2019 R&D Funding Forecasting

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A Supplement to R&D Magazine

2019 GLOBAL R&D FUNDING FORECAST INSIDE ▸ 2019 Global R&D Grows ▸ ▸ ▸

3.6% to $2.3 Trillion China R&D Exceeds $500 Billion, a 22% Global Share ICT is Global R&D Driver with $240 Billion in Spending Economies Moderate 2019 Global R&D Growth

2019

GLOBAL R&D FUNDING FORECAST

R&D’s Global Outlook

W

ith 2019 dawning, our Global R&D Funding Forecast is heralding its 60th year of reporting on the future of research and development across the world, with keen insights into countries, industries, government and academia, as the direction of innovation is analyzed and revealed. We unveiled some of these observations exclusively at the fourth R&D 100 Conference in Orlando in November—where we also celebrated the 56th year of the R&D 100 Awards given to the top 100 new products and innovations in science and technology.

The celebration of these awards truly reflects the pace and creativity of R&D developments globally as we honored a wide range of companies and institutions.

CONTENTS R&D Global Overview Government and Industry Continue to Grow Global R&D .

Forecast Gross Expenditures on R&D. . . . . . . . . . . . . . . . . .

U.S. R&D Government Matches Industrial R&D Growth . .

Changes in Federal R&D Rules . . . . . . . . . . . . . . . . . . . . . . .

Academic R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial R&D R&D Investment Alone Doesn’t Create Innovation .

Advanced Materials & Chemicals . . . . . . . . . . . . . . . .

Aerospace & Defense . . . . . . . . . . . . . . . . . . . . . . . . .

Automotive R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information & Communication Technologies . . . . . .

Life Science Technologies . . . . . . . . . . . . . . . . . . . . . .

International R&D International R&D Competition Heats Up .

North America . . . . . . . . . . . . . . . . . . . . . . . .

South America . . . . . . . . . . . . . . . . . . . . . . . .

Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Russia/CIS . . . . . . . . . . . . . . . . . . . . . . . . . . .

Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . .

Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Global Researcher Current R&D Challenges . .

Planning an R&D Budget. .

The 2019 R&D Budget . . .

3 5 . . 7 . 10 . 12

. . .

. . . . . .

. . . . . . . . 14 . . . . . . . . 15 . . . . . . . . 16 . . . . . . . . 17 . . . . . . . . 18 . . . . . . . . 19 . . . . . . . . 20

. . . . . . . . . . . . . . . . 21 . . . . . . . . . . . . . . . . 23 . . . . . . . . . . . . . . . . 24 . . . . . . . . . . . . . . . . 25 . . . . . . . . . . . . . . . . 26 . . . . . . . . . . . . . . . . 27 . . . . . . . . . . . . . . . . 28 . . . . . . . . . . . . . . . . 29

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

2019 Global R&D Funding Forecast Resources .

. . . . . 36

R&D Magazine has chronicled the successful ventures in R&D in great detail through these R&D 100 Awards for decades—and today, we continue to monitor and report on new and disruptive innovations across industries through a variety of ways. One of these is this annual report, the 2019 Global R&D Funding Forecast, which serves as a tremendous resource for researchers, economists, R&D professionals and industry leaders worldwide as they look to their futures.

Our exclusive surveys and in-depth research used to build this report make it one of the most reliable and sought after reports within the R&D community. In fact, in 2018 we were honored to be recognized by our publishing peers with a Folio Eddie Award for editorial excellence in Editorial Use of Data—a wonderful reflection of the value of our service to you.

The 2019 Global R&D Funding Forecast sets out to analyze the challenges and opportunities in R&D with this forecast of R&D funding for 110 countries and across a variety of key industries. We also examine the workforce issues within organizations and provide trending data to explain and underscore the future.

Readers will also learn about R&D in the United States within the federal and academic environments as well, which are increasingly growing partnerships and alliances among all parties. We know that these segments are redefining and evolving their relationships each year.

The global trend in R&D spending continues to grow worldwide with a 3.6% increase, reflecting a surge in ICT which has $240 billion slated for this Information & Communication Technology sector. And as in previous years, China continues to increase its global share of R&D spending with an increase of $33.7 billion, as other countries lose share in the R&D pie. The United States will increase its R&D spending by $15.3 billion in 2019 over 2018, and some of the ramifications of this increased activity is reflected in the concerns about finding and retaining professional staff.

