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Home > Press > R&D Funding Forecast: Industry Retakes Leadership Role

Total funding for research and development (R&D) is expected to increase to $338 billion in
2007, an increase of 2.85 percent over the $329 billion funded in 2006. The overall increase is driven by industry funding and industrial performance, while federal support of R&D is expected to slow, according to the joint Battelle-R&D Magazine 2007 R&D Funding Forecast.
- The federal government is expected to spend $98.3 billion funding R&D
efforts, a minor 1.8 percent increase over the $96.6 billion spent in
- Industrial investments on R&D are expected to reach $219 billion in
2007, a healthy increase of 3.4 percent over 2006 levels of $212
- Academia and other non-profits make up the remaining expenditures on
R&D with $20.8 billion for 2007. Academia is set to increase by 1
percent to $11.4 billion and non-profits are expected to increase by
3.6 percent to $9.4 billion.

R&D Funding Forecast: Industry Retakes Leadership Role

COLUMBUS, OH | Posted on January 25th, 2007

"Overriding all themes in this year's forecast are the dual needs of growing and maintaining the strong technological base that has characterized the U.S. for over 50 years and assuring that the education system provides the critical raw material for the engine that operates our industrial base," said Jules Duga, a Battelle senior researcher and co-author of the report.

Federal outlook
- Much of the emphasis in government-funded R&D continues to be
influenced by the global war on terror. Significant thrusts are being
directed toward problems that deal with the detection of instruments or
compounds that represent major terror threats, especially in the
manufacturing, packaging, and distribution of biological and
radiological materials. Augmenting that type of research is advanced
software development that takes advantage of information technology
ranging from improved data collection to higher quality interpretation
that allows officials to better connect the dots and aid in prevention
of terrorism.

- The Department of Defense will receive a record R&D budget of $76.8
billion in 2007-which is up 4.8 percent over 2006 levels.

- The Department of Homeland Security -- for the first time since its
inception -- will see a 21 percent decline in its R&D budget from the
$1.281 billion it received in 2006.

- A changing climate for technology transfer: The strong emphasis over
the last 20 years to transfer government-developed technologies to the
commercial marketplace has been upended. In the current environment,
technologies used for the global war on terror are already linked with
the commercial marketplace especially those that deal with personal
identification and protection against identity theft. In addition,
research directed toward the identification of biological threats has a
direct application to other public health problems, which are now under
the purview of state and local governments.

- Energy issues related to supply and impact on security will get greater
attention and support. Past efforts to reduce dependence on foreign
energy supplies have been less than successful. However, current
pressures from cost increases and the general trends toward green
practices appear to be having a greater effect on the funding of R&D
directed toward alternate energy issues.

- There will be a continued emphasis on the entire range of information
gathering, analysis, and communication technologies that create and
support reliable infrastructure.

Industry outlook
- Overall, the U.S. industrial climate is strong with industrial R&D
spending for 2007 up more than $7 billion -- a trend that is expected
to remain strong through the year and into 2008.

- Growth fields for industry are electronics, biotechnology,
pharmaceuticals, software development, and process modeling.

- Aerospace: Getting a healthy boost from commercial airliner sales,
communication systems and imaging satellite sales escalate.

- Semiconductor market appears poised for dramatic growth as various
elements within it support the emergence and development of new
technology, low cost, high-efficiency photovoltaic systems that are
approaching the cost efficiencies of petroleum-based energy supplies.

- Industries that show promise for improvements in R&D investments are
energy, nanotechnology-based materials science, and any industry or
sub-industry involved in sustainability areas.

- Non-profit R&D is growing, but academia is suffering. The near-zero
growth in academic-based research can largely be attributed to a lack
of industrial support, but federal and state government support has
also dwindled. Non-profit R&D funding comes mainly from the federal
government-in particular the Department of Defense and the Department
of Homeland Security -- which has kept funding levels in a growth mode.

Notable trends
- Outsourcing: The energy and pharmaceutical industries will continue to
outsource R&D at a growing rate in 2007 followed by the computer and
semiconductor industries. The largest portion of outsourcing will go
to other industrial concerns -- largely those in the supply pipeline --
and commercial labs followed by academia and federal labs. Overall,
about five percent is projected to be outsourced to foreign labs, but
the general trend toward this mode of operations is expected to grow.

- Changing demographics: The shifting demographics of the U.S. science
establishment raise a warning flag. Many program managers, planners,
teachers, researchers, and operating scientists and engineers are
approaching retirement age. There are thus legitimate concerns
regarding the number of future practicing science and technology
employees working their way through the educational pipeline. In
addition, there will be continuing needs for an educated public that
can participate in the public debate over science and technology.

"Over the past decade, the character of U.S. R&D funding has undergonerather significant changes in what is generally an enterprise that ismarginally predictable," Duga said. "These may well be seen as factors that have had, and will continue to have, impacts on the health and strength of
the U.S. R&D enterprise."

These trends include:
- Federal funding has been impacted by the emphasis that was required to
initiate special programs directed toward the global war on terror and
the development of techniques to fight non-traditional types of ground
- Federal funding for R&D has also been affected by major federal budget
deficits that accompanied the necessity of responding to the
unanticipated damage associated with natural disasters.
- Changes in industrial funding have been influenced by major moves
toward establishing or pursuing research programs in financially and
intellectually attractive offshore locales.
- Other countries, particularly China and India, are making aggressive
moves toward becoming formidable participants in the global R&D and
technology arena, with resultant strengthening economic presences.

The next few years will likely see significant changes in the relative position of the U.S. R&D enterprise, and it will be necessary to engage in stronger ties with the overall international science and technology community.

The full report of the 2007 R&D Funding Forecast will be printed in the January issue of R&D Magazine in late January. Reprints will be available then by contacting Battelle's Jean Hayward at (614) 424-7039 or at . It is also available online at .


About Battelle
Battelle is the world's largest non-profit independent research and development organization, with 20,000 employees in more than 120 locations worldwide, including five national laboratories Battelle manages or co-manages for the U.S. Department of Energy. Headquartered in Columbus, Ohio, Battelle conducts $3.7 billion in R&D annually through contract research, laboratory management, and technology commercialization. Battelle provides innovative solutions to some of the world's most important problems including global climate change, sustainable energy technologies, high performance materials, next generation healthcare diagnostics and therapeutics, and advanced security solutions for people, infrastructure, and the nation. Battelle has a long history of developing successful commercial products in collaboration with its clients, ranging from products to fight diabetes, cancer, and heart disease to the development of the office copier machine (Xerox). As a non-profit charitable trust with an eye toward the future, Battelle actively supports and promotes science and math education.

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