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Investing in chips and in the TSA

BERKELEY, Calif. (MarketWatch) -- Over the past week or two, a number of articles appeared about a so-called laser device that could scan a whole airport for explosive devices, lessening the need for invasive body checks at airports. It would all be done by some sort of modern terahertz scanner.

Curiously, this is kind of possible. Terahertz technology is considered by many to be the holy grail of scanning.

The problem is being able to build anything that can generate and detect a terahertz wave. This is a frequency similar to that used by the millimeter-wave machines found at some airports.

Generally speaking, the spectrum for these waves goes from 300 GHz to 3,000 GHz. It is nonionizing, meaning it does not irradiate you but can pass through clothes, wood, bricks, plastic. It cannot penetrate water or metal.

If you could see this spectrum, everyone would be naked -- a dream come true for the Transportation Security Administration.

Such technology is extremely complex and normal semiconductor technology cannot easily make any circuits for it. You need all the rare-earth, wild semiconductors that are hard to build, and consequently are very expensive. The materials required include indium phosphide, indium gallium arsenide and even zirconium dioxide, among other odd blends.

You can be sure companies like Intel Corp. (INTC) are always playing with these designs, and if any of the specialty semiconductor companies finds a breakthrough circuit or process, they will be gobbled up overnight at a healthy premium.

There are a couple of these companies worth tracking. All work with various rare semiconductor structures to develop the kind of high-speed chip needed for terahertz technologies.

The first and one of the most famous is Vitesse Semiconductor(VTSS) . Once upon a time, the stock was well more than $1,500 a share. It's still in the game, although it actually makes networking gear for a living.

Broadcom Corp. (BRCM) also plays in this game and always has to be considered. It's probably less of a buyout candidate if the company ever hit the home run with a high-speed breakthrough. It's a more conservative bet and a perpetually overlooked winner.

Now if you want to look at a rank OTC speculation, then check out SMG Indium Resources Ltd. (SMGI) , a mineral company involved in stockpiling indium, which has many uses other than exotic semiconductors.

Most semiconductor firms keep their eye on the possibilities for a superfast breakthrough, but the industry as a whole stays within the confines of the CMOS process, which is the manufacturing technology that dominates the sector. This process limits chip makers on what designs can be made.

Everyone does know that someday this has to change. It may be because of the great desire to develop the fascinating terahertz technologies.

Here's looking at you.