United States Risks Losing Global Leadership in Nanotech

Center for Functional Nanomaterials at
Brookhaven National Laboratory, USA.

According to a new report from Lux Research, global funding for nanotech increased only 1% (relative to 2008) to $17.7 billion in 2009. The publication of patent applications and number of granted patents rose at a more impressive rate, 11% and 5%, respectively. The report also found that the United States, Germany and Japan are still home to the most nanotech innovations in terms of absolute number, but that smaller markets such as Taiwan, Singapore, Israel and South Korea are more focused on nanotech and are more adept in commercializing such technologies. The report also indicates that despite impressive investments and attempt to become significant havens for nanotechnology, China and Russia are still far from threatening the status quo.

In terms of sheer volume, the United States dominated the rest of the world in nanotech funding and new patents last year, as U.S. government funding, corporate spending, and VC investment collectively reached $6.4 billion in 2009.

The report, titled Ranking the Nations on Nanotech: Hidden Havens and False Threats, which in full text is only available to clients of the Lux Research Nanomaterials Intelligence service, compares nanotech innovation and technology development in 19 countries in order to provide government policymakers, corporate leaders and investors a detailed map of the nanotech’s international development landscape. Overall, the report found global investment in nanotech held steady through the recent financial crisis, drawing $17.6 billion from governments, corporations and investors in 2009. Only venture capitalists dialed back their support during 2009, cutting investments by 43% compared to 2008 investment levels.

“Part of what motivated our research was the emerging possibility that ambitious new government funding in Russia and China represented a threat to U.S. dominance in nanotech innovation,” said David Hwang, an Analyst at Lux Research, and the report’s lead author. “But while the field certainly gained momentum in both countries as a result of the increased funding, both countries have economic and intellectual property protection issues that prevent them from being real threats just yet.”

Hwang’s comments should resonate here in the United States.  China and Russia are not threats yet due to their relatively unattractive intellectual property climates.  China, however, is making great strides on the intellectual property front, and in fact Newsweek recently suggested that China has now surpassed the United States and has a much higher rate of patent creation than the U.S.  Newsweek stated:

China, the putative future superpower, now has a much higher rate of patent creation than the United States, as well as a higher number of engineers being graduated. And because most American R&D spending comes from a handful of U.S. multinationals, some experts fear the companies will eventually shift their funding to China.

There were no statistics or figures given in the Newsweek article, so what “higher rate of patent creation” means is unexplained and could mean virtually anything, and could also just not be true or be only an opinion.  It seems unlikely that it means that more Chinese individuals and corporations are filing patent applications given that just several months ago it was widely reported that China was ranked fifth in terms of the number of international patent applications filed, with the United States filing nearly 6 times as many international patent applications as the Chinese.  Nor does it seem likely that “higher rate” could refer some per capita comparison given that China’s population greatly exceeds the U.S. population.

Notwithstanding, even if China does not really have a higher rate of patent creation and this Newsweek story is nothing more than unsubstantiated opinion journalism, which seems to be what Newsweek largely engages in these days, it is apparent that China’s interest in patents and a functioning patent system is on the rise.  If the U.S. wants to remain the dominant technology superpower in cutting edge innovative fields we need to aggressively recalibrate our patent and innovation policy.  Our leaders need to do more than pay lip service to innovation, inventors and the high paying jobs that can be produced through adoption of a coherent national innovation and patent strategy.

Returning to the Lux Research nanotech report, in order to uncover the most fertile environments for technology developers, buyers, and investors, Lux Research mapped the nanotech ecosystems of select nations, building on earlier reports published from 2005 through 2008. In addition to tracking fundamentals, such as the number of nanotech publications and patents issued, the report also inventoried direct and indirect spending on nanotech from government, corporate and venture sources. Among its key observations:

  1. The U.S. continues to dominate in nanotech development… for now. Last year saw the U.S. lead all other countries in terms of government funding, corporate spending, VC investment, and patent issuances. But its capacity to commercialize those technologies and leverage them to grow the economy is comparatively mediocre. U.S. competitiveness in long-term innovation is also at risk, as the relative number of science and engineering graduates in its population is significantly lower than it is in other countries.
  2. Other countries stand to get more bang for their nanotech buck. Japan, Germany, and South Korea continued their impressive trajectories from 2008, earning top spots in publications, patents, government funding, and corporate spending. Compared to the U.S., all three also remain more focused on nanotech and appear more adept at commercializing new technology. The relative magnitude of the technology manufacturing sectors in these three countries are the world’s highest, meaning their economies stand to benefit the most from nanotech commercialization.
  3. Russian and Chinese investment in nanotech yields slow progress. While both governments launched generous nanotech investment programs last year, the technology hasn’t gained momentum in either country’s private sector, both of which have a history of skimping on R&D. The relative lack of momentum was further underscored by the abysmal number of new nanotech patents for either country last year.

For now we can be thankful that the U.S. enjoys dominance in an important and growing field like nanotechnology.  Even though China does not receive high marks yet, it seems only a matter of time before the Chinese figure out what we in the United States, most in Western Europe and many in Asia have know for a very long time.  Significant investment in technology and the creation of a business friendly climate lead to businesses locating, investors investing and high-paying technology jobs being created.  Of course, there is also the national security angle to consider as well.  So not only are we allowing other nations to catch up to us from a technology and business standpoint, we are allowing other countries to catch up to us from a military technology standpoint, which is concerning.  See, for example, The Pentagon on China.

Simply stated, we need a renewed commitment to higher education in the fields of math, science and engineering for U.S. citizens.  We are doing a tremendous disservice to our nation by tolerating low performing students who are being taught by low performing teachers.  A lack of adequate K-12 education is leading to fewer and fewer Americans going on to achieve degrees and advanced degrees in those technical fields that are necessary to assure U.S. dominance in technology, business and national security applications.

After having a tremendous head start compared with the rest of the world due to our commitment to innovation and education we are allowing the rest of the world to catch up.  We need true leadership from those committed to providing a regulatory climate conducive to innovating, which will create businesses that create jobs.  The fact that few in Washington, D.C. have noticed that the Patent Office is the cure to this jobless recovery is staggering, and a sad admission that far to many of our leaders simply are out of touch or not smart enough to understand how jobs are actually created in the real world.

The time for political speeches is over.  All political speech typically does in this space is demonstrate to those who understand the law and business realities that our leaders don’t really get it anyway.  Politicians need to trust inventors and innovative companies, provide incentives to engage in research and development activities, adequately fund the Patent Office and then stand back!

Anyone that cannot understand the basic truth that sound innovation policy and an adequately funded, well functioning Patent Office is essential is nothing more than a part of the problem.  It is time for leaders to lead, or for them to get out of the way!


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