- Email: [email protected]
Nanomaterials: costs and opportunities
OPINION
Nanomaterials: costs and opportunities An in-depth understanding of customers, lifecycles, and cost will greatly increase your chances of producing the next success story. Gareth Wakefield | Oxford Energy Technologies Ltd. | [email protected] With the nanomaterials market predicted to reach $14 billion in 2008 in the US alone, a myriad of companies, from multinationals such as BASF and Air Products, to university start ups, such as Oxonica of the UK and Northern Nanotechnologies of Canada, are pitching to gain a share of this lucrative market. At the time of writing, it seems clear that current commercial applications of nanotechnology are substantially limited to the nanomaterials sector, making it a specialty chemicals industry. The applications that nanomaterials are being applied to are, for the most part, mature industries with established customers and supply chains: typical examples include cosmetics, electronics, paper, and plastics. For a start up, the drive to increase the value of the company is a drive to obtain repeat customers for standard products and stable revenue growth; so it’s not enough merely to engage with and sell samples to the research and development arm of the customer. The marketing department must see a clear way to increase the customers’ market share and profit and must pull the technology into the new products in the next phase of their product cycle. However, such industries have been using fine powder materials, in some cases nanomaterials, for decades: so how does a new player with a novel technology get a slice of the action? It strikes me that there are fundamentally three key aspects to successful adoption of a new nanomaterials technology: demonstrable product improvement, quality control, materials supply and, most important of all, cost. Firstly, making a material on the nanoscale is not of any use if the application it is used for is not strongly dependent on size. The material must have a significant role in the application in question
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and its properties must measurably improve the performance of the final product. If this is the case then there is a potential market with the side benefit of being patentable (useful for a new company – often intellectual property is their only tangible asset). A good example is the successful introduction of TiO2 nanoparticles into sunscreens: scattering and absorption of TiO2 is strongly peaked in the sub-100 nm size range, so the loading required for sun protection is reduced by a factor of about ten over standard pigmentary grade material. Therefore, consumers do not have to layer it on thickly and as a result the material gains market acceptance. For newer nanomaterials to penetrate this market, a material must have that special something that improves product performance; such as Optisol™ from Oxonica, which increases photostability and ultraviolet A protection. A potential customer needs to be sure that there is a guaranteed source of supply and also that there is more than one source. This may mean multiple suppliers or toll manufacturing options. There will be a scale up process before product launch, but it is unwise to attempt a scale up by more than a factor of ten per step. The process will take some time, so application areas for new materials need to be identified and lead customers should be approached early. These lead customers will verify the commercial need and give an important indication of the volumes of materials required during a typical product roll-out. There is no point in having a laboratorybased technology, which produces a few grams of a material, attempting to access a polymer fillers market requiring 100 tons of material, even if it is for a niche application. In such a case, a pilot plant run needs to be capable of producing 10–100 kg of material, in the first instance, to sample potential customers and these customers cannot be
JUN-AUG 2008 | VOLUME 3 | NUMBER 3-4
disappointed. There are likely to be technical issues regarding the successful implementation of the material in any case, so the pilot plant scale-up must have a rigorous quality control process in place to ensure that no substandard material gets as far as customer sampling. Even if outsourced, this will require dedicated staff to manage the supply chain. The final criterion is the most important – the company will be entering a market where the customer already purchases a material at a certain cost. Although the new nanomaterial offers substantial benefits, there is very little likelihood of large-scale adoption if the price point is significantly higher than the customer is already paying. For example, if customers currently pay $50/kg for an existing material, they are highly unlikely to purchase a new material that costs ten times as much. There may well be a premium for first mover advantage, increased market share and the like, but it is likely to be less than twice the cost of the current solution. This cost will constantly be under pressure from the customer, so your manufacturing cost must be comparable with current industry practice, even for a novel nanomaterial. The understanding of customers, their cost pressures, and product lifecycles is a crucial aspect to determining the acceptance of new materials technology. There are many examples of exciting new materials that have not gained market acceptance due to the focus being on the material rather than on the customer. If all of this sounds daunting for a new nanomaterials start up or product, don’t be disheartened. Understanding all this, early in the program, will greatly increase your chances of successful product adoption, revenue generation, and the creation of a successful, sustainable, nanomaterials company.
