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2001 BW 50

SPRING 2002

THE TECH OUTLOOK

Nano Technology
No, its not all hype: these supertiny gizmos will transform our way of life


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There isn't a nano-name company among this year's BW50 companies, and there won't be next year, either. But there are plenty of hopefuls. With all the hype about nanotechnology now swirling around Wall Street, you have no doubt already encountered some nanonewcomer with a catchy name like Nanogram, NanoOpto, Nanophase, NanoProducts, Nanosphere, or Technanogy.

More than 300 nano-whippersnappers in the U.S. and overseas are targeting what promises to be a new Industrial Revolution. Nanotechnology will leave virtually no business untouched--or unscathed. The ability to create materials from building blocks the size of a virus (page 182) will unleash unprecedented capabilities. Autos and airplanes, chemicals and plastics, computers and chips, cosmetics and drugs--all of these industries, and plenty more, are facing upheavals that could make the advent of the Internet seem like a minor adjustment.

Tiny upstarts aren't the only ones noticing that small is beautiful. Nano is receiving enthusiastic scrutiny from some big companies in the Standard & Poor's 500-stock index. Led by IBM (IBM ), Lucent Technologies (LU ), and Hewlett-Packard (HWP ), along with Samsung (SSNLF ) and Siemens (SI ), industrial heavyweights are pumping significant sums into nanotech research, as are governments around the world. A new study from CMP Cientifica, a market researcher in Madrid, says last year's worldwide government figure topped $1.2 billion (page 184). This year, the private and public sectors will probably spend $2 billion apiece on nano.

For insurance, big-name companies also are investing in nano-newbies--or teaming up with them. BASF (BF ), ChevronTexaco (CVX ), DuPont (DD ), and NEC (NIPNY )) are tapping the expertise of startups, most of which were founded by university researchers. Mitsubishi Electric Corp. (MIELY ) last year set up a $100 million fund to invest in nanotech, and Dow Chemical Co. (DOW ) in 2000 bought Dendritech Inc.'s dendrimer technology to serve as the basis for a future family of nanoscale polymers. All told, venture capitalists and corporate funds will probably plow $1 billion into nano investments this year, twice what they invested in 2000, says S. Joshua Wolfe, a partner at New York's Lux Capital Group.

However, Lux Capital has yet to place its first nanotech bet. "We get a lot of business plans for nano-X," says Wolfe. "The first thing we do is strip off that nano prefix and look at what these guys are really doing." Often, it's not nanotech at all. "Because nanotechnology is clearly the Next Big Thing," he adds, "it's attracting a lot of P.T. Barnums." One company wanted to promote a new drug based on small particles as a nanodrug, even though it knew the ingredients fell short of the nanotech scale.

To purists, nanotech means things with one dimension no bigger than 100 nanometers, or 100 billionths of a meter. Buckyballs--those soccer-ball-shaped carbon molecules discovered in 1985 by a team led by Rice University's Richard E. Smalley--are roughly 1 nm in diameter. Carbon nanotubes are about 1.4 nm thick. The latest entrants: slightly fatter nanotube-like wires made from silicon, gallium nitride, and other semiconducting materials.

Despite some misleading hype, there's no shortage of genuine articles. Take nanowire startup Nanosys Inc. in Palo Alto, Calif., which uses technology developed by Harvard University chemist Charles M. Lieber. Nanosys was launched in 2001 by venture capitalist Larry Bock, who had retired a year earlier with 14 life-science startups under his belt. Around that time, "I was reading Science magazine and suddenly realized there were almost as many articles on nanotech as on biotech," he recalls.

Fascinated, he started visiting researchers. When he got to Lieber, "it was an `aha!' moment," Bock says. Because Lieber's wires are made from the same materials used for semiconductor lasers, "they have something that carbon nanotubes don't--optical properties." Seeing huge potential in tiny lasers for miniature optical sensors capable of detecting single molecules, Bock came out of retirement. "This is a much bigger opportunity than any of my previous starts," he declares.

So far, though, the nano market is small potatoes. Estimated sales of buckyballs, nanotubes, and other nanomaterials vary widely, but a reasonable estimate might be $50 million. However, products made partly with nanomaterials were worth $26.5 billion last year, reckons NanoMat, a materials-oriented network of research labs and companies based in Karlsruhe, Germany. Current products include chemicals produced with microscopic catalytic particles, sun lotions with invisibly small zinc-oxide flakes to shield against ultraviolet rays, emulsifiers that keep paint from separating, and coatings that make eyeglass lenses more scratch resistant or extend the life of industrial tools. "There are lots of these unexciting, unsexy nanoproducts out there," says Edward K. Moran, director of one of Deloitte & Touche's technology-consulting practices.

More alluring products can be found in company labs, but many need a year or two to reach the market because new manufacturing systems also must be developed. Samsung Electronics Co., Motorola Inc. (MOT ), and other electronics giants are working on supersharp flat-screen displays for TVs, computers, and handheld gizmos. Today's LCDs--power-efficient as they are--are still big drains on batteries. An array of nano-tubes spitting electrons at the screen's backside would use just a fraction of that power. Samsung hopes to ship its first nanotube TVs in time for Christmas next year.

