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Global R&D to Reach $1 Trillion in 2006

By John P. Mello Jr.
Sep 27, 2005 8:03 AM PT

Worldwide spending on research and development will reach US$1 trillion in 2006, according to a survey released yesterday by Battelle and "R&D" magazine.

Global R&D to Reach $1 Trillion in 2006

The survey, which Battelle, of Columbus, Ohio, has been conducting annually for more than 40 years, showed that much of the growth in R&D is being fired by the Asian region.

Rapid R&D growth in that region has been going on for 10 years, the survey noted, and is expected to go on for 5 to 10 more.

Stoked by Offshoring

It added that much of the burst in the region's R&D activity can be connected to increased outsourcing from other nations, most significantly the United States.

"You can find a number of newspapers every day citing the increase in offshoring from the U.S., Great Britain and Europe, with much of that going toward Asia," Battelle Senior Research Scientist Jules Duga told the E-Commerce Times.

But, Duga, who has co-authored the R&D forecast for 26 years, added, "There's a substantial amount of internal investment, particularly in China, where they have been investing very heavily in their own research facilities -- partly for military applications and partly for domestic consumption."

US Biggest Spender

Duga's co-author, "R&D" magazine Editor Tim Studt, predicted that the growth in R&D investments through offshoring arrangements will taper off over time. "At the same time, internal R&D growth is there, so overall, there will not be a let up in total R&D spent in those countries, at least for the next couple of years," he told the E-Commerce Times.

Nevertheless, the survey pointed out that the United States remains the leader in gross spending on R&D, with a projected $312.2 billion expected to be burned on it in this year. That's almost 2.5 times the spend of leading Asian nations such as China ($125.49 billion) and Japan ($123.33 billion).

However, Uncle Sam's spending lead is expected to diminish in the coming years, according to the survey, from 32.7 percent of global R&D spending in 2004, to 32 percent in 2005, to 31 percent in 2006.

Duga cautioned about misinterpreting those declines. "A distinction must be made about the absolute amount spent on R&D in the U.S. and the relative amount," he said. "The major reason that the U.S. relative share is going down is not because our spending is going down, but because other people's is moving ahead."

China's R&D Growing

While the U.S. share of global R&D slips, China's share is expected to increase during that period, from 11.8 percent in 2004, to 12.8 percent in 2005, to 13.6 percent in 2006.

In addition to China and India, Duga noted, Singapore and Korea are hot R&D markets. "We expect Japan will continue to grow but not at the kind of rates that it has in the past," he added.

He remarked that sectors attracting the most R&D bucks were electronics, communications, specialty chemicals and pharmaceuticals. "Pharmaceuticals will be a huge growing area for quite some time to come," he said.

Historic Change

This year was the first that Battelle and "R&D" magazine have surveyed the international R&D scene. One of the drivers behind the departure from the study's historic domestic focus was the amount of R&D now being outsourced offshore, Duga explained. "Companies have gone through their 'dip their toe in water' phase and have started to make much more specific investments in not only doing R&D overseas but in construction of R&D facilities. It's a much greater commitment now."

Moreover, growth rates in Asia, as well as spending amounts have reached significant levels, Studt added. "Now that the rate of growth is continuing at almost double digit figures, it's starting to get a very noticeable part of the overall picture," he said.

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