[nasional_list] [ppiindia] The Business Of Nanotech (BW Coverstory, February 14, 2005)
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- Date: Mon, 14 Feb 2005 19:18:21 -0800 (PST)
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The Business Of Nanotech[1]
There's still plenty of hype, but nanotechnology is finally moving from the lab
to the marketplace. Get ready for cars, chips, and golf balls made with new
materials engineered down to the level of individual atoms
Pity the poor alchemists. They spent the Middle Ages in candle-lit
laboratories, laboring to brew universal elixirs and to turn base metals into
gold or silver. They failed utterly. By the dawn of the Scientific Revolution,
researchers equipped with microscopes founded modern chemistry -- and dismissed
alchemy as hocus-pocus.
But it turns out alchemists were just a few centuries ahead of schedule. Today,
in sparkling labs equipped with powerful microscopes, scientists on three
continents are promising dramatic new materials and medicines that would make
alchemists proud. This work takes place in the realm of nanotechnology,
industry's tiniest stage. The standard unit of measurement, a nanometer, is a
billionth of a meter -- barely the size of 10 hydrogen atoms in a row. In this
universe entire dramas can unfold on the tip of a pin, and a sneeze packs the
punch of a raging hurricane.
Why so small? Researchers have discovered that matter at this tiny scale often
behaves very differently. While some of the science behind this phenomenon is
still shrouded in mystery, the commercial potential of the infinitesimal is
coming sharply into focus. Familiar materials -- from gold to carbon soot --
display startling and useful new properties. Some transmit light or
electricity. Others become harder than diamonds or turn into potent chemical
catalysts. What's more, researchers find that a tiny dose of nanoparticles can
transform the chemistry and nature of far bigger things, creating everything
from fortified fenders to superefficient fuel cells. Engineers working at the
nano scale have a brand-new tool kit that's full of wonder and brimming with
potential riches.
Now it's time to start cashing in. Throughout 2005, companies large and small
will be rushing more nano-based products from labs to the marketplace.
Consumers will encounter nanotechnology in the form of nick-proof trims on
Hummers, Wilson tennis racquets with extra pop, even golf balls designed to fly
straight. Investors, meanwhile, will be faced with a slew of bold
announcements. On Feb. 1, for example, computer giant Hewlett-Packard Co. (HPQ
) disclosed a breakthrough in nanotechnology that, within a decade, could carry
computing beyond today's silicon and transistors. "We are reinventing the
computer at the molecular scale," says Stan Williams, an HP senior fellow and
co-author of the report.
For now, nano is starting out modestly. The biggest markets for nanoparticles
remain in familiar products, from the black rubber filler in tires, a $4
billion industry, to the silver used in traditional photography. Lux Research
Inc., a New York nanotech market researcher, estimates that only $13 billion
worth of manufactured goods will incorporate nanotechnologies this year. That's
little more than a rounding error in the global economy.
Feverish Activity
Yet new nano-based products that could have a far bigger impact are only a step
or two away. Within the next two years, diagnostic machines with components
built at the nano scale should allow doctors and nurses to carry pint-size
laboratories in their briefcases, perhaps to test for HIV or count white blood
cells on the spot. Nano sensors will scour airports and post offices for
anthrax and sarin. Toward the end of the decade, scientists say, new computer
memories composed of nanoparticles could conceivably pack the digital contents
of the Library of Congress into a machine the size of a yo-yo. By that point,
Lux predicts, nanotechnologies will have worked their way into a universe of
products worth $292 billion (see table, "Nothing "Nano" about It").
How does nanotechnology conjure up such surprises? Nature provides examples of
this molecular magic. Think of coal compressing, over millennia, into diamonds.
The gems are made of the same carbon atoms. But they've been rejiggered over
time into orderly crystal patterns linked by superstrong chemical bonds. Soft
becomes hard, sooty blackness becomes glittering clarity.
These days scientists can pull off such transformations between coffee breaks.
With atomic probes they manipulate molecules, one-upping Mother Nature. Delving
into the nano realm gives them startling surprises right in the old periodic
table of elements -- and they're filing a flurry of patents to lay claim to
these miraculous materials. "It's a land grab," says Douglas Sharrott, a patent
lawyer at Fitzpatrick, Cella, Harper & Scinto in New York.
