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Dialogue with Longwater:
Chemical innovations shining in the 5G Era
Along with the booming development of 5G technologies, what changes and opportunities will the chemical industry have? We interviewed Brian Zhou, Managing Partner of Longwater Advanced Materials Fund, a pioneer growth capital investor in advanced materials and chemistry-related technologies in China, about his perspectives.
In May 2019, BASF Venture Capital (Shanghai) Co., Ltd. (BVC Shanghai) announced its investment in the Longwater Advanced Materials Fund. This private equity fund is managed by Longwater Investment, a pioneer growth capital investor in advanced materials and chemistry-related technologies in China. In this way, the two are ready to seek new development opportunities for BASF, while one of the strategic focuses is advanced chemistry-related technologies and new materials.
Brian Zhou
Brian Zhou
Managing Partner of Longwater Advanced Materials Fund
BASF e-Mag
Overall, what changes will 5G technology bring to the chemical industry?
Brian Zhou

The industrial chain of 5G is long – high in value and wide in coverage. It is of great significance to technological innovation and industrial upgrading. We have identified two general trends that might have impact on the chemical industry in relation to 5G.

First, 5G technology enables high-speed data transmission, which would require higher performance with respect to reduced size, improved heat endurance and conductivity, widened bandgap and electromagnetic shielding, etc. Therefore, chemical companies need to promote those related materials to the market as well as to reduce the cost so as to enable mass application of 5G technology.

On the application side, 5G telecommunication will facilitate the digitalization of chemical companies in relation to, for example, real-time production monitoring, predictive maintenance, logistics monitoring, etc. The high speed and large capacity of data transmission will largely enhance the visibility of all things throughout the supply chain thanks to the wide application of IoT (Internet of Things) based on 5G network.

BASF e-Mag
What are the requirements raised by 5G for new materials?
Brian Zhou

There are various requirements for materials used on 5G terminals, including portable devices like cell phones, telecom equipment and infrastructure like base station. In general, such requirements are towards higher performances compared to materials used on 4G devices. For example, for antenna materials it used to be polyimide film as the insulation layer of flexible printed circuit while for 5G devices, it requires lower dissipation factor and dielectric constant, therefore liquid crystal polymer and modified polyimide will be quickly picking up.

BASF e-Mag
In Longwater's portfolio, are there any projects specifically linked to the 5G industry? What is the philosophy of the investment?
Brian Zhou

We are closely following up with several prospects, including a project on PTFE film applied to high-frequency printed circuit board, high performance thermal conducting ceramic project, a third-generation semiconductor material project, a liquid crystal polymer project etc. We believe Longwater will soon launch projects in the field of 5G materials.

Our investment thesis should be built on the foundation that the related material has visibly large potential linked to the booming 5G trend. Meanwhile, the specific target company shall have a clear competitive edge and the potential to become market leader attributed to technological leadership.

BASF e-Mag
Will there be any possibilities that these companies partner with BASF’s 5G business in the future?
Brian Zhou

Provided that BASF Venture Capital is one of our most important strategic limited partners, one of the underlying value-add proposition of us is to create and structure synergies between Longwater’s portfolio companies and BASF. By facilitating the fruition of such synergies, from which related portfolio companies and BASF will benefit, the investment return will be correspondingly enhanced. This is a mandate we will stick to. Such collaboration could include commercial ones such as a startup company becoming BASF’s supplier or the other way around; technical ones such as patent/tech licensing. At the same time, through frequent contacts with startups, BASF can obtain deeper insights into future trends and opportunities from frontline market. In the long run, BASF can continue working with us to evaluate these companies and identify potential merge and acquisition opportunities.

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BASF Venture Capital generates new growth potential in China

Founded in 2001, BASF Venture Capital GmbH (BVC) invests in new companies and funds worldwide to generate new growth potential for BASF. Since the beginning of 2018, BVC has sped up its activities in China by locating the regional office at the Shanghai Pudong Innovation Park. What are the cutting-edge technologies in focus? How does BASF work with "unicorns"?

According to Markus Solibieda, Managing Director of BVC: “Our aim is to identify the new technologies, their applications and our potential partners. Applications for the car industry, 3D printing, agricultural technology and artificial intelligence were at the core of our attention." In addition to focusing on the current business areas at BASF, it is also necessary to consider how to ensure the long-term success by capturing new technological trends to shape the future growth. This is what BVC is doing.

Unicorns and beyond: technologies in focus

Last November, BVC announced its investment in Prismlab, a leading provider of 3D printing processes and 3D printers, headquartered in Shanghai. Prismlab has developed a patented printing process that is characterized by a very high printing speed, high level of precision and lower printing costs. Over the past months, Prismlab has worked together with the 3D printing R&D team at the Innovation Campus Shanghai and the business team in Heidelberg, to explore new and exciting applications in this area. "Leveraging the material expertise of BASF and the innovation at Prismlab, we aim to disrupt and revolutionize the traditional production model," said Solibieda.

BVC sees emerging opportunities in the sector of agricultural technology. Solibieda met with various startups who use satellites, drones, and mobile apps to digitalize the industry. "One interesting application is using AI from satellite data to design precise marketing campaign for new product launch based on crop type and location," said Li Li, an investment manager with BVC in China. "Another important observation is that all the leading internet companies are making strategic moves into agriculture value chain, including JD, Alibaba, Tencent and Pinduoduo."

BVC also met with the leading companies in the field of automatic driving and 5G network to understand the competition landscape and opportunity potentials for BASF. In addition, BVC had several high-level meetings with the leading research organizations, such as Chinese Academy of Science, TUS Holding from Tsinghua University, and H-fund in affiliation with Peking University, to discuss technological areas related to quantum computing.

More than deep pockets: our investment partners

Investors in China are also important for BVC. Recently, BVC is investing in the Longwater Advanced Materials Fund. This private equity fund is managed by Longwater Investment, a growth capital investor in advanced materials and chemistry-related technologies in China. "Longwater's experts are well versed in China's chemical industry. Involvement in Longwater's network will support BASF's aim to engage with fast-growing companies and develop jointly with them innovations for its customers," said Solibieda.

In addition to traditional venture capitals, Solibieda met with local Chinese corporate venture capitals (CVCs) during his trip. "Unlike CVCs in the western countries, which are mostly under large and well-established companies, Chinese CVCs are also prominent in starting ventures," said Qin Han from BVC in China. These unicorn companies, he said, are also investors themselves to support and foster younger and smaller startups. "We have great interests in these investors, who have professional teams and very deep pockets to invest alongside BASF in the space of chemistry, new materials and new digital business models," said Solibieda.

Working with BVC

As the independent corporate venture arm of BASF, BVC aims to accelerate the transformation of the chemical industry by investing in funds and startups and offering truly disruptive technologies and transformational business models. "We will continue our conversation with research and business units about how BVC as the investment arm of BASF can help to build relationships with current and new customers and partners in China," said Solibieda.