|Title:||United States firms' plans to expand research and development operations by country/geographic region in percentages forecast for 2012|
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Where U.S. Firms Plan to Expand R&D
China XX% North America XX% India XX% Rest of World XX% Europe XX% Other Asia XX% Eastern Europe XX% Japan X%
Source: Battelle, R&D Magazine Survey
The following long-term developments are shaping the global distribution of R&D:
* Emerging economies are increasing their global technological presence
* Economic issues in established economies limit their ability to support R&D
* Established economies are losing their unique tech-opolies
* Sustainability is becoming a competitive advantage
* Energy has created new technology opportunities and hazards
* Rapid technology innovation is creating a more knowledge-intensive world
* Product and technology sourcing has created new techno-politico issues.
Leveling the Playing Field
As noted throughout this report, the newly emerging economies are developing homegrown technologies that often rival and sometimes exceed--those of established economies. Flush with revenues from manufacturing low-cost, high-value products for the established economies, these emerging economies are slowly increasing their annual investments in R&D infrastructures, education, and intellectual properties. Ten years ago, established economies were dealing with the globalization of manufacturing capabilities to emerging economies, while R&D operations seemed fairly stable. Five years ago, established economies were becoming concerned about R&D outsourcing issues with rationalizations posited to support the development of local markets in the emerging economies. Today, established economies are realizing the negative effects of their globalization efforts in the form of deficit balance of trade, high energy use, and increased government spending. These deficits limit the ability to invest in infrastructures and restrict long-term growth.
This globalization is now expanding to even smaller emerging economies such as Malaysia, Saudi Arabia, Indonesia, Thailand, Vietnam, Mexico, and others who look to ramp up their R&D spending and infrastructures. They note that the fastest way to develop long-term growth capabilities is to build a strong R&D infrastructure. Among new trends being established are limitations imposed on previously readily available resources and commercial markets. Examples include Chinas export restrictions of rare earth metals for which it has a near-monopoly and the development of captive sources for high-technology products that include commercial aircraft, high-speed trains, and spacecraft and space launch vehicles.
The economic debt-based problems of the U.S., the EU, and Japan put their R&D establishments and, by direct result, also their country's economic growth prospects in both short-term and long-term peril. In 2012, these three countries will struggle to increase their overall R&D budgets by X% to X%. China once again will easily increase its R&D investments by more than XX%; India and Brazil will both increase their R&D spending by nearly X%; and even Russia is expected to increase its R&D spending by more than X%.
It is well noted that the U.S. outspends all others in R&D, but the rate differences noted above have continued consecutively for the past five years and reflect the growth in technology prospects that can be expected from China and India in the not-too-distant future. The five-year outlook for emerging versus established global R&D investments also does not show any significant situations that would alter these trends.
As noted in this and previous reports, the U.S. and other established economies have a number of well-established high-tech industries that dominate the R&D global landscape. Some of these are supported and maintained by the high quality of universities in these economies, many of which have been in place for more than a century. Other industries are dominated by industrial market leaders, such as the ICT's Intel, Microsoft, Goggle, Apple, and Cisco. Still others, such as the aerospace and defense industries are dominated by strong government R&D support to Boeing, Airbus, Lockheed Martin, and others.
But, in industries such as chemicals, metals and steel, photovoltaics, nuclear energy, food products, and textiles, production capabilities have been lost to emerging economies, along with their integral R&D, technology, and intellectual property constituents. Still other industries, including pharmaceuticals (which just XX years ago had unquestioned dominance by U.S. firms), supercomputing, automotive, software, and polymers are in a state of transition with the outcomes still to be decided.
Sustainability is Good
Certain facts--that we live in a world with more than X billion inhabitants, with distinctly limited material and financial resources, a changing global environment, and contamination found in every part of the planet--all point to creating living and working environments that are sustainable, and that includes R&D in all its aspects.
Five years ago, a sustainable approach might have been considered as just being a "good citizen"; today it's considered an essential operating scenario that if sustainable components are not directly required by law, they likely will be soon.
However, the sustainability requirements put in place in established economies often differ from the requirements put in place in emerging economies. Shortterm, this disparity creates a potential cost disadvantage for the established economies, favoring the emerging economies. Additionally, the absolute cost differences between sustainable and unsustainable products and operations have yet to be resolved by R&D of new materials and technologies--it remains cheaper in the short-term to conduct unsustainable operations.
Although U.S. energy consumption is consistent with its share of global GDP, on a per-capita basis, the typical U.S. family uses substantially more energy than that used by the rest of the world. In the U.S., each person uses the energy equivalent of XX barrels of oil per year, while in China that number is XX barrels; in Japan, XX barrels; and in Mexico, XX barrels. The absolute amount of oil imported in the U.S. has actually dropped slightly each year over the past several years, indicating our reliance on renewable energy, along with increased development of U.S. oil and natural gas sources. It has been noted that with the existing programs in place, the U.S. has become a net energy exporter in 2011. These programs include exporting coal and natural gas to China; the increased development of shale gas sources in the northern plains region of the U.S.; and increased R&D in biofuels, photovoltaics, and wind turbine energy sources. The U.S. energy programs appear to be in place to satisfy, albeit partially, the rest of the world's fair share of the energy sources available.
The Technology Spiral
Of note is the ideal that technology development breeds an ever-increasing flood of new technologies. That scenario is evident in the electronics and ICT industries, with Apple, Intel, and other companies scheduling new product releases based on the expected development and efficient manufacture of new and enhanced product technologies. It is also apparent in the biomedical arena as medical practices and technologies improve, but not on the same time scale as in the ICT industry.
This trend helps established economies, since their R&D organizations are inherently involved in the development of these new technologies, establish product time scales and early on become aware of potential problems and issues. These rapid technology cycles are not so easy for emerging economies. By the time they solve these problems in these rapid technology cycles, and by the time they work out these problems in typical product development, the technology may have been switched to a different operating system, system protocol, or regulatory standard. Technology "windows of opportunity" may have been missed and whole generations of new technologies obviated.
A New Weapon?
Throughout history, withholding essential materials has often been used as an economic weapon to provide an unfair competitive product advantage. Patents, technology licenses, and production agreements are established for situations such as these. Companies that relied on China as their sole source of rare earth metals for their high-technology products, and are now hampered by the recent export restriction, likely should have known better. Japanese automotive companies who relied on sole-source suppliers found themselves in a similar situation when the earthquake and resulting tsunami disabled their sensitive supplier networks.
In a globalized network, the lack of essential components can disrupt supply chains in both manufacturing and R&D environments (although to an admittedly smaller degree with regard to R&D). The loss of thousands of research lab rats housed in the flooded basements of Houston's medical research complex during Tropical Storm Allison in 2001 irreparably damaged specific R&D programs, which took years to recover.
Overall, globalization of R&D should push technology forward at reduced costs and with greater quality and value to the user. Globalization will bring about changes, and the status quo is likely to be altered to the detriment of those who are not properly prepared for the change.
World's X,XXX Largest Public Corporations by Region
2000 2005 2010
U.S. and Canada X,XXX X,XXX XXX Western Europe XXX XXX XXX Japan XXX XXX XXX Other Mature Economies XXX XXX XXX China X X XXX Brazil, Russia, India XX XX XXX Other Emerging Economies XXX XXX XXX
Source: Booz and Company
Where U.S. Firms Plan to Expand R&D
China XX% North America XX% India XX% Rest of World XX% Europe XX% Other Asia XX% Eastern Europe XX% Japan X% ...