taken by IBM will have a positive impact on the company as clients are looking to streamline their work process, simplify the IT environment and reduce operational as well as administrative costs. Additionally, we believe IBM’s growing initiatives in the smarter planet, business analytics and cloud computing will drive long-term growth.

However, increasing competition from Oracle Corp. ( ORCL - Analyst Report ) , Hewlett-Packard Co. ( HPQ - Analyst Report ) , Microsoft Corp. ( MSFT - Analyst Report ) and EMC Corp. ( EMC - Analyst Report ) will likely be a headwind going forward.

We have a long-term (6-12 months) Neutral recommendation on IBM. Currently, IBM has a Zacks #3 Rank, which translates into a short-term Hold rating.