Nanomanufacturing and U.S. Competitiveness: Challenges and Opportunities
Published: 2014-05-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Nanotechnology has been defined as the control or restructuring of matter at the atomic and molecular levels in the size range of about 1–100 nanometers (nm); 100 nm is about 1/1000th the width of a hair.
The U.S. National Nanotechnology Initiative (NNI), begun in 2001 and focusing primarily on R&D, represents a cumulative investment of almost $20 billion, including the request for fiscal year 2014. As research continues and other nations increasingly invest in R&D, nanotechnology is moving from the laboratory to commercial markets, mass manufacturing, and the global marketplace. Today, burgeoning markets and nanomanufacturing activities are increasingly competitive in a global context—and the potential EHS effects of nanomanufacturing remain largely unknown.
GAO was asked to testify on challenges to U.S. competitiveness in nanomanufacturing and related issues. Our statement is based on GAO's earlier report on the Forum on Nano-manufacturing, which was convened by the Comptroller General of the United States in July 2013 (GAO 2014; also referred to as GAO-14-181SP ). That report reflects forum discussions as well as four expert-based profiles of nano-industry areas, which GAO prepared prior to the forum and which are appended to the earlier report.
section_title: What GAO Found
paragraphs: Forum participants described nanomanufacturing as an emerging set of developments that will become a global megatrend: a technological revolution that is now in its formative phases but that many knowledgeable persons—in science, business, and government—expect to burgeon in the years ahead, bringing new opportunities, “disruptive innovation,” jobs creation, and diverse societal benefits. They said that the United States likely leads in sponsorship and overall quality of nanotechnology R&D today as well as some areas of nanomanufacturing—for example, nanotherapeutic drug development and the design of semiconductor devices. But they cautioned that the United States faces global-scale competition and is struggling to compete in some industry areas (notably, advanced batteries). Challenges facing U.S. nanomanufacturing include (1) a key U.S. funding gap in the middle stages of the manufacturing-innovation process, as illustrated below; (2) lack of commercial or environmental, safety, and health (EHS) standards; (3) lack of a U.S. vision for nanomanufacturing; (4) extensive prior offshoring in some industries, which may have had unintended consequences; and (5) threats to U.S. intellectual property.
Key actions identified by our experts to enhance U.S. nanomanufacturing competitiveness include one or more of the following: (1) strengthen U.S. innovation by updating current innovation-related policies and programs, (2) promote U.S. innovation in manufacturing through public-private partnerships, and (3) design a strategy for attaining a holistic vision for U.S. nanomanufacturing.
Key policy issues identified by our experts include the development of international commercial nanomanufacturing standards, the need to maintain support for basic research and development in nanotechnology, and the development of a revitalized, integrative, and collaborative approach to EHS issues.

section_title: Letter
paragraphs: Thank you for the opportunity to be here today to discuss  nanomanufacturing and U.S. competitiveness, including opportunities,  challenges, and related issues. As you know, in July of 2013, at the  request of Committee Chairman Lamar Smith and former Committee  Chairman Ralph Hall, the Comptroller General of the United States  convened a strategic forum on nanomanufacturing. The forum brought  together experts from a wide range of relevant backgrounds to discuss  the status, issues, and implications of nanotechnology’s ongoing  movement from the laboratory to commercial markets, mass  manufacturing, and the global marketplace. In January 2014, we issued  a synthesis report from this initiative, which includes key messages  stemming from forum discussions as well as four nanomanufacturing  industry profiles.
Based on views expressed by forum participants as well as a broader  array of expert interviews, my testimony today will first, present a brief  background on nanomanufacturing and discuss how the United States  compares with other countries in research and development (R&D) and  competitiveness in nanomanufacturing; second, identify the key  challenges facing the United States in nanomanufacturing and discuss  their significance; third, identify some key policy issues concerning  nanomanufacturing; and fourth, discuss a few examples of public-private  partnerships and how they are designed to promote U.S. innovation in  nanomanufacturing. We conducted our work in accordance with GAO’s  quality assurance framework.
subsections: section_title: Background and Discussion of How the United States Compares with Other Countries
paragraphs: According to forum participants, nanomanufacturing is an emerging  megatrend that will bring diverse societal benefits and new  opportunities—potentially creating jobs through disruptive innovation.  Further, nanomanufacturing has characteristics of a general purpose  technology (GPT)—such as electricity or computers, or historically,  innovations such as the smelting of ore and the internal combustion  engine.