Nanomaterials: costs and opportunities An in-depth understanding of customers, lifecycles, and cost will greatly increase your chances of producing the next success story. Gareth Wakefield | Oxford Energy Technologies Ltd. | [email protected] With the nanomaterials market predicted to reach $14 billion in 2008 in the US alone, a myriad of companies, from multinationals such as BASF and Air Products, to university start ups, such as Oxonica of the UK and Northern Nanotechnologies of Canada, are pitching to gain a share of this lucrative market. At the time of writing, it seems clear that current commercial applications of nanotechnology are substantially limited to the nanomaterials sector, making it a specialty chemicals industry. The applications that nanomaterials are being applied to are, for the most part, mature industries with established customers and supply chains: typical examples include cosmetics, electronics, paper, and plastics. For a start up, the drive to increase the value of the company is a drive to obtain repeat customers for standard products and stable revenue growth; so it’s not enough merely to engage with and sell samples to the research and development arm of the customer. The marketing department must see a clear way to increase the customers’ market share and profit and must pull the technology into the new products in the next phase of their product cycle. However, such industries have been using fine powder materials, in some cases nanomaterials, for decades: so how does a new player with a novel technology get a slice of the action? It strikes me that there are fundamentally three key aspects to successful adoption of a new nanomaterials technology: demonstrable product improvement, quality control, materials supply and, most important of all, cost. Firstly, making a material on the nanoscale is not of any use if the application it is used for is not strongly dependent on size. The material must have a significant role in the application in question
48
and its properties must measurably improve the performance of the final product. If this is the case then there is a potential market with the side benefit of being patentable (useful for a new company – often intellectual property is their only tangible asset). A good example is the successful introduction of TiO2 nanoparticles into sunscreens: scattering and absorption of TiO2 is strongly peaked in the sub-100 nm size range, so the loading required for sun protection is reduced by a factor of about ten over standard pigmentary grade material. Therefore, consumers do not have to layer it on thickly and as a result the material gains market acceptance. For newer nanomaterials to penetrate this market, a material must have that special something that improves product performance; such as Optisol™ from Oxonica, which increases photostability and ultraviolet A protection. A potential customer needs to be sure that there is a guaranteed source of supply and also that there is more than one source. This may mean multiple suppliers or toll manufacturing options. There will be a scale up process before product launch, but it is unwise to attempt a scale up by more than a factor of ten per step. The process will take some time, so application areas for new materials need to be identified and lead customers should be approached early. These lead customers will verify the commercial need and give an important indication of the volumes of materials required during a typical product roll-out. There is no point in having a laboratorybased technology, which produces a few grams of a material, attempting to access a polymer fillers market requiring 100 tons of material, even if it is for a niche application. In such a case, a pilot plant run needs to be capable of producing 10–100 kg of material, in the first instance, to sample potential customers and these customers cannot be
JUN-AUG 2008 | VOLUME 3 | NUMBER 3-4
disappointed. There are likely to be technical issues regarding the successful implementation of the material in any case, so the pilot plant scale-up must have a rigorous quality control process in place to ensure that no substandard material gets as far as customer sampling. Even if outsourced, this will require dedicated staff to manage the supply chain. The final criterion is the most important – the company will be entering a market where the customer already purchases a material at a certain cost. Although the new nanomaterial offers substantial benefits, there is very little likelihood of large-scale adoption if the price point is significantly higher than the customer is already paying. For example, if customers currently pay $50/kg for an existing material, they are highly unlikely to purchase a new material that costs ten times as much. There may well be a premium for first mover advantage, increased market share and the like, but it is likely to be less than twice the cost of the current solution. This cost will constantly be under pressure from the customer, so your manufacturing cost must be comparable with current industry practice, even for a novel nanomaterial. The understanding of customers, their cost pressures, and product lifecycles is a crucial aspect to determining the acceptance of new materials technology. There are many examples of exciting new materials that have not gained market acceptance due to the focus being on the material rather than on the customer. If all of this sounds daunting for a new nanomaterials start up or product, don’t be disheartened. Understanding all this, early in the program, will greatly increase your chances of successful product adoption, revenue generation, and the creation of a successful, sustainable, nanomaterials company.