We invite you enjoy this 60th annual Global R&D Funding Forecast and refer to it as you and your teams analyze and plan your own futures in light of the changing world scene.

We sincerely hope that the scope and in-depth information are eminently useful all year long—and please watch out for periodic updates and additional new reports throughout 2019.

Bea Riemschneider Vice President, Content & Events, Innovation Editorial Director, R&D Magazine www.rdmag.com

Editor’s Note: The 2019 Global R&D Funding Forecast™ was partially based on data collected from a series of proprietary surveys of R&D Magazine readers. Unless otherwise noted, the sources of the data for the Tables and Charts in this report are the results of these surveys, which were conducted from June to September 2018.

Specific data points and analyses in this report are proprietary to Advantage Business Marketing (ABM, the publisher of R&D Magazine) and will not be released. The data presented in this report are the copyright of ABM and cannot be duplicated or used without written permission of ABM. All inquiries regarding this report should be addressed to the Editorial Director, ABM Science Group, 100 Enterprise Drive, Suite 600, Rockaway, NJ 07866. Copyright 2019.

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R

Government and Industry Continue to Grow Global R&D

&D Magazine published its very first R&D Funding Forecast in January 1959 and in that report it was estimated that $12 billion would be invested in R&D that year in the United States—72% by U.S. industry, 16% by the U.S. government and the remaining 12% by U.S. academia.

A lot has changed in those intervening 60 years. Obviously, R&D is no longer the exclusive province of the United States.

R&D is now a global undertaking totaling more than $2.3 trillion annually and performed by more than 115 countries.

The U.S. still maintains a leadership role in R&D endeavors, but other countries are eager to compete for the value, new technologies and new products created by aggressive and innovative R&D investments.

Our 60th annual Global R&D Funding Forecast—which became global in 2006 when total R&D spend first exceeded $1 trillion—is forecast to grow globally by 3.6% in 2019 to $2.3 trillion in purchasing power parity (PPP) values for the 116 countries having significant R&D investments (more than $20 million). The 2019 increase is less than the 4.1% increase seen in 2018 due to an expected slowing of the global economic growth seen over the past decade.

The Global R&D Funding Forecast is provided by R&D Magazine as a public service for scientists, engineers and research

managers for use in preparing their R&D budgets compared to the global R&D environment. This exclusive report is a combination of the industrial, government and academic investments by the R&D spending countries of the world. These investments are largely influenced by the value and growth of each country’s gross domestic products (GDP).

R&D Magazine’s Global R&D Funding Forecast is based on science, technology and economic survey data from various sources. These include the International Monetary Fund (IMF), the World Bank, the Organization for Economic Cooperation and Development (OECD) and the U.S. Central Intelligence Agency (CIA), along with multiple reader surveys performed by the editors of R&D Magazine.

While U.S. R&D spending continues to see annual increases, its overall share of the global R&D investments continues to shrink as other countries increase their R&D spending at a higher rate than that of the U.S. Ten years ago, the U.S.’s share of the $1.143 trillion total global investment then was about 34%, while China’s share was 12.5%.

Today, the U.S. share is about 25% and China’s share is more than 22%. Those trends have continued over the past decade in a mostly linear fashion and without pause. The policies and strategies of China’s R&D investment policies continues unabated.

Share of Total Global R&D Spending 2017

2018

2019

North America

27.72%

27.29%

27.07%

South America

2.36%

2.27%

2.22%

Asia

42.67%

43.53%

44.24%

Europe

20.98%

20.64%

20.31%

Russia

2.87%

2.87%

2.79%

Middle East

2.50%

2.52%

2.50%

Africa

0.90%

0.88%

0.87%

Total

100.0%

100.0%

100.0%

U.S.

25.57%

25.18%

24.98%

China

21.16%

21.61%

22.32%

Japan

8.82%

8.52%

8.30%

Germany

5.46%

5.38%

5.30%

South Korea

4.06%

4.01%

4.02%

India

3.66%

3.84%

4.04%

Total

68.73%

68.54%

68.96%

As noted in this Table, U.S. and European investments as shares of the total global R&D spending have been declining over the past decade, while Asian R&D investments, especially that of China, have been increasing as a share of the total global R&D investment. China’s massive R&D increases have been driving most of this investment which is expected to continue as stated in China’s current Five-Year Plan.

Smaller R&D regions, including Africa, South America, Russia/CIS and the Middle East are expected to maintain their comparatively small global R&D shares for at least the next five years.