The questions around nano are no longer whether it's coming or if it's real but
just how big it will be. Some see nano simply as a new material revolution,
akin to the dawn of plastics. Others herald a transition as dramatic as
mankind's advance from stone to metal tools. But those hazy predictions aside,
the questions that are echoing from laboratories in Tokyo to the hectic offices
of short-sellers on Wall Street are about money. Which nanotechnologies will
create new fortunes, industries, and corporate champs?
Activity on the ground is feverish. Some 1,200 nano startups have emerged
around the world, half of them in the U.S. Companies that long labored in
dull-as-dishwater materials businesses are finding that they can create a stir
by trumpeting their mastery over age-old particles, from specks of ceramic to
soot. Brokerages such as Merrill Lynch & Co. (MER ) and Punk, Ziegle & Co. are
scouring the markets for nano-focused companies and plunking them into nano
indexes. Meanwhile, investors, torn between an alluring new market and the fear
of a dot-com-like bubble, are struggling to get a grip on exactly what nano
means for them.
Their confusion is understandable. Nano is not a single industry but a scale of
engineering involving matter between 1 and 100 nanometers. Instead of one new
phenomenon, like the Internet, nano offers new possibilities for thousands of
materials that already exist. This means much of the early activity will likely
take place at industrial giants. Already, 19 of the 30 companies in the Dow
Jones industrial index have launched nano initiatives. Says Margaret Blohm,
manager of General Electric's (GE ) nanotechnology research and development
program: "I lose sleep at night because expectations are so high."
How do these tiny molecules create big new products? Sometimes size alone is
the key. Consider DuPont's (DD ) new Voltron, a super-durable wire coating used
in heavy-duty electric motors. If you looked at previous generations of such
coatings through a powerful microscope, the chemical components would look
loosely packed, with irregular spaces between the molecules. This structure
leads the material to break down more easily. Voltron's nanoscale particles
fill in many of the voids, making a stronger insulator that lasts longer. In
DuPont's tests on electric motors, a coating of Voltron extended the time
between failures by a factor of 10, to more than 1,000 hours. And since such
motors consume an estimated 65% of U.S. electric power, lengthening their life
and efficiency promises big energy savings. "This chemical combination can only
be done with nanomaterials," says Krish Doraiswany, a senior planning manager
for DuPont's nanotech research effort.
Most of the early advances in nano will improve what we already have. Examples:
lightweight army fatigues that resist chemical weapons and food packaging
designed to keep last month's lettuce green and crunchy. Later this year,
duffers will be able to buy golf balls manufactured by NanoDynamics Inc. in
Buffalo, N.Y., that are designed to prevent a shift in weight as they spin.
This should create balls that fly straight down the fairway and even hold a
steadier line on the putting green. "If demand for the balls takes off, this
could become a major business for us," says NanoDynamics CEO Keith Blakely, who
plans to sell the balls for a pricey $5 apiece.
Beyond straight putts and fresh produce, can nano live up to its potential to
create entirely new industries and corporate titans? The answer depends on how
the players, from regulators to entrepreneurs, handle a host of thorny
challenges. Governments must devise smart regulations to control new materials
and therapies. Companies face logistical conundrums, such as carrying out
quality control on shipments of minuscule carbon nanotubes and silicon crystals
-- the I-beams and sheet glass of this industrial revolution -- that are
virtually invisible.
The nascent industry also must hammer out standards and enforcement practices
that are sorely lacking. A 2004 study by Lux Research found that many of the
200 global suppliers of basic nanomaterials failed to deliver what they
promised. "As a group they have a frighteningly poor track record," says Lux
Vice-President Matthew Nordon. The upshot? Until the industry puts a qualified
supply chain in place, only innovators working with world-class labs can count
on reliable material. This limits access to nanotechnology and hurts its growth.
An even greater challenge for nano industries is to ensure that their new
materials are safe in the human body and in the environment. Setbacks could
sink nano companies and even lead to a global backlash among the same activists
who are raging against genetically modified food. "I'm worried about an
overreaction to both the hype and the fear," says Kristen Kulinowski, an
executive director at Rice University's Center for Biological & Environmental
Nanotechnology.
Such concerns rattle the equity markets. As recently as last summer, about a
dozen nanotech companies were positioning themselves for initial public
offerings. But last year's most widely anticipated IPO in the sector -- a $115
million offering for Nanosys Inc. in August -- was withdrawn at the last minute
as investors cooled to a company rich in patents but still years from making a
profit. Now the IPO market appears stalled, even for stars such as Nanofilm, a
profitable Valley View (Ohio) manufacturer of optical films, and Konarka
Technologies Inc., a Lowell (Mass.) leader in plastic solar panels.