As one participant said: “Everything will become nano.”
Figure 1, below, provides examples of nanomanufacturing products that  illustrate four diverse areas being affected by nanomanufacturing.  Different manufacturing activities occur at different stages of the value  chain.
subsections: section_title: Comparison for Nanotechnology R&D: Two Indicators
paragraphs: According to experts, the United States likely leads in nanotechnology  R&D today but faces global-scale competition—which one forum  participant described as a “moon race.” Two indicators of how the U.S.  compares with other countries are R&D funding levels and scientific  publications.
With respect to R&D funding, there is some uncertainty about  international comparisons because relevant definitions may vary across  nations—and some countries may not adequately or effectively track R&D  investments or not share such information externally. However, forum  participants viewed the United States as currently appearing to lead in  terms of overall (that is, combined public and private) funding of  nanotechnology R&D. When public funding alone was considered, a  participant in the July 2013 forum presented projections showing the  United States as likely being surpassed by some other nations.
With respect to scientific publications, the United States appears to  dominate in numbers of nanotechnology publications in three highly cited  journals—which is an apparent indication of U.S. competitiveness in  quality research. However, China overtook the United States in 2010  through 2012 (the most recent year reported) in terms of the quantity of  nano-science articles published annually.
section_title: Comparison for Nanomanufacturing: Four Industry Areas
paragraphs: A semiconductor is the generic term for the various devices and integrated circuits that  regulate and provide a path for electrical signals. As such, semiconductors are the  foundation of the electronics industry. semiconductors. However, they also said that U.S. manufacturing in  this area has declined (although some plants are located here) and  that the United States does not have a strategy to assure U.S.  leadership in the semiconductor industry.
Nano-based concrete: Concrete is the most heavily used  construction material in the world—with about 5-billion cubic yards  annually produced worldwide—and demand for it is expected to  increase to meet the infrastructure needs of a growing global  population. Nanomaterials can enhance the performance of the  concrete used to construct this infrastructure. These materials might  potentially result in roads, bridges, buildings, and structures that are  more easily built, longer-lasting, and better-functioning than those that  currently exist. Experts offered differing views on U.S. global  competitiveness in the commercialization and use of nanomaterials in  concrete. A key forum participant said that while cement for domestic  use is produced in the United States, today’s dominant companies— which are spearheading development of new technologies—are  headquartered elsewhere (although this industry was previously  dominated by the United States). Additionally, some experts said that  other countries are spending more resources than the United States  to promote commercialization; for example, one expert said that China  established a national technology center to improve its  competitiveness and domestic production of high-value, nano-based  construction products. On the positive side, chemical admixtures are  one means to introduce nano-materials into concrete—and the United  States has a 15% market share of chemical sales, worldwide.
section_title: Key Challenges Facing U.S. Nanomanufacturing
paragraphs: According to forum participants and experts interviewed, challenges to  U.S. competitiveness in nanomanufacturing include U.S. funding gaps,  significant global competition, and lack of a U.S. vision for  nanomanufacturing, among others.
subsections: section_title: U.S. Funding Gaps and Possibly a Diversion of Venture Capital
paragraphs: Participants said that in the United States, government often funds  research or the initial stages of development, whereas industry typically  invests in the final stages. As a result, U.S. innovators may find it difficult  to obtain either public funding or private investment during the middle  stages of innovation. For nano-innovators, this support gap can  characterize the middle stages of both (1) efforts to develop a new  technology or product, and/or (2) efforts to develop a new manufacturing  process. Thus, U.S. innovators may encounter two support gaps, which  participants termed:  the Valley of Death (the lack of funding or investment for the middle  stages of developing a technology or product), and  the Missing Middle (a similar lack of adequate support for the middle  stages of developing a process or an approach to manufacture the  new product at scale).
