Under the leadership of the chemical industry's innovation, the world is likely to usher in an era of new and powerful materials. But to become the protagonist of this story, today's chemical companies need some crucial prerequisites: reorganizing product portfolios, successfully using digital technologies, and rewriting business models to obtain higher returns on innovation investments.

To understand the dilemma facing the chemical industry today, you must understand its past. The history since World War II can be divided into two major periods. The first period (from the 1950s to the 1970s) was a period of continuous innovation. Dozens of new chemical substances and compounds were discovered and commercialized. Most of them are plastics and polymers, and many are extracted from hydrocarbons, especially petroleum. The high value of these innovations enables the chemical industry to play a key role in global economic activity.
However, after 1980, the supply channels for new products were basically exhausted. For the next 30 years, until 2010, chemical companies focused on achieving growth through global expansion. It started with demand-oriented growth in South Korea and Taiwan, then China, and then a new market in the Middle East with abundant oil reserves (and therefore raw material advantages). With the implementation of ambitious new projects in these areas, many Western chemical companies have shifted production to these areas. They found that the return on investment in emerging markets is higher than the return on R&D expenditure. In addition, in these high-growth regions around the world, new materials are not a priority for customers. On the contrary, in order to succeed in this area, chemical companies need a competitive cost structure, and a comparison with local manufacturers that sell "good enough" products (products with 80% functionality and 50% price). Plans to expand market share. Innovation is not the primary issue.

However, after the 2008 financial crisis, globalization stagnated. As products become commodities, chemical companies have expanded their scale through acquisitions. Therefore, many traditional chemical companies are large in scale and cumbersome to operate. Their R&D funding is too scattered to compete with more entrepreneurial institutions on long-term research projects with uncertain results. They depend on the income of the best-selling chemicals, which have been around for decades. Polyvinyl chloride (PVC) was invented in 1913, polyethylene was invented in 1936, and polypropylene was invented in 1954. Even specialty chemicals that were highly profitable when they were first introduced—including many additives, pigments, and polycarbonate—can easily become bulk commodities, with manufacturers competing primarily on prices.
At the same time, innovation in the field of materials has gained a new lease of life-mainly outside the existing chemical industry. For example, the nano-scale revolution-the remarkable discovery of two-dimensional monoatomic materials, such as graphene extracted from carbon or silene extracted from silicon-has produced lighter, stronger, lighter and stronger than any chemical products in history. New materials that are more plastic and more resistant to high temperatures. However, despite their potential applications in technology, healthcare, consumer products, manufacturing, and the environment, their direct profit potential is still unknown. Some start-up companies and academic research centers are responsible for most of the research and development of these new materials, and get most of the initial income from them. In fact, they are drawing the outline of a new chemical industry. The existing large-scale chemical companies have their R&D centers in a neglected state and hardly participate in them.

If existing companies are still on the sidelines, the industry may give up the "high ground" to emerging companies. For those determined companies, they still have time to make up for their laziness and profit from nanomaterials and other major breakthroughs. In fact, if you look closely, some recent strategic measures taken by chemical companies indicate that the industry may be moving in this direction—perhaps it may be expected to restore the magic that it once had in the plastics industry.

Three new developments can help the chemical industry lead a new era of material innovation.