by David Hwang, Lux Research
August 27, 2010 - Amidst stock market crashes and bankruptcies, nanotech research and development (R&D) continues to grow across the globe. Even after the hype for nanotech fell precipitously in the wake of the first wave of failed ventures, it remains a strong cradle for innovation. Global totals for nanotech publication counts, patent issuances, government funding, and corporate spending all continued to grow (albeit by negligible amounts in some cases). Governments maintained or increased their funding, and corporations as a whole kept their nanotech budgets static through 2009. Venture capital (VC) investors, however, dialed back their enthusiasm level, cutting investments by 43% relative to 2008. All told, financial support for nanotech totaled $17.6 billion in 2009, up only slightly from 2008's $17.5 billion.
When it comes to nanotech, the international playing field is uneven. Varying levels of government support, corporate interest, and economic vitality accelerate and hinder nanotech development and commercialization. Governments and companies alike are relying on the strengths of other nations to supplement their own operations and expertise. Lux Research set out to take the temperature of nanotech development around the world in order to uncover the most fertile environments for technology developers, buyers, and investors mapping the status of the nanotech ecosystems in 19 countries by analyzing their performance on two axes -- nanotechnology innovation and technology development:
- Nanotech activity, the measure of absolute amount of nanotech development. This factor examines the capabilities and resources of a nation's engine for nanotech innovation, drawing on eight metrics (Figure 1). The metrics used for measuring Nanotech Activity are specific to nanotechnology, and are compared on an absolute basis, meaning that smaller countries tend to rate lower.
- Technology development strength, the measure of technology commercialization prowess. This factor measures the ability of a country to grow its economy through technological innovation -- not specific to nanotech -- by looking at the economy's relative technology intensity, pulling from six metrics (Figure 2). These metrics don't pertain to nanotech per se, but Technology Development Strength is calibrated relative to each country's population or GDP, so that small countries are at no disadvantage compared to larger ones.
Using the framework outlined above, we tracked the performance and progress of countries from 2007 to 2009, and grouped the countries into four categories, determined by their positions on the grid (see Figure 3):
- "Dominant" countries occupy the upper-right quadrant. These countries have both high Nanotech Activity and the Technology Development Strength needed to commercialize it;
- "Ivory tower" countries occupy the upper-left quadrant. These countries have high Nanotech Activity but are less likely to develop their economies based on it because of relatively poor Technology Development Strength;
- "Niche" countries occupy the lower-right quadrant. These countries are technology development powerhouses, scoring high on Technology Development Strength but without the scale to support internationally competitive levels of Nanotech Activity. As a result, these nations focus on developing centers of competence in specific domains like electronics or coatings.
- "Minor league" countries occupy the lower-left quadrant. These countries can claim neither a high Nanotech Activity nor Technology Development Strength and are inconsequential to the development and commercialization of nanotech globally.
Overall, 2009 revealed few changes to the international status quo. Looking at the placements of individual countries, we make several observations:
- US crosses into "ivory tower" territory. The US earned full marks in every metric for Nanotech Activity, and sits on the top as a result. The National Nanotechnology Initiative (NNI) is a well-coordinated and well-funded program, helping to support vibrant start-up and academic research ecosystems. Corporations like 3M and IBM, researchers, and private investors played their part, funneling billions of dollars into nanotech and filing thousands of patents in 2009.
That being said, the US's Technology Development Strength is below average, sitting at 2.8. The US economy is very diverse with substantial service industries, and its HMHT manufacturing output is fairly low, even if those HMHT sectors are among the largest in the world by absolute measure.
The same pattern is evident in R&D spending and T&S workforce: mediocre scores, even with large absolute numbers. The number of graduates with tertiary S&E degrees per capita is among the lowest of the group -- less than half of that of Taiwan, South Korea, and Singapore, and less than one-third the amount in Russia -- which is a grave concern for the US's technology development strength in the long-term. On the other hand, the emigration rate of graduates in the US is the lowest, meaning that the students that do graduate elect to stay, and most of the world's emigrants leave their countries to settle in the US, adding to the nation's intellectual capital.
- Japan trails in volume of activity, but is better poised to profit from it. Japan has the second-highest Nanotech Activity score (4.2). Though not as well coordinated or as well-funded as its US counterpart, Japan has a healthy government program and network of research centers for supporting nanotech, and its technology-oriented private sector helps to make up the funding gap. Patents and publication counts are healthy, and giant conglomerates like Toray and Sumitomo are very active in nanotech research and commercialization.
Japan regressed slightly in 2009 to 4.0 for Technology Development Strength, which is still among the world's best. Its consistently high R&D spending implies a strong dependence on technological innovation for economic growth, and the significance of its HMHT manufacturing sectors (which make up about 20% of GDP) corroborates that connection, indicating Japan is an attractive place for nanotech commercialization. Like the US, Japan has a large T&S workforce, a low number of S&E graduates, and a very low emigration rate. Its slight drop was due to an overall improvement in infrastructure by other countries, which weakened Japan's relative position.
- China is changing radically, but still is far from threatening the upper echelon. China's Nanotech Activity score grew from 2.35 to 2.5 in 2008, and stayed there in 2009. Nanotech is a recurring theme in many of its national plans, and both public and private funding has grown quickly over the years, despite a lack of coordination. The number of publications grew astronomically while the dismal patent count remained unchanged, balancing each other out in the scoring -- and raising red flags. As a lagging indicator of innovation, patent counts usually undergo the same changes seen in publications on a few years' delay, but potential issues regarding the ability to protect those patents and poorly implemented incentives for researchers may yet keep that from holding true in China. The nanotech companies that do exist in China are usually generic nanomaterial producers (such as Shanghai Huzheng Nano Technology Co. or developer Tianjin Tianhezhongxin Chemicals Co.), supporting the notion that China's research has produced little proprietary and commercializable technology to date.
China's Technology Development Strength also stayed at its 2008 levels, scoring 2.7 in 2009. That's not to say progress has stopped however. Between 2005 and 2009, the number of S&E graduates grew 50%, and construction of infrastructure continues at a breathtaking pace. Moreover, the flow of Chinese citizens seems to have reversed in recent years, as well, with many expatriates returning to their country of origin now that the opportunities have bloomed in China. China's HMHT manufacturing sectors are substantial, but expenditures on R&D are severely lacking, giving credence to the claim that China's economy is composed from reverse-engineered products and cheap knock-offs. China will need to grow its R&D activity and pursue innovation of its own if it wants to keep its growth from stagnating.
- Russia makes a big push, but remains in the "minor league." Russia improved slightly on its 2008 Nanotech Activity score of 2.45, moving to 2.6 in 2009. Rusnano, the state-sponsored nanotech investment arm founded in 2007, is holding steady, continuing to divvy out massive amounts of money to fund research and commercialization in an effort to revitalize the economy. As a direct result of the formation of Rusnano, Russia drastically improved its government funding, nanotech initiative, nanotech R&D center scores, and publication counts, but it will still take a couple of years before the infusion of money will start to have an effect on the vitality of private sector.
Russia's economy is still heavily dependent on revenue from oil, and technological innovation has historically taken a back seat. Ironically, Russia is home to a surplus of researchers and S&E graduates, but it appears as though their talents are not utilized effectively, causing many of the country's most educated to move to other countries. As a result, Russia scores fairly poorly on Technology Development Strength, maintaining a score of 2.6 in 2009.
David Hwang received a BSE in Bioengineering from the University of Pennsylvania and is analyst at Lux Research Inc. His full report on national nanotech efforts is "Ranking the Nations on Nanotech: Hidden Havens and False Threats".