Allowing a smartphone to get wet is typically a bad idea. We all know that.
But did you know that it takes more than 3,000 gallons of water to produce one?
Water is needed for mining the metal, making the glue and plastic for assembly and packaging. This amount is 20 times the average per capita daily water consumption in India.
Are you wondering why I'm referring to water when in a piece on technology stocks?
The one word answer is - semiconductors.
Semiconductors are tiny circuits, known as chips, that power all our electronic devices and tech enabled instruments. Device manufacturers often joke that semiconductors are particularly thirsty. Each 30 cm integrated circuit board that holds the chips in your phone requires at least 2,000 gallons of water.
Each chip needs to be rinsed with ultrapure water. This is to remove debris (ions, particles, silica, etc.) from the manufacturing process. Only then can the chips be uncontaminated. It takes 1,400-1,600 gallons of tap water to make 1,000 gallons of ultrapure water.
Now why are semiconductors so critical?
Semiconductors are now a key focal point of China-US geopolitical competition. If data is the new oil and artificial intelligence (AI) is the new electricity, then it makes sense to view semiconductors as the must have resource.
No wonder semiconductor manufacturers are hot stocks.
Like my colleague Richa Agarwal explained in this video, smallcaps getting into the semiconductor business are particularly in demand.
But investors are missing out on something important. The water resources required to manufacture semiconductors, are soon going face a huge scarcity.
China only accounts for 7.6% of global semiconductor sales. It has planned massive investments in the sector over the next decade. As semiconductor production requires considerable water resources, which China lacks, it's frantically looking for alternative water sources.
Controlling advanced chip manufacturing in the 21st century with water resources may prove to be like controlling oil supplies in the 20th. The country that controls this manufacturing can throttle the military and economic power of others.
The US-China war on chips combined with the pandemic led to a worldwide shortage of chips. This has choked the manufacturing of cars and electronics the world over.
India's plans to be a global supply chain hub depends on chip availability. This is even more so for the EV ecosystem in the country. Also, these Taiwanese chip foundries risk losing business amid the US China standoff.
So, it turns out, the chip crisis has brought an unforeseen opportunity for India.
The ambitions of Indian manufacturers are no longer limited to designing and outsourcing chip making to Taiwan.
They desire to take a big tech leap. This is the right thing to do if India is to position itself firmly in the global supply chain.
India could possibly get access to the chip making technology from Taiwan. Or chip producers here may use indigenous technology. But the big question mark remains availability of water.
The government's Jal Jeevan Mission has allotted projects to few companies to prepare India for such long term water scarcity.
One such stock critical to the water mission is completely out of the radar of semiconductor and technology investors.
If you ask me, this is one the best stock for long term technology profits.
I've recommended this in my premium stock recommendation service - StockSelect.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com.
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