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Rushing To Market

Investing heavily, Russian initiative hopes to catch up in nanotechnology commercialization

by Ann M. Thayer
May 25, 2009 | A version of this story appeared in Volume 87, Issue 21

Rusnano Investments
Credit: Source: Rusnano
Russian initiative plans to spend $8.55 billion to create nanotech industry
Credit: Source: Rusnano
Russian initiative plans to spend $8.55 billion to create nanotech industry

IN 2004, the U.S., Japan, and the European Union accounted for 85% of global R&D spending on nanotechnology, with most of it coming from government sources, according to a recent analysis by the London-based consulting firm Cientifica.

Fast-forward to 2009, and that percentage has shrunk to 58%. It will shrink further, Cientifica predicts, reflecting the emergence of Russia and China as major players in nanotechnology. Although the EU remains in the lead, Russia has taken second place, followed by the U.S., Japan, and China. When corrected for the countries' actual purchasing power, however, China moves up and ties with the U.S. for third.

Over the past two years, Russia has moved quickly and decidedly to catch up with other countries that have had national nanotechnology programs in place for several years. In 2007, Russia's government inaugurated its own national initiative and created the state-owned Russian Corporation of Nanotechnologies (Rusnano) to develop a nanotech industry. Coordinating basic research is the responsibility of the Kurchatov Institute, in Moscow.

The push on nanotechnology is part of a strategy to diversify the Russian economy away from oil and gas, explained Rusnano Chief Executive Officer Anatoly Chubais in his keynote address at the recent Nanotech 2009 conference in Houston. Rusnano will focus on financing projects that lead to nanotech-based products and on other support areas, such as certification, standardization, safety, and education.

Russia is stepping in later than other countries, Chubais acknowledged, and has a lot to learn in order to set its priorities. Already, though, Rusnano plans on investing an average of $1.2 billion annually during the next seven years. It will invest in all stages and sizes of projects, taking up to an almost 50% share and funding a large proportion of their expenditures. Loans for up to 10 years are being offered at terms that, in light of Russia's inflation rate, represent "negative interest rates," Chubais added.

Russia's goal for what it will reap from these investments is equally ambitious. Sales of Russian nanotech-enabled products were about $545 million in 2008. Rusnano wants to help create an industry with $27 billion in sales of nanotech-enabled products by 2015, or about a 3% share of the estimated world market. About one-third of these sales are to come from Rusnano-backed operations.

In many ways, Rusnano behaves as a venture capital investor that evaluates business plans, invests money, provides administrative and managerial support, and eventually exits its investments. But it differs in one important way: "We do not have a target for profits, only for revenues," Chubais told C&EN in an interview after the address. The idea is to act as a coinvestor and assume certain financial and other risks to make projects attractive to private investors. When a business becomes sustainable, "we will exit," he added.

Sales of Russian nanotech-enabled products were about $545 million in 2008.

WELCOMING TO ALL sources of new nanotechnology, Rusnano is looking to work with foreign companies, governments, and other investment funds. Applications for financing are open to any party, Chubais explained. It wants innovative projects that end with the manufacture of marketable goods based on nanotechnology. Although not all operations need be in Russia, a stipulation is that most of the manufacturing must be done there.

To fulfill the Rusnano mission, Chubais has been on the road talking with potential collaborators and coinvestors in countries that include the U.S., South Korea, Israel, and Germany. "We go country by country to find advances that each can offer and companies that want to expand," he said. Still, Rusnano does not want to spread itself too thinly over the world but rather find "real" projects that will give results.

It's been only a year since Rusnano formulated its commercialization strategy. In that time it has received nearly 1,000 applications for funding. One-third were rejected in an initial review and half are still to be reviewed. From about 133 undergoing further appraisal, 12 proposals have been approved and launched. The total investment in these projects is about $864 million, nearly two-thirds of which is from Rusnano. Areas for investment so far include medical devices and metal cutting tools.

The biggest project is Russia's first large-scale polycrystalline silicon and monosilane facility, in the Irkutsk region. The 3,800-ton-per-year plant will also supply a Rusnano-backed cluster of firms that will use the output for making photovoltaics and semiconductor components. Partners include the Russian companies Sitronics, Angstrem, and Sistema; Switzerland's Oerlikon; and possibly NanoGram from the U.S.

Russia is moving in the same direction as many other countries by shifting the balance of government funding from pure to applied research. Whether the economic crisis crimps such spending won't be seen until at least 2013, Cientifica notes, because government money is generally allocated over long periods. Because Russia and other governments are embracing nanotechnology to fuel economic growth, one view is that they will continue to invest.

"We understand that we are at a very initial stage, but we feel real enthusiasm to support the program and see a number of potential partners across the world in countries already developing nanotechnology," Chubais said.



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