The Valley of Death begins after a new technology or product has been  validated in a laboratory environment and continues through testing and  demonstration as a prototype in a non-laboratory environment (but before  industry acquires it as a commercial technology or product). The Missing  Middle occurs during analogous stages of the manufacturing-innovation  process, as illustrated below (fig.2). Participants further said that  substantial amounts of funding/investment are needed to bridge the  Valley of Death and the Missing Middle—and that high costs can be a  barrier to commercialization, especially for small and medium-sized U.S.  enterprises.
Additionally, some said that recently, venture capital (VC) funding has  been diverted from physical science areas like nanotechnology to fund  new ventures in Internet services that may provide larger and faster  returns on investment.
section_title: Significant Global Competition
paragraphs: Varied forum participants and experts interviewed made statements to the  effect that other nations do more than the United States in terms of  government investment in technology beyond the research stage.  According to participants, the funding and investment gaps that hamper  U.S. nano-innovation (such as the Missing Middle) do not apply to the  same extent in some other countries—for example, China and Russia—or  are being addressed. Multiple participants referred to the European  Commission’s upcoming Horizon 2020 program, specifically mentioning a  key program within Horizon 2020: the European Institute of Innovation  and Technology or EIT, which emphasizes the nexus of business,  research, and higher education. The 2014-2020 budget for the EIT  portion of this European Commission initiative is €2.7 billion (or close to  $3.7 billion in U.S. dollars as of January 2014).
section_title: Lack of a U.S. Vision for Nanomanufacturing
paragraphs: Multiple forum participants said that the United States lacks a vision or   However, one explained  strategy for a nanomanufacturing capability.that such a strategy could be designed by (1) proceeding from a vision or  goal to the examination of the social, technological, economic,  environmental, and political elements of the relevant systems and their  interactions with one another; (2) understanding the basic science,  engineering, and manufacturing involved; and (3) consulting the full range  of stakeholders. This participant said that although systems thinking and  the design of a grand strategy, based on a vision, are often employed  following a crisis that motivates a nation, such an effort could be usefully  pursued in advance of a crisis, using foresight. Such an effort would  reflect the statements of another participant who said, in effect, that the  future of nanomanufacturing for the United States is limited only by our  ability to envision what we want to see realized. This approach would  likely draw upon the U.S. federal government to develop and articulate  the strategy—in coordination with industry, academia, nonprofits, and  state and local governments. Additionally, some federal effort is implied  for implementation, but the level of funding and the mix of funding  sources (not specifically discussed at the forum) would likely be specified  as part of developing a vision and strategy for nanomanufacturing.
section_title: Other Competitiveness Challenges
paragraphs: Forum participants described further challenges to U.S. competitiveness  in nanomanufacturing, including  the earlier loss of an industry, as discussed above for lithium-ion  batteries—or even extensive prior offshoring in some industries, which  can be important, in part because, as one participant said: “when we  design here  ship  abroad, we lose this shop- floor-innovation kind of mentality” and  threats to U.S. intellectual property on the part of some other  countries or entities within those countries—which occur with respect  to both university research and private R&D on, for example,  manufacturing processes.
section_title: Some Key Policy Issues Concerning Nanomanufacturing
paragraphs: Forum participants suggested the need to address policy issues in U.S.  research funding, challenges to U.S. competitiveness in  nanomanufacturing, and other areas, including environmental, health, and  safety (EHS) issues.
U.S. research funding. Forum participants said it is essential for the  United States to maintain a high level of investment in fundamental  nanotechnology research. This is because (1) some other countries are  now making significant investments in R&D and (2) ongoing research  breakthroughs will drive the future of nanomanufacturing. One participant  emphasized that as nanotechnology increasingly moves into  manufacturing, it may be important to consider not only continuing  funding for fundamental nanotechnology research, but also targeting  some funding to early stage research on nanomanufacturing processes.
Challenges to U.S. competitiveness in nanomanufacturing. Forum  participants said the United States could improve U.S. competitiveness in  nanomanufacturing by pursuing one or more of three approaches, which  might be viewed either as alternatives or as complementary  approaches.
