Large players work at tiny science
By Chris Kraeuter
Posted on March 17, 2004
SAN FRANCISCO (CBS.MW) -- Corporations from the largest to the smallest, from high-tech to old school, see nanotechnology as a key to the future.
Nanotechnology, the manipulation of materials on the atom- and molecule-scale, has multibillion-dollar corporations from Intel (INTC: news, chart, profile) to Eastman Kodak (EK: news, chart, profile) to ChevronTexaco (CVX: news, chart, profile).
They're among the companies that believe it's a miracle technology that can transform products in every industry. Longer-lasting tennis balls. Faster, cheaper computer chips. Lighter, stronger airplanes.
However, investors who expect nanotechnology to lift large-cap stocks might need an atomic-force microscope to separate the contenders from the pretenders.
"Selectivity is the key," said Pete Conley, director of institutional equity research at MDB Capital. "This is not one of those 'Let's go out and buy (nanotech stocks) indiscriminately.' That's a low-probability way to win."
Breaking it down
The nanotech movement has been accelerating in earnest since 1989, when, in the first public demonstration of its kind, researchers at IBM (IBM: news, chart, profile) moved around 35 atoms of xenon to spell out the letters "I-B-M." This sort of precise control of atoms allowed scientists unprecedented influence over the properties and characteristics of materials.
Toyota (TM: news, chart, profile) used nanocomposites for its autos' bumpers, a process credited with making them 60 percent lighter and twice as strong. Hewlett-Packard (HPQ: news, chart, profile) has demonstrated molecular switches that can be read and set electronically.
"This is really a way of making things work better," said Bart Romanowicz, executive director of the Nano Science and Technology Institute in Cambridge, Mass. "Every industry will benefit from breakthroughs in this area."
What those breakthroughs will be and what this "area" encompasses remains to be seen, but the National Science Foundation estimated that nanotechnology's market impact would exceed $1 trillion by 2015. The nanoscale generally refers to measurements of less than 100 nanometers.
Comparatively speaking, DNA measures half a nanometer to 2 nanometers in diameter, a single red blood cell measure between 2,000 and 5,000 nanometers and a strand of hair measures between 10,000 and 50,000 nanometers across.
The gigantic hopes being pinned on such tiny developments would seem to be vastly outsized, but for some companies nanotechnology is just another step in a long product roadmap.
Intel said it has been manufacturing chips with nano-size features on them since 2000. This year the company began ramping its flagship Pentium processor at 90 nanometers, following its 130-nanometer generation of chips.
Others in the industry are also shifting production toward 90 nanometer production.
"It's an evolutionary kind of thing, not a revolutionary kind of thing," said Ken David, director of components research for Intel's Technology and Manufacturing Group.
Armed with a budget of $4.8 billion this year, the company's development teams are concentrating on the next steps in the product roadmap: 60 nanometers and 45 nanometers. Also, Santa Clara, Calif.-based Intelhas a venture capital arm with a $1.2 billion portfolio.
Through these methods, as well as partnerships with corporations and universities, Intel is able to find the materials and methods that will secure the company's future.
Getting those materials and methods to translate into a final product, though, is easier envisioned than implemented.
"University labs and even some commercial activities we see are providing these technologies in relatively crude states," David said. "We really work to refine these things for the good of the industry."
Oil and gas giant Chevron Texaco has also carved out its space in the nanoscape.
While attempting to fix clogging problems that hampered gas production, ChevronTexaco scientists in 2002 discovered and isolated the presence of an unknown class of diamond molecules, called diamondoids.
Diamondoids represented nanotech building blocks that the company anticipates applying to certain oil and gas applications, but also to specialty materials, like coatings and special polymers, microelectronics, and pharmaceuticals.
Waqar Qureshi, vice president of ChevronTexaco's technology ventures unit, said the company has actively sought out partners to help it.
"The potential applications are very broad and we really need the expertise and capabilities of the right people," Qureshi said. "They are able to think about things and investigate properties that we can't."
As to how this will impact the company's stock price, spokesman Jeff Moore said that research at ChevronTexaco is undertaken with an end goal in mind. "We have shareholders to answer to. We are operating with their money and there has to be a return."
Hans Coufal, manager of science and technology at IBM's Almaden Research Center, sees nanotech benefiting everything from drastically reducing semiconductor manufacturing costs to enabling quantum computers.
IBM researchers have been at the forefront of nanotech research for more than two decades. IBM researchers won a Nobel Prize in physics for the 1981 invention of the scanning tunneling microscope, which was the first instrument that created images of atoms on the surfaces of materials.
Coufal's lab is one of eight research centers operated by IBM employing more than 3,000 workers. He said, though, that IBM works extensively with a range of partners. "Even a company like IBM cannot afford the resources to do everything ourselves."
Small companies rely on larger corporations for their manufacturing infrastructure, and large companies rely on start-ups and university labs for their agility in research.
When it comes to deciding precisely what to pursue and what not to, Coufal said his researchers first have to ask themselves one question: Will this impact the company and the marketplace? "If the answer is 'No,' then they don't even need to think about the details or ask for money."
Eastman Kodak is another Dow industrials component counting on nanotechnology to bolster its product portfolio.
Currently, the company has incorporated nano-sized particulates in film coatings, ink jet emulsions, and display panels called OLEDs.
Vicki Barbur is a technology director for Kodak's Growth Initiatives division, a team of less than 40 people formed two years ago. The team claims a two-to-five-year window to introduce commercial products into new markets.
Barbur said all the company's research and partnerships are geared toward arriving at an application.
"We are in the business of accelerating the development of research assets into products that we can commercialize and introduce into new markets," Barbur said.
A matter of time
This approach to nanotechnology separates R&D at large corporations -- regardless of the industry -- from similar work at smaller companies or even university labs.
"Big companies look at this and see a business project rather than a science project," said Girish Solanki, industry manager of the Technical Insights division at Frost & Sullivan, a research and consulting company.
Both big and small players are driven, though, by one goal in the end: money.
Small companies see licensing dollars from the intellectual property they hatch, large companies see more advanced products and cheaper manufacturing techniques that can boost revenue and lower costs.
And investors? Well, they're are always looking for the "next big thing."
Solanki estimated consumers won't see a widespread impact from nanotechnology for another five to seven years.
In the meantime, nanotech evangelists will continue to preach their visions to anyone who will listen, not unlike those who heralded innovations from the arrival of the steam engine to the advent of the Internet.
"It's just a question of time for commercialization," said Solanki, drawing parallels to past prognostications regarding instant communications across computer networks and access to unprecedented amounts of data on the Internet. "In 1980, that would've seemed like hype."
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