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Nanotech spending nears $3 billion

Spending on research and development in nanotechnology will surpass $3 billion in 2003, as nations and companies compete for leadership in the field, according to a new report.

Spending on research and development in nanotechnology is expected to surpass $3 billion in 2003, as nations and companies compete for leadership in the growing field, according to an investment firm report.

Nanotechnology--the science of building products out of components that measure 100 nanometers or less (a nanometer is a billionth of a meter)--has been alternately hyped and panned by analysts, the media and investors. Nonetheless, the effort and funding being put into the field are real indeed, according to the Nanotech Report 2003 from Lux Capital, a venture firm specializing in nanotechnology.

The U.S. government has invested approximately $2 billion in nanotech projects since 2000, the year then President Clinton announced the National Nanotech Initiative. The European Union, meanwhile, will invest more than $1 billion in nanotech research projects between 2002 and 2006.

Asian nations have also been increasing their efforts, with many Asian companies striking research and patent deals directly with U.S. universities. Japan has increased funding for nanotech from $120 million in 1997 to nearly $750 million in 2002, according to the firm. By 2010, nearly 50 percent of the world's physical scientists will be located in Asia, the report predicted.

About $900 million in venture capital has gone to nanotech companies since 1999, with $386 million invested in 2002, according to the report. More than 700 companies are involved in some way with nanotechnology.

The interest largely stems from nanotech's potential. At its tiny dimensions, matter begins to behave differently, researchers say. Materials that conduct electricity can begin to act as insulators. Combining different classes of molecules can also lead to new materials that feature properties optimized for specific tasks.

If and when a nanotech explosion occurs, it will be different than the electronics boom or the Internet boom of previous years. For one thing, the incumbent industrial interests are working hard to ensure that they aren't caught by surprise, according to the report. The established chemical and electronics firms will likely dominate the field in developing new materials because of their large research and development budgets, the report said.

The industry will also take time to develop, because much of the basic research is still being created.

"The vast majority of the work being done in what we call nanotech is for the most part still in a form we consider science," the report said. "This is why many firms committing resources in hopes of harnessing nanotech have partnered with university laboratories through joint ventures and funding initiatives."

In the next decade or two, computer companies may make memory chips or processors from molecules. So far, though, the main nanotech products have been fairly mundane. The stain-resistant pants from Old Navy and Eddie Bauer, for instance, use a nanotech coating from Nanotex.