High-Tech Trends Have Global Effect
It seems that nanotechnologies are becoming integrated into every U.S. industry - but the nation does not have a corner on the "high-tech" market.
Susan Avery (Oct/Nov 07)

"The Future is Coming Sooner Than You Think" - the title of a special report on nanotechnology released earlier this year from the Joint Economic Committee of Congress - could apply to all high-tech industry segments right now. From biotech to consumer electronics, former science fiction scenarios are quickly becoming reality as the pace of technological development accelerates.

Rapid prototyping systems that can build parts molecule by molecule, biofeedback-based sensors that allow users to control computers with the power of thought, data storage devices containing the entire Library of Congress in a space the size of a sugar cube, photovoltaic paint, insulation that generates electricity based on the temperature differential between the inside and outside of a building, nanodevices programmed to destroy specific DNA segments of cancer cells, and tiny chips implanted into real insects that can be used to gather intelligence information for the military are just a few examples of real high-tech advances in various stages of development.

American innovation is alive and well, despite the fact that most Americans have no idea how any of this technology works and just want their iPhones or whatever the latest, hottest, high-tech gadgets happen to be. Fortunately, an elite segment of the U.S. population does know how it works, and that demographic segment is in increasingly high demand.

Wanted: Qualified People
"Companies of all sizes continue to have problems recruiting highly qualified and educated individuals to work for them, whether those individuals are foreign or domestic," says William T. Archey, president and CEO of the American Electronics Association (AeA). He notes that in 2006, the unemployment rate for computer scientists was 2.5 percent, and for engineers it was below 2 percent.

Qualified business managers who can understand the technologies and also navigate the complexities of ever-changing global high-tech markets are in highest demand, adds Jim Poage, president and CEO of the San Antonio Technology Accelerator Initiative (SATAI), which has assisted more than 600 local clients - individuals as well as startup companies - with their commercialization efforts since 2003. Of these, thus far, fewer than 50 have managed to acquire investment capital.

"We don't see the shortage of qualified scientists and engineers," says Poage. "What we do see is a shortage of experienced entrepreneurs - people that have started companies and run them up to be successful. That's a hard skill set to find anywhere."

The most common obstacles to success in high-tech startups, he observes, are "the lack of a good management team, the lack of a clear business plan, and the lack of what I would call a maniacal focus on raising money and making sales." Also scarce, he says, are "the mid-career IT professionals, project managers, and customer-support people who have both the interpersonal skills and the technical background to really bridge the gap between the technical community and the business community."

Many state and federal government initiatives have been launched to help bridge the knowledge gap. Concerns about declining math and science test scores among U.S. students - combined with the rise of China, India, and other countries as major contenders in high-tech - prompted the 21st Century Competitiveness Act, which Congress passed almost unanimously and President Bush signed into law in August. This legislation authorizes increased federal funding for research and development, plus $43 billion for improving public education in science, technology, engineering, and math (STEM) subjects.

Cyberstates
According to "Cyberstates 2007," the tenth anniversary edition of AeA's annual report detailing national and state trends in high-tech employment and other key industry factors, total U.S. tech industry employment increased by almost 150,000 jobs in 2006 to 5.8 million.

The fastest-growing industry segments were software services, which added 88,500 jobs; and engineering and tech services, which added 66,300. Communications services was the only segment that showed a decline in employment, and electronics manufacturing had only a slight net increase. Within the manufacturing segment, some sectors lost jobs while others, including the semiconductor industry with a gain of 10,900 jobs, showed strong growth.

State-by-state data in AeA's "Cyberstates" report, based on 2005 numbers from the Bureau of Labor Statistics, showed California, Texas, New York, Florida, and Virginia to be the top-five states for high-tech employment. Florida had the highest growth rate at 4.1 percent, followed by Virginia at 3.0 percent. The state with the highest concentration of tech workers as a percent of its private-sector work force was Virginia, with 8.9 percent.

Considering that, as Archey points out, "the average tech industry wage is 86 percent more than the average private-sector wage," state governments are becoming increasingly sophisticated in their efforts to promote high-tech development. State initiatives have moved far beyond merely providing direct funding to university R&D programs or offering incentives to companies that bring in high-tech (and high-paying) jobs. Instead, they are targeting specific technologies and industries based on the strengths of existing university programs and industry clusters, and also investing in initiatives that will foster collaboration between universities, industries, and government. California's $3 billion commitment to stem cell research is probably the most famous example, but there are many others.

Almost every state has at least one biotech-related initiative, including state-funded stem cell programs in Maryland, Connecticut, New Jersey, and New York (although on a smaller scale than California's). A growing number of states are also now investing in alternative energy and nanotechnology development, usually through university-state partnerships. A report earlier this year from the National Governors Association and the Pew Center on the States - entitled "Investing in Innovation" - notes that although state investments in R&D are dwarfed by total R&D spending by industry and the federal government, these kinds of well-planned initiatives can make a dramatic difference in future high-tech developments.

In Texas, the state's two-year-old Emerging Technology Fund, in addition to offering incentives to attract high-profile researchers to universities, also provides matching grants to high-tech startup companies in order to help expedite commercialization of new products. This initiative "has had a beneficial effect throughout the state," says Poage. "There are now a whole bunch more companies that are commercializing products than were there a year ago. It has also helped to level the playing field somewhat because areas that previously had almost no technology coming out now have tech companies starting up."

Nationwide, high-tech venture capital investments increased 2 percent in 2006 to $12.7 billion, with software services the largest sector at $5 billion, according to AeA.