Premature Marketing?
Doubts and confusion plague the market, where even the definition of nano is
open to debate. When Merrill Lynch analysts released their Nano Index last
April featuring 25 companies, critics howled that they were fueling hype -- and
that a few of the pharmaceutical outfits on the list were included simply
because they engaged in the common practice of making molecules. Merrill
retooled the list, limiting it to companies that publicly stress a commitment
to nano. Still, Manuel P. Asensio, president of Asensio & Co., a short-seller
that is still betting against the stock of one nano index company -- NVE Corp.
(NVEC ), a maker of electronic sensor instruments -- continues to grumble.
"There is no market yet," he says. "Isn't Merrill attempting to create a retail
fervor?" Merrill's Steven Milunovich, who directs its nanotech research,
responds that the firm covers only three of the stocks on the index and
compiles the list not to recommend investment vehicles but as a way to track
the
young industry. "It's a 30-year trend, and we're only at the beginning," he
says.
In today's cautious climate, investors are focusing less on dazzling visions
and more on companies with real products, customers, and profits. The leading
performer in Merrill's index in 2004 was MTS Systems Corp. (MTSC ), a
39-year-old testing-equipment company whose tools are widely used in nano labs.
Its stock rose 80%. Harris & Harris Group Inc. (TINY ), a venture-capital firm
with heavy investments in nano, saw its stock rise 75% -- a sign that investors
hold high hopes for the segment. But most businesses selling true nano
products, from materials company Altair Nanotechnologies Inc. (ALTI ) to
France's Flamel Technologies (FLML ), a medical supplier, suffered market
declines through 2004. And the Merrill index fell another 12% in January, 2005.
No doubt nano is in for its share of bumps, with flops sure to outnumber
successes by a wide margin. Yet the technology of the tiny is on track to
disrupt nearly everything in its path, including companies, industries, and
universities. Why? At the atomic level the boundaries among biology, chemistry,
physics, and electronics lose much of their meaning. The sciences start to
merge. Many of the winners in nano will be those that can reach across old
boundaries and create novel hybrids. Israeli biologists and electrical
engineers, for example, have teamed up to attach dna to carbon nanotubes to
create microscopic transistors. These assemble themselves in the lab following
a biological blueprint. The result is an inanimate transistor -- but one that
grows, like a tadpole or a toenail.
Funding Magnet
Companies that can bring such innovations to market stand to restructure entire
industries. Korea's Samsung Group plans to produce TV displays featuring the
most prominent building blocks of the Nano Age -- carbon nanotubes -- by 2006.
If successful, these screens could be lighter, cheaper, brighter, and more
energy-efficient than today's models. The technology would spread quickly from
TVs to computer screens, even electronic billboards. GE is adding a new
nano-focused wing to its R&D center in Niskayuna, N.Y. The company won't
disclose the size of its investment but says a 50-member team of researchers is
looking to seed nano into everything from medical technology to lighting to
high-performance turbines.
For entrepreneurs, nano spells funding. Venture capitalists have invested $1
billion in nano companies, nearly half of it in the past two years. Meanwhile,
government funding is holding steady at $4.7 billion annually, nearly equally
divided among Asia, Europe, and North America. The cash is pouring into
university labs and new nano corridors from Albany to Shanghai and Fukuoka
prefecture in Japan. "Any professor with his head screwed on has moved research
programs into nano," says Greg Blonder, a partner at Morgenthaler Ventures.
Many of the early prospectors are focusing on health-care testing tools, which
are far less regulated than medicines and therapies. LabNow Inc., an Austin
(Tex.) startup, has its sights set on addressing the AIDS epidemic. Using
minute channels and sensors, the company has devised a blood laboratory on a
chip the size of a business card. The patient places a single drop of blood on
the chip, which is then inserted into a small electronic reader. Within
minutes, HIV/AIDS patients can get a count of their white blood cells -- a
crucial metric for treatment. Currently that test takes weeks or months in poor
regions of the world, where blood samples are trundled back and forth in slow
trucks. Patients can die waiting for the results. LabNow's technology has the
potential to speed AIDS treatment in much of the world -- and let LabNow cash
in on the $5 billion global market for point-of-care testing. In October,
LabNow got $14 million in equity funding from a consortium led by Geor
ge
Soros. The company hopes to roll out its systems in South Africa by the end of
2005.
Red Flag
More dramatic breakthroughs are expected within two or three years as companies
developing novel medical procedures begin to emerge from the regulatory maze.
