17 January 2013 17:57 [Source: ICIS news]
By Joe Kamalick
WASHINGTON (ICIS)--Major US chemicals producers expect to raise research and development (R&D) spending this year, a key survey reported this week, and while the increase may be smaller than in earlier years it could still have impact on broader industries and the nation’s economy.
In its annual survey and review of R&D spending worldwide, the Battelle Company noted that the overall US chemicals and advanced materials sector “is an innovation-intensive business … responsible for more than one-tenth of all patents filed in the US”.
The chemicals sector also has a large economic impact in employment and international trade, Battelle said.
R&D spending by chemicals companies, the research firm said, creates a ripple effect that generates still more innovation and expansion in other industries.
The report said that “new materials catalyse applications research in other markets such as transportation, pharmaceuticals and energy”.
“For example, progress in battery-based energy storage depends largely on performance improvements in component materials,” Battelle said. “At the same time, major chemical and metals producers are themselves major consumers of energy and materials, which can create market pull for deployment of new technologies.”
In addition to its R&D analysis of the chemicals sector, the annual Battelle survey also examines four other key research-critical industries: the life sciences; information and communications; aerospace and defence; and energy.
But it is only the chemicals sector, Battelle noted, that is a key supplier to the other four. This means, said the report, that the outlook for chemical and materials R&D is to a large degree tied to these four key technology areas and others.
It also means that R&D advances in chemistry can trigger innovations across the whole spectrum of research-intensive manufacturing.
Within the chemicals sector, said Battelle, “R&D activity involves either new production processes or new forms and compositions of matter,” with new developments from basic research “and computational design increasingly common in early stages of advanced materials research.”
“Research objectives can include sales growth from development of higher-performing products, cost reductions through yield improvement, sustainability for cost or customer reasons, and regulatory compliance,” the analysis said.
“Some large companies may undertake R&D or make venture investments and acquisitions in order to forward integrate into value-added products which are based on advanced materials,” the report added.
Not surprisingly, major US chemicals manufacturers are top spenders in research and development.
According to Battelle, the top ten firms in chemicals R&D in 2011 were, in order, DuPont, Dow Chemical, 3M Company, PPG Industries, Goodyear Tire & Rubber, Honeywell Advanced Materials, ALCOA, Huntsman International, Eastman Chemical and Air Products & Chemicals.
In the number one spot, said the report, DuPont had R&D spending of $1.956bn (€1.467bn) in 2011, the latest year for which full-year numbers were available. That was up by 18.5% from the company’s 2010 R&D outlay of $1.651bn.
Dow was close behind, with a 2011 R&D spend of $1.646bn, according to Battelle, a marginal increase from its 2010 level of $1.660bn.
3M was in third place for 2011 R&D expenditures, spending $1.57bn that year.
The rest of the top ten chemical R&D spenders fall off into multi-million dollar research funding figures, with the number ten firm, Air Products, allotting $118m to research in 2011.
In surveying chemicals producers about their R&D spending policies going forward, Battelle said that it found “more than half of the respondents expressed optimism that their R&D budgets would be increasing for 2013, although most respondents expect their budget increase to be very small”.
On a global scale, Battelle said that R&D spending this year was expected to grow by 3.7% or $53.7bn to nearly $1,496bn. If that research spending gain actually develops as expected, Battelle president Jeffrey Wadsworth noted that it would be the first $50bn annual advance recorded.
Although the US still holds the lead position among individual nations for R&D spending (government and private), Asian nations continue to accelerate their research objectives, especially China.
Battelle estimates that the US will spend $423.7bn this year in R&D and China will expend $220bn. Clearly, the Middle Kingdom is still well behind the US in dollars spent on research and development, but Beijing’s outlays are advancing quickly, much faster than the US.
While anticipated US R&D spending this year, $423.7bn, is only about 3% ahead of its 2011 outlay of some $412bn, China’s expected 2013 spending at $220bn is fully 24% higher than its 2011 outlay of $177.3bn.
Battelle also noted that while global R&D spending this year is expected to increase by $53.7bn, the largest share of that advance was attributed to China, which is likely to boost its 2013 research funding by nearly $23bn.
China, said the report, “continues its decade-long annual double digit increases in R&D investments”.
Beijing’s galloping increases in research and development spending are likely to have a long-term effect and ultimately could leave other nations, even the US, in the dust.
“It is important to note the long-term effects of R&D investments and their close relationship to economic growth,” Battelle said, adding: “R&D is not an instrument that can be quickly turned on and off to trigger economic growth.”
The study noted that a decade ago the EU vowed to invest 3% of its annual gross domestic product (GDP) in research and development, but Europe’s R&D outlays have generally been only 1.9% of GDP.
“On the other side, China established a consistent pattern of double-digit R&D funding increases in the 1990s and over the past 20 years has risen from R&D obscurity to challenging the US – and likely succeeding – for global R&D leadership.
Battelle said that another subtle but telling data point in the annual R&D report is nations’ spending on so-called STEM education, a national emphasis on teaching science, technology, engineering and mathematics courses at all levels and especially in advanced education.
Battelle said that it sees a continuing trend in which more advanced STEM-qualified technologists are being created each year in the so-called BRIC nations (Brazil, Russia, India and China) than in the US and EU.
($1 = €0.75)
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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