Nanotech
The hottest emerging technology by far right now is nanotechnology, which isn't actually an industry but rather a multidisciplinary specialization that overlaps many industries, including most if not all of the 49 North American Industrial Classification System (NAICS) codes that AeA uses to define "high tech," plus many others not included in AeA's list. Nanomaterials (such as nanospheres, nanofibers, and nanotubes) are already being used in a growing number of consumer products as well as industrial applications. Development and initial commercialization of nanotools, which allow measurement and manipulation of matter at the nanoscale (one billionth of a meter), and nanodevices, which perform specific functions at the nanoscale, are already well under way.

A recent study by Lux Research, a New York-based market research and consulting firm specializing in nanotechnology and the physical sciences, found that U.S. corporations directly employed about 5,300 "white-coat" nanotech developers at the end of 2006, predicting that this number will grow to 30,000 in the next two years. In addition, the National Science Foundation (NSF) forecasts that nanotech will indirectly affect at least two million blue-collar jobs within a decade.

Lux Research also found that $12.4 billion was invested in nanotech R&D worldwide in 2006, and more than $50 billion worth of nano-enabled products were sold. The U.S., Japan, Germany, and South Korea were the leaders in nanotech, but China, India, and Russia are beginning to close the gap.

The Project on Emerging Nanotechnologies, a nonprofit group funded by various foundations and private donors, recently produced a mashup Google map of the United States showing the cities with the highest concentrations of companies, organizations, universities, and government agencies involved in nanotech. The top-two "NanoMetros" identified by the group were San Jose and Boston. Three other California cities - San Francisco, Oakland, and San Diego - and one other Massachusetts city - Middlesex-Essex - also made the list, along with Denver, Austin, Houston, and Chicago.

The National Nanotechnology Initiative (NNI), a U.S. government program that coordinates the nanotech-related work of 26 federal agencies, has seen its R&D budget increase every year since it began in 2001, now up to $1.4 billion for FY2008. NSF is the lead federal agency for NNI, overseeing operations of the National Nanotechnology Infrastructure Network, which includes more than a dozen partner universities throughout the country that provide access to nanotech R&D facilities for both academic and industry users.

Also part of NNI are five nanoscale science research centers operated by the Department of Energy at Brookhaven (NY), Sandia/Los Alamos (NM), Oak Ridge (TN), Argonne (IL), and Lawrence Berkeley (CA) national laboratories; plus intense nanotech research being conducted by the Department of Defense primarily through its Defense Advanced Research Projects Agency (DARPA) and through the research offices of the service branches. All military branches are undergoing technology modernization programs, investing in advanced communication technologies and weapons systems in which nanotech will inevitably play a major role.

The Joint Economic Committee report on nanotech predicts that as early as 2010, there will be "nanosystems" - assemblies of nanotools or nanodevices that function together to perform tasks; by 2015, actual manipulation of atoms to design molecules will be possible; and by 2020, nanotech could possibly reach what some scientists call "singularity" and take on a life of its own, using artificial intelligence far beyond the capabilities of its human creators.

"Since the path from initial discovery to product application takes 10-12 years, the initial scientific foundations for these technologies are already starting to emerge from laboratories," notes the report, which was signed by Senior Economist Joseph Kennedy. Since "as we go forward, an increasing proportion of investment in nanotechnology will come from the private sector," the report recommends that nanotech "be allowed to proceed as other transforming technologies such as chemistry, steam power, and electricity have done."

Globalism
Just as nanotech is expected to become integrated into almost every industry and eventually permeate almost every aspect of daily life, so is globalism a fact of life for all high-tech companies.

Offshoring in the semiconductor industry has been taking place for decades, initially for lower labor costs in the assembly process, but now increasingly for complex fabrication and design work, with Taiwan and China the major chosen locations. Offshoring of software services, primarily to India, gained momentum about 10 years ago. A growing number of U.S. companies are outsourcing R&D work of all kinds to foreign countries as the quality of math, science, and engineering education has continued to improve overseas. China, for example, now annually awards four times as many engineering bachelor's degrees than the United States does.

High-tech imports to the United States exceed high-tech exports: $322 billion in imports compared to $220 billion in exports during 2006, according to AeA. Not surprisingly, the biggest trade deficit with any single country is with China. While U.S. high-tech exports to China more than tripled between 2000 and 2006 - from $4.6 billion to $14.1 billion - high-tech imports from China to the U.S. almost quadrupled - from $26 billion to $102 billion.

The largest market for U.S. high-tech goods is the European Union, with which the United States has a trade surplus ($46.1 billion in high-tech exports versus $33.4 billion in imports in 2006). The United States also has a trade surplus with its second-largest high-tech market, Canada ($30.1 billion in exports versus $11.7 billion in imports); but a deficit with its third-largest market, Mexico ($29.6 billion in exports versus 44.7 billion in imports). The countries of Central and South America, taken as a whole, could be considered the fourth-largest market with which the United States also has a trade surplus in high-tech ($17.1 billion in exports versus $3.1 billion in imports in 2006).

Globalism has blurred the boundaries between countries, however. Most major U.S. high-tech companies have overseas facilities, and foreign direct investment in the United States continues to increase as well. As noted in a 2004 AeA report on outsourcing, which still holds true, "In the global marketplace, companies need to have a physical presence in overseas markets or they cannot compete in those markets. Indeed, these jobs are not outsourced, but rather are necessary for companies to gain access to their customers."