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January 22, 2004

R&D FUNDING FORECAST PREDICTS MODEST OVERALL INCREASES, STRONG FEDERAL SPENDING IN 2004

Columbus, Ohio-Total R&D expenditures in the United States are expected to increase about 2.5 percent from the $283.8 billion spent in 2003 to nearly $291 billion in 2004, according to the Battelle-R&D Magazine annual funding forecast.

Government funding of scientific research and development will see the largest increase, while industrial support of R&D will increase only slightly in 2004, according to the closely watched forecast.

The forecast, based on data supplied by the National Science Foundation, predicts:

  • Federal spending on R&D is expected to be $89.4 billion-an increase of 4.8 percent.
  • Industrial spending on R&D for 2004 is expected to increase less than a percentage point at .85 percent for a total of $181 billion.
  • Academia, and other non-profit R&D funding, is expected to increase an average of 7.6 percent to $20.3 billion.

    "The focus area of R&D appears to be shifting in the first half of the 21st century," said Jules Duga, a Battelle senior researcher and co-author of the report. "R&D research now has a significant focus on nanotechnology, biotechnology and support of defense and homeland security. This is a shift from growth drivers in the mid- to late-1990s when R&D was dominated by pharmaceutical, software, telecommunications and semiconductor technologies," he said.

    The federal outlook:

    • Defense and homeland security will be the major drivers in the increase in federal R&D spending with the primary focus on developing tools for the war on terrorism and products and systems for soldiers.
    • The effects of Sept. 11, 2001 continue to have a major influence in the character of current federal R&D.
    • Much of the new growth in biotechnology spending is focused on support of bioterrorism defense applications.

      Industry outlook

      • After adjusting for inflation, the $181 billion that will be spent by the industrial sector is slightly less than what was spent in 2003. This marks the fourth consecutive year of essentially decreases in industrial spending on R&D.
      • Industrial support of R&D is marked by an increasing trend to outsource R&D programs and activities to other companies, organizations and offshore facilities.
      • The globalization of industry and technology has complicated the task of tracking regional R&D activities.
      • A negative balance of trade position in the U.S. and the shifting of its manufacturing base to foreign suppliers will influence the extent to which U.S. industry will support a strong R&D base.

        The 2004 forecast marks the 41st year Battelle has issued the funding forecast, and the 25th year, that Battelle's Duga has authored it.

        "Preparing these forecasts over the course of 25 years has afforded me a unique perspective from which I can see three megafactors have emerged that have had the greatest impacts on R&D," Duga said. They include:

        • The structure and operations of corporate R&D have undergone many changes. While there continue to be very significant central corporate R&D facilities in many companies, others have foregone the central laboratory function in favor of distributed functions that are housed in laboratories that serve individual lines of business.
        • The past 10 years have seen an increase in the extent to which industrial R&D has been performed in offshore facilities-some of which are captive while, in more recent times, many of which are independent facilities.
        • Industrial R&D has also seen a significant increase in outsourcing to the facilities that are resident in the supply chain, thereby reducing internal risk and capital investment and passing the responsibility to other performers.

          The full report of the 2004 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. It develops and commercializes technology and manages laboratories for government and commercial customers. Headquartered in Columbus, Ohio, Battelle and the national labs it manages or co-manages have 16,000 staff members and conduct more than $2.7 billion in annual research and development. Battelle innovations include the development of the office copier machine (Xerox), pioneering work on the compact disc, and medical technology advancements.

          For more information, visit www.battelle.org or contact Katy Delaney, Media Relations Manager, at (614) 424-5544 or delaneyk@battelle.org.


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