Thinking small puts new spin on growth industry
Applications for nanotechnology are boundless, from car manufacturing to IT and medicine, and that means financial opportunity, the experts tell Chris Oliver
The next big thing is really small, with pundits predicting a US$1 trillion global market in nanotechnology in just 10 years.
Heralded as the new industrial revolution, the industry today is worth US$100 billion annually in goods and services produced worldwide. Some observers predict the sector will be worth US$800 billion by 2010 and others, such as the American National Science Foundation, believe the global market will be worth US$1 trillion by 2015.
These estimates might sound suspiciously like the boasts bandied about on the Nasdaq in 1999, but industry watchers believe nanotechnology will be a distinctly unique phenomenon compared with the technology, media and telecommunications bubble.
Nanotechnology is an industry involving construction on the scale of atoms and molecules. The prefix 'nano' means one billionth. But rather than think of the field as microtechnology or biotechnology, it is more correct to view it as manufacturing at the molecular level. It involves either building micro-scale machines or ordinary-sized objects using smaller machines called assemblers. Advances are being made in biology, chemistry, physics, engineering, computer sciences and mathematics.
If scientists can develop nanotechnology further, there are boundless applications for almost every industry from this Lilliputian world. 'In coming years the application of this new manufacturing technology will change every single branch of industry in which things are actually produced - from car building through IT hardware to medical technology,' says Marco Beckmann, chief executive of Nanostart, a German company that invests and advises financial institutions seeking to channel money into the sector.
'We are on the threshold of a new technological age. There are many indications that nanotechnology may well prove to be the biggest investment opportunity of the century.'
Some concepts are moving from the realm of science fiction and into the laboratory. Examples include drugs that can be absorbed through the skin using nano-particles, eliminating the need for needles; cars that can fix themselves with memory metals; or new cancer-fighting machines eliminating surgery.
Mr Beckmann says some benefits are already widely in use. A German company and a French university's joint venture led to a nanotechnology innovation that increased the storage capacity of computer disks more than 2,000 times. Known as Giant Magnetoresistance, the technology was developed in 1988 and became an industry standard in today's US$40 billion annual market.
'The companies involved in these breakthroughs achieve above-average growth,' says Mr Beckmann.
The field is not necessarily solely geared towards introducing products, but on improving or upgrading existing technologies and goods. An example is car paint that is resistant to scratches and damage from ultraviolet rays. The use of nanotechnology means it is still paint, but not 'nano-paint'.
He says the industry is in its early stages, but the potential to change and improve everyday products is almost unlimited.
Investors cannot approach nanotechnology as they did with the IT sector, which is limited by the twin forces of falling margins and technological obsolescence. 'It is not like chip production which has almost become a commodity,' says Ben Tai, venture capital investor at Latitude Capital. 'Personally, I feel this will be a very interesting sector.'
The United States, Germany, Britain and Japan are the industry leaders in nanotechnology.
Mr Beckmann says the global investment community has been slow to endorse the emerging nanotech story, perhaps partly because of the painful hangover that dogs a Nasdaq worth less than a quarter of its 1999 level.
Another reason may be the lack of knowledge, with few investors in Asia, Europe or North America aware. 'This lack of knowledge among the general public is reflected in the ranks of stock market players,' says Mr Beckmann. 'A few investors are gradually beginning to realise that nanotechnology promises enormous economic potential, but hardly anyone really knows what nanotechnology is, and how they can invest in it.'
There are believed to be just two nanotech dedicated funds worldwide, Luxembourg-based DAC Nanotech-Fonds and Munich-based Activest NanoTech.
Only last year, the first nanotech indices were launched by investment banks Punk Ziegel & Company and Merrill Lynch.
'These first steps indicate that the capital markets are now also beginning to realise that nanotechnology is becoming a serious investment opportunity,' he says. Apart from research and development units in groups such as HP and IBM, there are 180 listed companies worldwide pursuing commercialisation of nanotechnology applications.
'The technological outlook for the sector, combined with the capital market's lack of interest, in the wake of the recent poor performance of tech stocks, means there could be no better time to gain an initial exposure in the nanotech segment,' Mr Beckmann says.