By: Gary Anglebrandt
CRAIN’S DETROIT BUSINESS
June 13, 2013
LANSING, MICH. — Tucked into a nondescript backstreet on the outer edge of Lansing is one of the world's largest makers of a "miracle material" based on simple graphite. What's more relevant to the company that makes graphene — XG Sciences Inc. — as well as the rest of the world is the material's potential in familiar industries, such as those that make automobiles and cellphones.
Graphene and its close relative, graphene nanoplatelets are carbon-based nanomaterials that are 100 times stronger than steel, incredibly thin and light, transparent yet nonpermeable, stretchable and great at conducting electricity and heat.
With properties like these, the list of possible applications is limited mainly by the imagination. Heat dissipation in cellphones and stronger, lighter automotive body materials are two immediate examples.
Last year, XG relocated to a larger headquarters with a production capacity of 80 tons of graphene nanoplatelets, moving from a pilot plant with an annual capacity of 3 tons. That, along with its sizable number of customers — about 600 — its position as a price leader and its relationships with large corporations, gives XG an edge in this nascent industry, according to Boston-based Lux Research Inc., which tracks the graphene industry.
CEO Mike Knox and three Michigan State University scientists started XG Sciences in 2006 using technology licensed from the school — although the company's current core technology was developed in-house — and $500,000 in seed funding from investors including Capital Community Angel Investors in Lansing and Ann Arbor Spark, Knox said.
The company's chief scientist and a co-founder is Larry Drzal, a professor at MSU and director of the school's Composite Materials and Structures Center. Liya Wang, whose résumé includes time as director of emerging technologies at A123 Systems Inc., is the current head of R&D.
The company has raised $10.5 million in four rounds of funding and is working on another round. All the money has come from corporate and private individual investors — no venture capital or private equity funding, Knox said.
Hanwha Chemical Corp., part of the South Korean conglomerate Hanwha Group, bought 19 percent of XG in 2010 for about $3 million, according to a Hanwha press release at the time. The next year, another major Korean company, steel conglomerate Pohang Iron & Steel Co., or POSCO, bought 20 percent for an undisclosed amount.
That backing gives XG the money and market knowledge to commercialize graphene products, said Anthony Vicari, a research associate at Lux Research.
"It's one of the things that allows XG Sciences to remain a leader," Vicari said. "It knows exactly what customers need."
Customers and licensing agreements
Graphene is made of carbons arranged in a honeycomb pattern. It's just one atom thick — so thin, it doesn't have height. With graphene, a single layer is stronger because the increasing concentrations of defects and flaws in multiple layers reduce its properties, said Lawrence Drzal, chief scientist at Lansing-based XG Sciences Inc.
XG, which generated $4 million in revenue last year, has customers in the automotive, electronics, battery and aerospace industries, including suppliers to cellphone makers. Asian electronics and battery manufacturing companies are the most active among them, Knox said.
XG has increased its staff to 30 employees from eight about two years ago, Knox said. Most revenue comes from selling bulk graphene nanoplatelets to corporations, universities and government-backed entities for research and development.
XG also has a licensing agreement with the Boston-based materials company Cabot Corp., supplies graphene nanoplatelets to Argonne National Laboratory outside Chicago for research on lubricant additives and has worked with about 40 global companies on research projects.
"Having these partners will make it easier to commercialize these materials in the future," Vicari said.
Graphene's success stories
Graphene falls into the category commonly known as nanotechnology. About 10 years ago, another well-hyped "miracle material" called carbon nanotubes was all the rage and came with similar property descriptions and predictions about the imminent major advances to industry they would bring.
One reason that carbon nanotubes never saw widespread commercialization was the lack of "intermediary" products, Vicari said. Producers made carbon nanotubes in bulk. Companies didn't buy because it was up to them to do all of the heavy R&D lifting from there.
By making graphene-based products that carry some of the development a few steps closer to final commercial products, companies like XG Sciences are increasing graphene's odds that it won't meet the same fate as nanotubes. Battery makers, for example, can buy a ready material instead of developing one from raw nanoplatelets themselves.
XG Sciences makes nanoplatelet-based products that command higher prices. The main product areas are nanomaterials for lithium-ion batteries, graphene-nanoplatelet-based "leaf" products tailored to have certain electrical or thermal properties, and conductive inks and coatings.
Some GNP leaf customers are cellphone industry suppliers that use the technology to dissipate heat in mobile devices. Other customers use the conductive inks to develop printed circuits.
The graphene industry sold nearly $9 million of material last year, according to Lux Research. About $8 million of that was nanoplatelets.
Lux forecasts the nanoplatelet market will grow to $117 million by 2020.
Sony and Nokia are among the more familiar names interested in graphene, Vicari said. The U.S. is in the lead in terms of production capacity, but major expansions are underway in Asia, while Europe and the Middle East have been spending a lot more on research lately.
XG forecast: $100M over next 5 years
As far as Lux Research knows, graphene has not made it into commercialized products in any significant way. One company whose graphene has made its way onto store shelves is Vorbeck Materials Corp. in Jessup, Md.
Vorbeck's graphene-based inks are used to print antitheft circuits embedded between piles of cardboard in packaging for consumer products. The packaging is made by Richmond, Va.-based MeadWestvaco Corp. and has been on the market for more than a year, said Vorbeck President John Lettow.
XG began developing its own products over the past few years. "We think we can build this into a $100 million business over the next five years," in large part because of these products, Knox said.
The nanomaterials for batteries are the most developed of XG's products.
"We're talking to all the major battery makers in world, who are testing our materials," Knox said. "That would include the whole range of applications, from electric vehicles to consumer electronics."
Khasha Ghaffarzadeh, senior technology analyst at Cambridge, England-based IDTechEx Ltd., said XG will have to play catch-up to some other companies, such as Vorbeck, that got into product development earlier.
"XG doesn't have first-mover advantage in all the markets," he said.
POSCO invested in XG because of the company's leading position as a maker of graphene nanoplatelets and its low-cost production technology, Jaehong Shim, general manager of Fort Lee, N.J.-based POSCO America Corp., said in a statement.
"Only a few companies in the world have succeeded in mass-producing graphene nanoplatelets," he said.
POSCO holds a license for XG's production technology and plans to open a plant in South Korea after 2015 as the graphene market "matures," Shim said.
Cabot signed a $4 million nonexclusive licensing agreement in 2011.
Licensing the manufacturing to large corporations will help support the bulk manufacturing side of XG's business, Knox said. The company is too small to produce its material in the amounts large customers need; big corporate licensees take care of that, he said.
"We've identified about 30 global companies that are close or in the process of commercializing our material," Knox said.
General Motors Co. is not a customer now but has purchased XG's materials in the past, he said.
Knox welcomed doubtful eyes cast on the graphene industry.
"People should be skeptical. (Graphene's) been overhyped and in some cases vastly overhyped," he said.
"But the flip side is that I'm a pretty smart guy, and the guys at POSCO are equally smart, and all of our investors are equally smart guys, and we all see a big opportunity there. We see a big market, and it's going to be just like anything else: You've got to grind it out as you would a real product and a real business."