Nanotechnology will also benefit owners of current laptops. Batteries made with carbon nanotubes and nanoscale lithium particles could store higher energy densities, last twice as long, and recharge faster. Because nanotubes are the best heat conductors yet found, they could help keep the batteries in electric cars charged by recovering the energy lost as heat when a driver stomps on a car's brakes. And nanotube gas-tank clusters could store hydrogen for fuel-cell-powered cars that use don't burn gasoline, thus curbing pollution.

Nanotubes are also stronger than steel, so long filaments could create supertough, fiber-reinforced plastics. These materials could slash the weight of planes, spaceships, and ground vehicles. The Pentagon figures nanotubes will yield better radar-absorbing coatings and help make its planes, ships, and tanks stealthier. If nanotech lives up to its promise in aerospace, says David O. Swain, chief technology officer at Boeing Co. (BA ), it will be an "unbelievable breakthrough." For space travel, he adds, its importance would be "almost a bigger step than going from propellers to jets."

Pharmaceutical companies can't wait to use nanotech to discover and deliver drugs. Today, highly sensitive microchips containing intact DNA can spot interactions between candidate antibiotics and target bugs, for example. Remarkable as they are, such chips could be stuffed with 100,000 times more little chemical labs--each of which is 100,000 times more sensitive--if they were made with nanotubes, according to Chad A. Mirkin, director of Northwestern University's Institute for Nanotechnology.

To deliver a drug to a precise target and thus minimize side effects, buckyballs can be assembled into shapes that fit snugly into receptors on the surface of specific cells. The balls could be coated with drugs that disrupt the cell's reproductive cycle, Mirkin explains. Such treatments are now in the works for cancer, AIDS, and other diseases.

What's more, nanotubes are so thin that they can penetrate the skin without pain. So Therafuse Inc., a Vista (Calif.) startup, is developing a skin patch for diabetics. It will draw blood through nanostraws to monitor glucose levels and inject insulin when required.

Nanotech also offers "completely new systems" for detecting biohazards, Mirkin adds. Today, for example, we don't have anything that can recognize the surface of an anthrax spore. So technicians have to crack a suspect spore to release and analyze its DNA. But Mirkin's lab has a different approach: a minuscule "quill pen" that writes nanothin lines. "You can program a computer to draw thousands of patterns based on educated guesses" about unique features on the surface of an anthrax spore, find patterns that bind only to anthrax, then reproduce these for detection kits, Mirkin says. Chicago's NanoInk Inc. licensed the technology last year.

Computer and chip companies were among nanotech's pioneers, and they remain big investors. But ironically, their payoff may be up to a decade away, despite the remarkable progress posted by IBM (IBM ), Hewlett-Packard (HWP ), Hitachi (HIT ), and others in developing nanoscale transistors and, last year, prototype nanotube circuits. "There's geometric progress in this area," says Harvard's Lieber. "A year ago, I would sort of wink at people when I said `nanoelectronics.' Now, I actually believe in my heart we'll be able to do it."

However, silicon chips will keep getting better for at least another decade. Since the semiconductor industry has hundreds of billions of dollars tied up in silicon assets, nanochips may not make economic sense until silicon runs out of steam. Also, researchers still have lots of work ahead in devising manufacturing methods that will reliably direct nanotubes to self-assemble into complex circuit designs.

The ultimate dream of nano engineers is an "assembler," which was first described in the writings of nanotech pioneer K. Eric Drexler, head of Foresight Institute in Palo Alto, Calif. It's a teensy robot that could be programmed to assemble atoms into gears and other components of nanomachines. That vision is still science fiction, says Raymond A. Kurzweil, author and president of Kurzweil Technologies Inc. But if assemblers can be developed, "they'll solve humanity's material needs," he adds. From molecules of dust and dirt, they would harvest the atoms needed to assemble computers, appliances, and other goods.

Researchers may need help moving from their labs to nano startups. Entrepreneurs also need advice on nanotech's intricacies. To meet these needs, the NanoBusiness Alliance was formed last year, and its 200 members are eyeing a huge potential jackpot. The National Science Foundation pegs nanotech as a $1 trillion market by 2015.

That figure may be conservative. Lux Capital's Wolfe points out that nanotech has started a snowball rolling, the likes of which has never been seen. Physicists work with chemists who collaborate with materials scientists who talk to computer scientists who are teamed with biologists. Cross-fertilization that used to be rare is becoming common. Big surprises really do come in small packages.

Corrections and Clarifications
In ``Nanotechnology'' (The Tech Outlook, BusinessWeek 50, Spring, 2002), Mitsubishi's $100 million nanotech venture fund is sponsored by Mitsubishi Corp., not Mitsubishi Electric Corp.


MARCH 25, 2002



By Otis Port in New York, with Roger O. Crockett in Chicago



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