The main reason behind cobalt’s current popularity is its use in electric-vehicle (EV) battery technology. But there are other pieces to the puzzle. Cobalt only naturally occurs in compounds with other metals, namely nickel and copper, and roughly 60% of cobalt on the market comes from the Democratic Republic of Congo. Concerns about future supply, coupled with the EV craze, have sent the metal’s price skyward.
And battery companies aren’t the only ones interested in cobalt. Semiconductor equipment vendor Applied Materials (NASDAQ:AMAT) has outlined a second long-term use for cobalt in leading-edge semiconductor technology. In fact, Applied is calling cobalt the most significant new material to come to semiconductor manufacturing in the past 20 years, since the 1997 introduction of copper interconnects.
Cobalt over copper and tungsten
Semiconductor companies have been experimenting with cobalt for some time, but it’s really Applied Materials that has gone all-in on cobalt in recent years. Per its June 5 presentation, cobalt will increasingly replace copper interconnects (the wiring between transistors) and tungsten contacts (the surfaces between transistors and interconnects).
The reason is that at higher densities (thus, smaller widths) beyond a certain threshold, cobalt’s chemistry begins to outperform these other metals. While copper and tungsten work better on chips of 10 nanometers and above, cobalt works better in thinner layers. As copper and tungsten layers become thinner, they begin to “scatter” electrons, increasing the chip’s resistance (and thus slowing things down). Overall, Applied Materials believes cobalt could increase chip performance by 15% over copper and tungsten at smaller die sizes.
As described by Applied Materials product manager Kevin Moraes:
[I]f you need a pictorial, think of a 100-meter sprint being — copper represented by a man who’s had more than a few drinks, finding a meandering path to the finish line. And cobalt, represented by … Usain Bolt, making [a] lightning-fast straight path to the finish line.
In the coming age of artificial intelligence, leading-performance chips will need every speed advantage they can get, so cobalt is likely to be part of this battle.
The Applied advantage?
Applied Materials has been working with cobalt-deposition equipment since 2012, and now claims it has the most complete cobalt solution compared with Lam Research and KLA-Tencor. Said Moraes:
None of our competitors have a solution that comes anywhere close to what we have, and in terms of creating the value that we create with this cobalt solution compared to what we have. So no competitor today, for example, has a viable or a production-proven CVD [chemical vapor deposition] cobalt solution as an example.
Whether Applied is really that far ahead, and whether Lam or KLA-Tencor has the ability to catch up, are open questions. Applied is the largest of the three, has the biggest research and development budget (see the chart below), and was the only company to give a recent presentation specifically on the cobalt breakthrough. So perhaps cobalt could be a differentiator in the semiconductor equipment industry over the medium term.
With cobalt’s importance in (current) electric-battery technology as well as in leading-edge integrated chips, it’s easy to be bullish on its prospects. But remember, the price of cobalt has skyrocketed over the past few years. Should the price of cobalt continue to surge, its possible cost could become a barrier to implementation, or encourage the use of substitutes.
In addition, Intel says that it is attempting to use cobalt in its new 10 nm chips. However, Intel has delayed volume production of these chips several times, most recently saying they’ll be ready for volume production in 2019. While the cause of the delay is unknown, it’s possible the implementation of cobalt is playing a part. And earlier in the year it was reported that Apple was looking to secure supplies of cobalt, so Applied Materials isn’t the only tech company in need of a cobalt supply.
The cobalt story is certainly interesting, for not only those investing in the metal itself, but also those investing in electric-vehicle or semiconductor stocks. Cobalt may very well be the most controversial commodity of the 21st century, so all tech investors should be monitoring the metal’s supply and demand.