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U.S. Nanotechnology Industry - Investment Analysis and Growth Opportunities
Frost & Sullivan, May 2005
Nascent Nanotechnology Industry Sees Increased Product Development
Nanotechnology has the potential to make substantial improvements in the general quality of life and is, therefore, drawing the attention of entrepreneurs and investors around the globe. Recent product launches, such as transparent sun blocks, stain-free fabrics, golf balls designed to fly straight, and nick-proof trims on hummers, clearly demonstrate the enormous potential of the technology to provide superior medical treatments, better production processes, faster computers, and smaller memory devices.
With many more nanotech-based products presently in their developmental stage and expected to be launched within the next few years, the nanotechnology industry is currently in the late introduction or early growth phase and, hence, faces numerous challenges.
Fundraising Remains a Key Challenge to Sustaining Product Development
Most nanotechnology companies are presently in the conceptual or development stages. While the development of technologies is an important factor for an industry in its growth phase, the lack of real products in the market is likely to be a deterrent for raising the funds required for the commercialization of products. Companies dedicated to nanotechnology are unable to sustain research and development activities solely based on their revenues, and funding is vital to further their research activities.
An added challenge for nanotechnology companies is the lack of sufficient consumer knowledge concerning the benefits offered by nanotechnology, as well as the complex nature of such products. Initially, nanotechnology products are expected to be more expensive than traditional products, notes the analyst of this research. Convincing the customer that the added value is worth the additional cost will be key determinant of the growth of this technology.
Quest for Better Technologies Drives the Growth of Nanotechnology
The constant search for better products and processes is spreading the application of nanotechnology across various industries. In the healthcare & biotech sector, research is driven by the need to improve medical equipment, to find better drug delivery systems, and by the search for medical cures. Overall, the promise of a better quality of life and the potential for lucrative returns are ensuring heavy investments and innovation in this relatively new technology.
The nanotechnology industry can be compared to the stage of the information technology (IT) industry in the early to mid 1990s. While the sector holds high potential for future growth, its present stage is characterized by numerous small market participants, lack of clarity about the final product, absence of clearly defined structure, low profit margins, and high research and operational expenses.
Although the chemicals & materials market was the first to adopt nanotechnology, the focus now seems to have shifted to the healthcare & biotech sector, says the analyst. Much of the miniaturization of computer chips to date has involved nanoscience, and it is expected that products for industry applications and defense & security applications are likely to be the first to enter the marketplace.
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