These three approaches are described in table 1, below.
section_title: Examples of Public- Private Partnerships Designed to Promote Innovation in Nanomanufacturing
paragraphs: Two examples of U.S. public-private partnerships that are designed to  promote innovation in nanomanufacturing are housed in universities. A  related example with similar goals is a user facility that is located within a  federal laboratory.
subsections: section_title: The NASCENT Center
paragraphs: The Center for Nanomanufacturing Systems for Mobile Computing and  Mobile Energy Technologies (NASCENT) was founded at the University  of Texas at Austin in 2012, with funding from NSF. Two key objectives  are:  to create processes and tools for manufacturing nano-enabled  components for mobile computing, energy, healthcare, and security— as well as simulations for testing potential nanomanufacturing  approaches, and  to provide an ecosystem with computational and manufacturing  facilities—for example, large-area wafer-scale and roll-to-roll  nanomanufacturing,faculty, staff, and students.   as well as the university’s resources, including  The Center’s overall goal is to facilitate the rapid creation and deployment  of new products and to mitigate the risks associated with the Valley of  Death and the Missing Middle. A co-director of NASCENT told us that  another goal is to use “10 years of NSF funding to develop the center  infrastructure so it will . . .  self-supported from industrial  partnerships and other  funding sources.” Center partners  include  industrial partners—such as toolmakers, materials suppliers, and  device makers—that will provide both technical and financial support;  companies ranging from start-ups to well-established firms that will  implement or adopt technology created by the center; and  “translational research partners” such as technology incubators and  technology funds.
section_title: The College for Nanoscale Science and Engineering
paragraphs: The College of Nanoscale Science and Engineering (CNSE), established  in 2004, is part of the State University of New York and is located in  Albany—within the existing regional (Hudson Valley) ecosystem centered  on the semiconductor industry. CNSE is designed as a unique research,  development, prototyping, and educational public-private partnership for  advancing nanotechnology. A chief CNSE partner is SEMATECH—a  global consortium of major computer chip manufacturers that coordinates  cutting-edge R&D projects on semiconductors and is headquartered at  CNSE. CNSE has more than 300 members and strategic partners that  include large U.S.- and non-U.S.-headquartered private companies such  as IBM, Intel, Samsung, and Global Foundries; small and medium-sized  companies; universities from across the United States; and regional  community colleges and economic development organizations, as well as  government-agency sponsors. CNSE facilities allow the development of  semiconductors just short of mass production—which is relevant for  companies attempting to transition from an innovative concept to a  prototype and to prepare for large-scale production. CNSE has developed  models of pre-competitive collaboration among its partners, which use  high-tech CNSE equipment that would be too costly for many individual  companies to purchase.
section_title: The Center for Nanoscale Science and Technology
paragraphs: The Center for Nanoscale Science and Technology (CNST) is hosted by  a federal laboratory at the National Institute of Standards and Technology  (NIST). CNST is a user facility with baseline sponsorship through the  Department of Commerce, which is augmented by external commercial  funds in the form of user fees paid by industry, academia, government  labs, and states. CNST supports the U.S. nanotechnology enterprise from  discovery to production by providing industry, academia, NIST, and other  government agencies access to world-class nanoscale measurement and  fabrication methods and technology. The CNST’s shared-use  nanotechnology-fabrication capability (called NanoFab) gives researchers  economical access to and training on a commercial state-of-the-art tool  set required for cutting-edge nanotechnology development. The simple  application process is designed to get projects started in a few weeks.
Looking beyond the current commercial state of the art, the CNST’s  nanotechnology-metrology capability offers opportunities for researchers  to collaborate on creating and using the next generation of nanoscale  measurement instruments and methods.
section_title: Concluding Remarks
paragraphs: Based on the views of a wide range of experts, nanoscale control and  fabrication are creating important new opportunities for our nation—as  well as the need not only to recognize challenges, but also, where  challenges exist, to act in response to them. The United States leads in  some areas of nanomanufacturing, but faces increasing international  competition. Challenges specific to U.S. competitiveness include, among  others: possible weaknesses associated with prior extensive offshoring in  the U.S. funding gap known as the Missing Middle,  some U.S. industries, and  the lack of a national vision and strategy for the United States to lead  or sustain a high level of competitiveness in global nanomanufacturing  markets in the years ahead.