Already, nano-ized versions of existing drugs are causing a stir. Last month,
American Pharmaceutical Partners Inc. shares surged 50% on news that the Food
and Drug Administration had approved the marketing of Abraxane, a nanoscale
protein-based drug for the treatment of metastatic breast cancer. The nano
version is able to squeeze into places in the body that its existing macro
counterpart cannot without intolerable side effects. Further out, researchers
are working on customized treatments, such as nanoparticles built to match the
unique genetic profile of a patient's cancer cells -- and programmed to seek
out and destroy them. Hundreds of these therapies are in the works. Most will
fail. But if even a handful succeed, they could change medicine.
To achieve such triumphs, nano companies must squelch fears about the effects
of the particles in the body. Worries grew last spring when researchers at
Southern Methodist University reported brain damage in a large-mouth bass that
had been swimming in an aquarium stoked with common carbon-based nanoparticles
known as buckyballs. Although far from conclusive, such findings raise red
flags worldwide -- and they extend far beyond the networked legions of
activists. Last year, giant reinsurer Swiss Reinsurance Co. warned against a
rush into nano, citing "the unforeseeable nature of the risks it entails and
the recurrent and cumulative losses it could lead to."
One industry that should be able to tap nano's potential without those risks is
semiconductors. As the circuits and pathways on the chips grow tinier,
manufacturers are running into problems. Electrons tunnel through flimsy walls
that are only several atoms thick. The electricity coursing through the
intricate maze generates searing heat, which is increasingly costly and hard to
control. As the industry struggles to maintain Moore's Law, which predicts the
doubling of computing power every 18 months, costs are exploding. The price of
a new semiconductor fabricating plant is projected to reach $10 billion by the
end of the decade.
Nano innovators aren't likely to replace the silicon chip anytime soon, but
they could help ease the squeeze over the next decade. This process has already
started with memory chips, the least complicated kind. Within two or three
years, developers hope to make viable memory chips from spaghetti-shaped carbon
nanotubes, each one only 1 nm wide. Further out, engineers are learning how to
replace minuscule metal circuits and gateways on today's chips with new
nano-engineered materials. IBM researchers have built transistors with carbon
nanotubes that promise "a huge leap in performance while cutting heat loss,"
says Phaedon Avouris, a researcher at Big Blue's Nanometer Scale Science &
Technology Labs.
Despite this progress, it's a long hike to nanocomputing, not a sprint. HP
researchers don't expect their platinum circuits to debut until 2011 at the
earliest. And it won't be until much later in the next decade, say scientists,
that nanotechnology may be able to provide a new architecture for faster
computing in the post-Silicon era.
The future of nanotechnology? It may seem strange now, but within a decade or
so the term is likely to vanish from syllabuses and portfolios and remain part
of company names only as a vestige of the past. After all, nano denotes only
size. Once work on that scale becomes routine, that buzzword will fade. But the
physical world -- medicines, metals, and even the roles the elements play --
will be utterly changed by this revolution, all brought about by bits far too
small for the eye to see.
Why The Old Rules Don't Apply:
At this size, familiar materials can do things they couldn't do before. How
does nanotech work? For starters, it's tiny. For lots of jobs today, that's a
prerequisite. The semiconductor industry needs ever-smaller tools and
components to build coming generations of chips. Nothing bigger than nano-scale
bits will fit. Similarly, some of the latest fuel cells carry nano-scale meshes
on their filters. These help to sift electrons from hydrogen ions -- a crucial
step in creating electricity. For exacting work like that, nano -- from the
Greek for dwarf -- is a perfect fit.
Nanotech derives much of its power from transformations that occur when matter
is reduced to the molecular dimension. For example, breaking down a chunk of a
material into nanoparticles vastly increases its surface area, often by a
factor of millions. This makes it dramatically more reactive -- quicker to
ignite or melt and absorbing more faster. Think of a spoonful of confectioner's
sugar dissolving instantly in a cup of coffee, while a sugar cube in another
cup has barely begun to lose its sharp corners.
Why does this matter? Drugmakers are betting that nano's greater absorption
rate will lead to far more efficient dosages of drugs, many delivered as nano
specks. And by making the particles chemically reactive, scientists are
building exquisitely sensitive sensors that can detect individual molecules.
Thanks to all that surface area, nanoparticles often appear hypersensitive.
