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Technology Firms Focus on R and D

Photonics Spectra
Feb 2000
Gaynell Terrell

US companies are expected to increase research and development funding by 10.6 percent this year, continuing a trend in corporate research financing that began in 1997, a noted economic forecast suggested.

The favorable trend in funding should last for several years, provided there are enough people available to pursue research careers, said the contract research concern Battelle Memorial Institute and R&D Magazine in a press release.

The report, issued in January, predicted that private-sector research spending would total $187.2 billion in 2000, up from an estimated $169.3 billion in 1999. Battelle senior researcher Jules J. Duga said many companies have widened their research focus as a competitive strategy because business innovations, particularly in the high-technology fields, are emerging at a breakneck pace.

"There's an expression we use in agriculture: 'Don't eat your seed corn.' If you're not doing research, you're not providing for the next level of service. It's got to be a continuous process," Duga said.

Agilent Technologies Inc. of Palo Alto, Calif., the Hewlett-Packard Inc. spinoff, will spend about 10 percent of its gross revenues on research in 2000, said spokesman Michael Fournell. The dollar amount is likely to increase as revenues rise from $8.3 billion in 1999 to an estimated $9.4 billion, he noted.

Cree Research Inc. of Durham, N.C., was still finalizing the numbers but reported that it will increase research funding solidly in 2000 with specific objectives in mind. Scott Schwab, director of strategic accounts, said Cree intended to boost support for blue laser diodes and performance of its entire line of light-emitting diodes.

A number of photonics companies said that their research spending is cyclical. Brian Wilson, research and development director for North American Coatings Laboratories in Cleveland, said his budget reflects a modest 5 percent increase in 2000. "We're mainly working on ongoing projects, things that are new to us but may not be new to the entire industry. We haven't outlined any major new products for this year," he said.

In contrast, Analytical Spectral Devices of Boulder, Colo., will drastically cut back research in 2000 to 13.7 percent of sales. That's after investing about 24 percent of sales in research in 1999 to develop three new products for remote sensing and analytical chemistry.

"A tremendous amount of work goes into supporting a new product. We will get revenues back from them before investing in the next new products," said John Enterline, director of sales and marketing.

Industries putting the largest investment in research in 2000 are the usual big spenders -- telecommunications, semiconductors, computers and drugs, the Battelle forecast said.

Government research is expected to rise only about 1 percent, from $65.9 billion in 1999 to $66.4 billion in 2000. That's 24.9 percent of the nation's total research funding. After adjusting for inflation, the study noted, that would represent an actual decline in government research. Historically, government financing has supported basic science and technology research from which commercial products and services are developed.

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