Experts outlined three main approaches for responding to these  challenges: (1) reviewing and renewing policies that undergird U.S.  innovation; (2) supporting public-private partnerships that address U.S.  funding gaps—especially as these apply to nanomanufacturing; and (3)  defining a vision and strategy for achieving and sustaining a high level of  U.S. competitiveness in nanomanufacturing. The potential benefit that  experts see in pursuing forward-looking approaches such as these is to  help chart a favorable course for the global economic position of the  United States as we move further into the twenty-first century.
Chairman Bucshon, Ranking Member Lipinski, and Members of the  Committee, this concludes my statement. I would be happy to answer any  questions you may have.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: If you or your staff have any questions about this testimony, please  contact me at (202) 512-5648 or personst@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this testimony. GAO staff members who made key  contributions to this testimony include Judith Droitcour, Assistant Director,  and Eric M. Larson, Analyst-in-Charge.
section_title: Appendix I: List of Forum Participants
paragraphs: Gene L. Dodaro (Host), Comptroller General of the United States  George Allen, Former U.S. Senator and former Governor of Virginia  Tina Bahadori, Environmental Protection Agency  Sarbajit Banerjee, University at Buffalo, State University of New York  Lynn L. Bergeson, Bergeson & Campbell PC  Bjorn Birgisson, KTH Royal Institute of Technology  Bill Canis, Congressional Research Service  Vicki L. Colvin, Rice University  Joseph DeSimone, University of North Carolina  Bart Gordon, Former Chairman, Committee on Science and Technology,  U.S. House of Representatives, and Partner at K&L Gates LLP  John Ho, QD Vision, Inc.
section_title: Appendix II: Examples of General Purpose Technologies
paragraphs: Appendix II: Examples of General Purpose  Technologies ”Nanotechnology has yet to make its presence felt as a general purpose technology, but its potential  is so obvious and developing so quickly that we  are willing to accept that it is on its way  to being one of the most pervasive general purpose technologies of the 21st century” (Lipsey et al.  2005, 132).
section_title: Appendix III: List of References
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Christensen, Clayton M., and Michael E. Raynor. 2003. The Innovator’s  Solution: Creating and Sustaining Successful Growth. Boston,  Massachusetts: Harvard Business School Publishing Corporation.
Council on Competitiveness. 2007. Competitiveness Index: Where  America Stands. Washington, D.C.: Council on Competitiveness,  January.
Executive Office of the President. 2012. Report to the President on  Capturing Domestic Competitive Advantage in Advanced Manufacturing.  Washington, D.C.: Executive Office of the President, July.
GAO (U.S. Government Accountability Office). 2012. Nanotechnology:  Improved Performance Information Needed for Environmental, Health,  and Safety Research. GAO-12-427. Washington, D.C.: GAO, May 21.
GAO (U.S. Government Accountability Office). 2014. Nanomanufacturing:  Emergence and Implications for U.S. Competitiveness, the Environment,  and Human Health. GAO-14-181SP. Washington, DC: January.
Holman, Michael. 2007. “Nanotechnology’s Impact on Consumer  Products.” (Slide presentation at a meeting organized by the Directorate- General for Health and Consumers, European Commission, October 25,  2007.) New York, New York: Lux Research, Inc.
Lipsey, Richard G., Kenneth Carlaw, and Clifford Bekar. 2005. Economic  Transformations: General Purpose Technologies and Long-term  Economic Growth. New York: Oxford University Press, Inc.
Morse, Jeffrey D. (ed.). 2011. Nanofabrication Processes for Roll-to-Roll  Processing: Report from the NIST-NNN Workshop. Workshop on  Nanofabrication Technologies for Roll-to-Roll Processing. Seaport  Convention Center, Seaport Boston Hotel, Boston, Massachusetts,  September 27-28.
Persons, Timothy M. 2013. “Comptroller General Forum on  Nanomanufacturing: Overview.” Slide presentation at the Comptroller  General Forum on Nanomanufacturing. Washington, D.C.: U.S.  Government Accountability Office, July 23–24.
Roco, Mihail C. 2013. “Global Investment Profile in Nanotechnology— Comparing U.S. to Selected Economies.” Slide presentation at the  Comptroller General Forum on Nanomanufacturing. U.S. Government  Accountability Office, Washington, D.C., July 23.
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