Nanotechnology

GLOBAL INVESTOR FOCUS
Nanotechnology—32
Investing in nanotechnology is
its own science
The burgeoning field of nanotechnology
promises huge potential in many sectors
of the economy. Investors who want to
position themselves in this technology
must be able to distinguish between
reality and science fiction.
Maria Custer / Credit Suisse
Figure 1
Performance of quoted stocks with exposure
to nanotechnology
Source: Datastream
260
220
180
140
100
60
20
Price Index
05/02
01/03
Nano Basket Equal WE
NASDAQ Composite
01/04
01/05
Many of the nanotech “visions” that reach the public are just
fantastic ideas without any scientific basis. Nanotechnology is a
reality today, and the market for products containing nanotech is
rapidly beginning to emerge. However, due to the heterogeneity
of this science and the broad range of thinkable applications, it
is very difficult to estimate the market potential for nanotechnology
products at this stage. The US National Science Foundation
estimated in 2001 that the nanotechnology market will reach a
size of USD 1 trillion annually by 2015. The difficulty in estimating
the market size begins with the definition of what is nanotechnology
and what is included in the current nanotech market. Several
factors, such as time-to-the-market of nanotech products (the
success of basic products in this area, the success of finding
applications, the time to scale up products), barriers to entry,
penetration rates and global economic growth, play an important
role in the estimates.
Although its potential is difficult to assess, the chances that
nanotechnology will change traditional industries and global economic
structures are high. The better investors understand the
nanotechnology market at its current early stage, the more they
will be able to profit from the expected changes.
Investment case and strategy
Investing in nanotechnology is not easy because the investment
landscape is not yet established. Although the number of companies
with nanotechnology products under development is increasing
significantly, many of these companies are currently at a very
early stage and are privately held, financed by governmental
research funds or venture capitalists. There are a few publicly
quoted nanotechnology companies, but those expected to achieve
the largest part of their revenue and profits with nanotechnology
products have a small market capitalization. This makes it difficult
to build a nanotechnology investment portfolio without including
larger, established companies, and those have only limited exposure
to nanotech. Reflecting this, for the time being, the number
and size of investment vehicles allowing risk diversification, such
as nanotechnology funds, are limited.
In addition, nanotechnology is an interdisciplinary technology
that can be used in many different industries in contrast to traditional
industries like pharma, where investors can obtain exposure
in a single, well-defined part of the stock market.
We have identified the following approaches to invest in nanotechnology:
p Large companies with exposure to nanotechnology (for example:
BASF, Dow Chemical, General Electric, General Motors, Hewlett-
Packard, Intel, IBM, etc.)
p Companies that provide equipment and nanomaterials for
nanotechnology research (for example: Veeco, FEI Company)
p Smaller companies with high exposure to nanotechnology
(for example: Flamel Technologies, Nanogen)
Large companies with exposure to nanotechnology
Many major global corporations with significant research and
development operations are investing heavily in the development
of nanotechnology. This is an effort to keep up with technological