Take gold. Although inert when wrapped around a finger or filling a tooth, at
its tiniest size it becomes a potent catalyst -- one that could be used to
purge carbon monoxide from the atmosphere. And aluminum at the nano scale "can
catalyze rocket fuel," says Steve Jurvetson of Silicon Valley venture-capital
firm Draper Fisher Jurvetson, which has invested some $95 million in 11 nano
startups. "It literally explodes."
Lots of other changes occur when matter sheds its heft. Some nano materials,
when reduced to a size smaller than a wavelength of light, become invisible.
This opens the possibility of having materials we know as opaque, such as
silicon, transmit light. Others become fabulously strong. Carbon nanotubes, for
example, share a similar atomic structure with their cousin, the diamond. This
makes them sturdy, yet their willowy form leaves them as flexible as a noodle
-- a combination of strength and suppleness that's tough to find in the larger
universe.
Lots of the nano world remains a mystery. In its miniature form, matter pays
little heed to the familiar world of Newtonian physics. The laws of gravity,
optics, and acceleration represent averages, not the quirky behavior of each
single nanoparticle. For those principles, researchers must venture into
quantum physics. Those who come to grips with this realm and can harness its
power stand to become the titans of the nano age.
Nanotech's Heartland Lift
Cleveland's Five Star Technologies is the kind of new company that's proving
the Rust Belt can become part of the Next Big Thing. Nanotechnology is a
blessing for the Rust Belt. It's restoring some long-gone luster to the
traditional materials businesses, which fell out of favor -- and investors'
sights -- during the Internet boom. Suddenly, industrial goods, from coatings
to lubricants, are in vogue again. And this is bringing investment back to
cities like Cleveland.
Consider Jim Mazzella, whose father, also named Jim, founded Mazzella Lifting
Technologies in the 1950s. The Cleveland business hoisted lots of metal for the
local steel and auto-parts manufacturers. But when the younger Jim and his
brother, Tony, took over the business in the early 1990s, they wanted to get
into new technologies.
LUCRATIVE BUBBLES. That's when they encountered Oleg V. Kozyuk, a Ukrainian
scientist who held patents for a technology called controlled-flow cavitation.
It may sound like a dental malady, but cavitation is a powerful natural force,
a bombardment of microscopic bubbles that breaks down some of the hardest
materials on earth. It can eat away submarine propellers, molecule by molecule.
Kozyuk's technology harvests this force. And the Mazzellas quickly saw its
potential. Cavitation produces trillions of molecules -- the raw material for
nanotechnology.
These days, Jim Mazzella is the CEO of Five Star Technologies in Cleveland, a
company centered on Kozyuk's technology. Five Star has received plenty of
attention from angel investors, not just in Cleveland but from afar. In
October, 2003, Five Star landed $4.5 million in venture funding from a
consortium led by Morganthaler Ventures in Menlo Park, Calif.
"A CONSTANT CHALLENGE." Mazzella now has 20 employees and has expanded the
intellectual property, with 11 patents issued and 12 more in the works. He has
landed a contract with a medical-products company, and he plans to extend into
a host of products, from cosmestics and health-care goods to metal oxides for
heavy industry. "Our long-term vision is that we can be a number of divisions,
or separate companies, that address each of these different markets," he says.
How does one small company target such diverse markets? If you reduce materials
to the molecular level, they can go into all sorts of products. The hard part
is to figure out which markets to attack. "Getting focus has been a tremendous
challenge for us," says Mazzella. "From an operational perspective, it's a
constant challenge to make sure we're not getting spread too thin."
Five Star's first splash is in health care. Late last year, the company started
selling nanomaterials for a sprayable gel to a Cleveland company, Improvita
Health Systems. The particles in the gels are engineered to cling to inflamed
skin. It's a children's product that goes by the brand name Runny Rhino Cold
Relief.
BOLD FORECASTS. Sure, it's a long way from Runny Rhino to Mazzella's dream of
a large and diversified manufacturer of nano materials. But he has already come
a long from heavy lifting to nanotechnology. Eventually, says Mazzella, "Nano
is going to touch almost every market and product that you can think of."
A decade ago, entrepreneurs in the digital economy made similar bold forecasts.
Most of them inhabited the coasts. With nanotech -- a revolution in material
sciences -- the Rust Belt is back in the game.
---------------------------------
[1] By Stephen Baker and Adam Aston (FEBRUARY 14, 2005)
http://www.businessweek.com/magazine/content/05_07/b3920001_mz001.htm
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- » [nasional_list] [ppiindia] The Business Of Nanotech (BW Coverstory, February 14, 2005)
