February 27, 2012 - IMM@BUCT

BUSINESS
firm has been upgrading its labs. Lubrizol
was purchased in September 2011 by Berkshire
Hathaway, a conglomerate controlled
by billionaire investor Warren Buffett.
FMC is slating a nearly 5% increase in
R&D spending this year. The firm plans to
direct funds across its product lines, which
include agricultural chemicals, specialty
chemicals such as lithium for car batteries,
and industrial products. NewMarket, the
parent of fuel additives maker Ethyl and
lubricant oil additives maker Afton Chemical,
also plans a nearly 5% increase in R&D.
BASF , the chemical industry’s largest
R&D spender in absolute terms, is not in
this year’s survey because it provided its
R&D spending plans too close to C&EN
press time to be included in the analysis.
However, it plans to spend nearly $2.4 billion
on research this year, up 5.9% compared
with 2011. The rate at which BASF plans to
increase spending is more than twice that
of the largest R&D spender in the survey,
DuPont, which plans a 2.2% increase to $2.0
billion. A BASF spokesman explains that the
firm continues to increase R&D spending as
it emphasizes growth through innovation.
Other surveys of spending plans also find
that chemical makers are cautiously increasing
future-oriented investments. According
to the economics and statistics department
of the industry group American Chemistry
Council (ACC), high energy prices, the debt
crisis in Europe, a slowdown in economic
growth in China, and last year’s earthquake
in Japan all contributed to a global soft patch
centered in manufacturing.
In the future, ACC economists say, developed
nations will continue to grow slowly
while emerging markets grow more rapidly
because of industrialization and consumerdriven
demand. As a result, 90% of yearover-year
increases in chemical industry
capital spending will be directed to emerging
markets between now and 2016.
The trade association’s fall survey
of the chemistry enterprise found that
global capital spending by chemical firms
increased 10.0% to $511 billion in 2011 and
should rise 9.0% to $557 billion in 2012. By
2016, ACC predicts, the global industry’s
capital spending will reach more than
$800 billion.
In the U.S., ACC’s survey found, capital
spending rose 7.0% in 2011 to $29.4 billion,
and it will rise an additional 7.3% this year
to $31.5 billion. Much of the spending will
go toward replacing worn-out plants and
equipment. Moving ahead, the economists
say, the development of shale gas will be a
game changer that will lead to new investments
in petrochemicals and derivatives.
When it comes to R&D, ACC’s survey
found that U.S. chemical firms increased
R&D budgets by 3.5% in 2011 to $57.4 billion
and plan to increase spending another
4.0% in 2012 to $59.7 billion. The survey
includes pharmaceutical research spending,
which the group says will rise at a faster
pace than nonpharmaceutical spending.
TAKING A GLOBAL perspective, the “2012
Global R&D Funding Forecast,” put together
by R&D Magazine and the nonprofit
research group Battelle , predicts that
worldwide R&D spending by all industries
will grow 5.2% in 2012 to $1.4 trillion. Asian
countries, according to the report, are leading
the growth with an 8.6% increase in
spending. European R&D will grow by 3.5%,
and U.S. spending will rise 2.1%.
TECHNOLOGY
R&D In Emerging Countries Comes With Risks And Rewards
As chemical firms increased their R&D
spending over the past decade, many of
them enlarged their research capabilities
in developing countries. Those overseas
investments have helped companies gain
market share and increase profits, but
they are not without risk.
Dow Chemical has about 900 people
working in R&D labs in Asia, with the largest
contingent, roughly 500 people, in
Shanghai. Having experts on the ground
in a region that has become a manufacturing
powerhouse means Dow can better
contour products for the local market, according
to William F. Banholzer, the firm’s
chief technology officer (CTO). “You can’t
solve Asian customers’ problems from
the U.S.,” he says.
Just about all of Dow’s researchers in
China are native to the region. Their familiarity
with local markets has helped Dow
develop coatings materials, for instance,
that reduce airborne formaldehyde, a
lung irritant and probable carcinogen that
is still widely used in industrial processes
in China.
Banholzer acknowledges that he worries
about intellectual property (IP) theft
in developing countries in which legal protections
may not be as robust as in more
developed ones. But he points out that
IP theft occurs in developed countries
too. For instance, Kexue Huang, a Dow
researcher who was based in Indianapolis,
recently pleaded guilty in a U.S. court to
stealing Dow technology for making the
insecticide Spinosad (C&EN, Sept. 26,
2011, page 7).
The best way for a company to protect
itself, Banholzer says, is to make sure it
has patent protection. Yakov Kutsovsky,
Cabot’s CTO, agrees. “We made a conscious
decision to patent our products in
China,” Kutsovsky says. The commitment
will go a long way to developing robust
patent protection for all companies operating
in China, including Chinese firms,
he says.
A smaller company than Dow, Cabot
has 50 technical service employees at its
Shanghai research center who tweak the
firm’s product line to suit the needs of
customers in China. Having such a team
on the ground in the country is “a major
competitive advantage,” Kutsovsky says.
Although Cabot has not had any IP stolen,
Kutsovsky says, the company takes
a number of precautions in developing
countries. For one, the firm takes steps
to earn employee loyalty and keep turnover
low. It also has protocols in place to
safeguard information when it works with
third parties. And it brings in critical technology
from Europe and the U.S. only on
an as-needed basis—and only with appropriate
security precautions, he says.
Like Dow, DuPont has a large contingent
in developing countries. Combined,
well over 1,000 researchers work at major
DuPont research installations in Shanghai;
Hyderabad, India; and Paulínia , Brazil,
notes DuPont CTO Douglas Muzyka.
These centers develop products for local
markets and act as hubs connected to
DuPont’s global R&D infrastructure.
In China, for instance, local researchers
developed a composite material strengthened
with DuPont’s Kevlar p -aramid fiber
WWW.CEN-ONLINE.ORG 22 FEBRUARY 27, 2012