Expansion and advancement in the chemical sector
The chemical industry is witnessing a surge in funding for startups, with a focus on growth areas such as building materials, waste management, additive manufacturing, and machine learning. According to an Accenture Study on Growth and Innovation in Chemicals, this shift is a response to the impending need for all industries to reduce greenhouse gases and support a circular economy.
The study analysed the innovation lifecycle in the chemical industry across six key levers: patents, startups, corporate venturing, partnerships, M&A, and capital projects. The results suggest that while chemical companies have increased their investments in newer fields like batteries, recycling, and pyrolysis, the majority (68%) of investments are still going into traditional areas.
Technology-related investments in areas like AI, 3D printing, hydrogen/fuel cells, and analytics show potential for innovation. Notably, startups exploring materials that support CO2 reductions and the circular economy account for 10% of investment share. However, the numbers are still fairly small, indicating that the industry may not be pivoting quickly enough to address the requirements of a circular economy.
The study also found a 28% increase in the number of announced partnerships since 2016, with production being a dominant focus. Yet, the search results did not specify which companies have entered into the most partnerships with chemical firms in the last five years.
The chemical industry is experiencing increased opportunities due to factors like GHG reduction mandates, electric vehicles, 3D printing, and changing consumer sentiment. To capitalise on these opportunities, the industry needs breakthrough innovations. Nearly 20% of startup investments have been focused on digital solutions such as AI/ML for molecule discovery and quantum computing for simulations.
However, much of the industry's corporate venturing continues to focus on existing product groups like agrichemicals, paints and coatings, and food ingredients. The majority of M&A transactions focused on agrichemicals, "traditional" specialty chemicals, or coatings, adhesives, sealants, and inks. Far fewer M&A investments focused on entry into new markets and moving into new businesses.
The highest growth rates in M&A transactions were in chemicals and solutions for electronics, information technology, and plastic products. This indicates a shift towards more technology-driven sectors, which could be a step towards a more sustainable future.
In conclusion, the chemical industry is at a pivotal point. While there are signs of progress, the industry needs to accelerate its pace of innovation to meet the challenges of a rapidly changing world. The need for breakthrough innovations to support a circular economy and reduce greenhouse gases cannot be overstated.
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