Nanotech funding on the up - reaches $8.6bn

Corporations, governments, universities and others will spend an estimated $8.6bn on nanotechnology research and development in 2004, and a growing portion of the total comes from the private sector.

Spending on nanotech research will more than double from the estimated $3bn level level of 2003, according to an annual state of the industry report from Lux Research, a consulting firm that studies the industry.

Currently, about 1,500 companies - 1,200 of them start-ups along with corporate stalwarts like GE and Intel -have announced R&D plans.

"We expect 2004 to be the last year that governments outspend corporations on nanotechnology," said F. Mark Modzelewski, managing director of Lux Research. This year, governments will pour $4.6bn into nanotechnology research while corporations will sink $3.8bn globally.

Nonetheless, investors are proceeding with caution. Venture investing in nano start-ups will likely decline to $200m this year, down from the $325m and $386m invested in, respectively, 2003 and 2002. Nano poster child Nanosys, with its $3m in annual revenue, recently had to withdraw an IPO. Most of the money is being spent by large outfits.

Twenty two per cent of the venture funding has just gone to five firms - Nanosys, Quantum Dot, Molecular Imprints, Frontier Carbon and Catalytic Solutions. Acquisitions will be the fate of many start-ups, Modzelewski said.

Nanotechnology refers to the science of building products out of components measuring less than 100 nanometers, usually designer molecules. (A nanometer is a billionth of a meter and derives from the Greek root 'nano' or dwarf.) At this level, many materials such as gold or silicon begin to exhibit novel properties.

Self-replication is another distinguishing feature of many nano projects. Palo Alto's Cambrios, for example, believes it will be possible to build electronic devices can built by controlling chemical reactions, similar to how clamshells are created though a reaction between inorganic minerals and highly specialised proteins secreted by a bivalve.

The US remains the largest nano nation in terms of money, according to the report. National and local US governments will spend around $1.6bn on grants and nano science, or 35 per cent of the total coming from the public sector. All of Asia will spend $1.6bn, while Europe will invest $1.3bn.

US funding is coming from the federal government but also states such as California and New York. Oregon will also begin to invest more heavily in nanotechnology facilities in 2005.

In the private sector, US companies will account for $1.7bn, or 46 per cent of the $3.8bn invested, while Asia will account for $1.4bn, or 36 per cent, and Europe will spend and $650m, or 17 per cent of the total. Sixty-four percent of the 88,546 nanotechnology patents registered with the US Patent and Trademark Office since 1976 belong to US entities.

The first successful use of nanotechnology in products has been in stain-resistant pants and car panels. Basic materials like these will continue to characteris the market, although firms developing these products get less venture funding than companies trying to make memory chips out of molecules.

"A lot of the materials stuff doesn't take as much money," Modzelewski said. "For most guys, it is just not that big a leap."

Still, the electronics industry could take off soon. Companies such as ZettaCore have already demonstrated how they can make memory chips out of molecules.

"This could switch at any time with a big deal," he said.

Several companies have also begun to show how molecularly enhanced solar panels could recharge batteries or even homes.

Michael Kanellos writes for CNET News.com.