Defense spending will drive R&D investment in 2005, Battelle says

COLUMBUS, Ohio, 11 January 2005. Total research and development funding in the United States will increase this year by approximately 3.6 percent to $312 billion in 2005 over the $301 billion estimated for 2004, according to the Battelle R&D Magazine annual funding forecast.

Jan 11th, 2005

COLUMBUS, Ohio, 11 January 2005. Total research and development funding in the United States will increase this year by approximately 3.6 percent to $312 billion in 2005 over the $301 billion estimated for 2004, according to the Battelle R&D Magazine annual funding forecast.

The principal driving force will be federal government spending, estimated to increase by almost 6 percent to $98 billion over the $92 billion in 2004. This increase is primarily influenced by increases in spending by the Department of Defense (DOD). Although other federal sectors show greater percentages in increased funding, the sheer magnitude of the DOD budget will dominate the 2004-2005 shift.

Private industry will continue to be the principal funder of R&D, as it has been for the past 25 years, but the increase for 2005 is expected to be a little less than 2 percent, representing basically no change in real dollar outlay. Private industry is expected to fund $191 billion in R&D over the $187 billion estimated for 2004, continuing a trend of flat funding that has been in effect for about the past four years.

The academic and other non-profit sectors taken together will see increases of approximately 8.6 percent in total funding from the $21 billion funded in 2004 to the nearly $23 billion expected for 2005.

Federal Outlook:

* Overall, the federal government is expected to increase its total R&D spending by a considerable amount in 2005 and it will continue to provide a strong level of support for the near future.

* The direction of this support will cause temporary shortfalls in some of the basic R&D needed to sustain or advance the platforms from which applied research, technical development, and eventual market development can grow.

* Any curtailment of basic research funds that results from a shifting of priorities is expected to be temporary. Analysis of government-supported R&D in the past has shown that priorities are influenced by periods of special concentration -- such as space and energy.

* R&D in support of national defense accounts for the major portion of the total increase in federal expenditures, with much of this being divided between DOD and defense-related work conducted through the Department of Energy (DOE). Basic science programs at both agencies will see increases of about 8 percent.

* As expected, the Department of Homeland Security will see a substantial increase in R&D support, with much smaller increases going to other high-visibility and high-impact programs such as the National Institutes of Health and the National Science Foundation.

* Of note in the area of federal and industry cooperation is the continuing support of the Advanced Technology Program (ATP), conducted under the aegis of the National Institute of Standards and Technology (NIST). The ATP has again survived attempts at termination, but is slated to continue with a reduction in funding.

Industrial Outlook:

* Industrial support of R&D, which has been essentially flat due to the recession, has not been growing consistently at even the rate of inflation.

* Outsourcing has complicated the analysis of past trends and will impact future activity.

* The movement to utilizing captive facilities located primarily in Japan and Western Europe has blossomed into a significant increase in the support of R&D in non-captive, independent performing institutions in developing or re-developing countries.

* The most visible examples of this are the major increases in outsourced R&D in China and India and the growing efforts in other parts of the world. Such outsourcing has grown from exploratory ventures to the construction of major branch offices.

Major R&D opportunities on the horizon:

* Materials technologies: The development of new classes of materials that can survive in hostile environments (such as medical implants; deep sea; and ultra-high temperature, high radiation or highly corrosive situations) as well as being higher strength-to-weight replacements, as in energy saving applications.

* Medical diagnostic imaging: The expansion of techniques for rapid and less expensive, non-invasive medical diagnostics methods, with emphasis on obtaining and interpreting images.

* Information mining and assessment: The development of techniques for the gathering and mining of information in a wide range of topics, and the capacity to rapidly analyze content.

* Environment: The management of the environment, including reduction of global warming.

* Energy production and distribution: Renewable and/or low-waste production, including nuclear options, bioenergy, hydrogen, and fuel cells.

* Medical technology: Emphasis on the development of methods for diagnostics and therapeutics and including devices, feedback systems, early-warning systems, and emergency response equipment.

* Anti-terrorism technologies: Identification, isolation and deactivation of materials, systems, devices and the like that can produce physical, economic, and psychological disruption. Also, the development of hardening devices or approaches, used to minimize the impact of attacks.

Battelle's forecast is based on historic patterns of the past, analyses of the planned budget of the U.S. Federal Government, other organizations' member or subscriber surveys, published literature, and wide-ranging discussions with industry and government experts.

The 2005 forecast marks the 42nd year Battelle has issued it and the 26th year it has been co-authored by Dr. Jules Duga, a senior research scientist.

"As we look toward the anticipated levels of R&D support and performance for 2005, it is important to consider some of the major factors that are either active at the present or which will surely be the precursors of megatrends in the near future," Duga said. "Perhaps more importantly, this forecast articulates the factors that influence the trends in R&D investment."

The full report of the 2005 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 haywardj@battelle.org.

Battelle is a global leader in science and technology. Headquartered in Columbus, Ohio, it develops and commercializes technology and manages laboratories for customers. Battelle, with the national labs that it manages or co-manages, oversees 16,000 staff members and conducts $3 billion in annual research and development. Battelle innovations include the development of the office copier machine (Xerox), pioneering work on compact disc technology, and medical technology advancements. For more information, see www.battelle.org.

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