Source: R&D Magazine Survey 2018

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We project that China will outspend the U.S. in R&D in absolute dollars by no later than 2024 and China will continue to increase its spending margin over the U.S.’s for the foreseeable future.

The Science of R&D

The primary basis of global R&D is economics. Countries and scientific organizations need monetary resources to fund their expensive R&D investments. And for the past ten years, the global economies have been on an uninterrupted growth trend (since the great recession of 2009) and global R&D investments have thus doubled to more than $2.3 trillion.

The global R&D leaders have remained mostly the same over the past ten years, although the ranking order by annual amount of R&D investments has shifted. In 2009, the top five R&D spending countries were (in order) the United States, Japan, China, Germany and France. In 2019, they’re the United

States, China, Japan, Germany and India. The amounts invested by these top five countries was $786 billion in 2009 and $1.51 trillion in 2019.

The secondary basis of global R&D is socio-economic strategies. These are the policies that individual countries and organizations deem as necessary goals for their future development and economic well-being. An organization’s level of R&D investment is measured as a ratio of their gross domestic product (GDP for countries) or ratio of sales (industrial companies). These vary widely between organizations and countries. Finland, for example, has a relatively low GDP ($254 billion) compared to Saudi Arabia’s GDP ($1,854 billion). Both, however, have comparable levels of R&D ($8.9 billion) because Finland’s traditional R&D/GDP of 3.50% is seven times that of Saudi Arabia’s 0.50% R&D/GDP. Industrial companies have similar disparities. The current

World of R&D 2019 Finland

Denmark Singapore

Researchers per Million Population

United States

Canada

Australia

United Kingdom Belgium

Poland Argentina Mexico

Egypt

Iran

Switzerland

Ireland Czechia

Italy

Israel

Malaysia Turkey

Japan

Austria Germany

France Netherlands

Russia Spain

Taiwan

Sweden

China Brazil

Saudi Arabia South Africa Indonesia Bangladesh Pakistan India

Qatar

R&D as a percent of GDP The size of the circles in this chart reflects the relative amount (compared to the U.S. as a baseline) of annual R&D investments by the indicated country. Regional groupings are indicated by the colors of the balls in the legend. The horizontal axis reflects R&D spending as a percent share of each country’s GDP (gross domestic product). The vertical axis reflects on the number of researchers (including scientists and engineers) per million population for the respective countries.

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Source: R&D Magazine Survey 2018, World Bank, International Monetary Fund, CIA Fact Book, OECD

South Korea

Norway

2019

GLOBAL R&D

FUNDING FORECAST

Forecast Gross Expenditures on R&D 2017 Actual

2018 Estimated

2019 Forecast

GDP

R&D

GERD

GDP

R&D

GERD

GDP

R&D

GERD

PPP Bil, USD

as % GDP

PPP Bil, USD

PPP Bil, USD

as % GDP

PPP Bil, USD

PPP Bil, USD

as % GDP

PPP Bil, USD

1 United States

19,360.0

2.83%

537.59

19,921.0

2.84%

565.76

20,458.9

2.84%

581.03

2 China

23,120.0

1.96%

444.82

24,646.0

1.97%

485.53

26,223.3

1.98%

519.22

3 Japan

5,405.0

3.50%

185.53

5,469.9

3.50%

191.45

5,519.1

3.50%

193.17

4 Germany

4,150.0

2.84%

114.84

4,253.8

2.84%

120.81

4,338.9

2.84%

123.22

5 India

9,447.0

0.84%

76.91

10,146.1

0.85%

86.24

10,937.5

0.86%

94.06

6 South Korea

2,027.0

4.30%

85.43

2,087.8

4.32%

90.19

2,148.4

4.35%

93.46

7 France

2,826.0

2.25%

62.13

2,885.4

2.25%

64.92

2,943.1

2.25%

66.22

8 Russia

4,000.0

1.52%

57.81

4,068.0

1.52%

61.83

4,129.0

1.50%

61.94

9 United Kingdom

2,880.0

1.73%

49.16

2,926.1

1.72%

50.33

2,970.0

1.73%

51.38

10 Brazil

3,219.0

1.18%

37.14

3,293.0

1.17%

38.53

3,375.3

1.16%

39.15

11 Canada

1,764.0

1.80%

30.85

1,801.0

1.80%

32.42

1,837.0

1.80%

33.07

12 Australia

1,235.0

2.34%

28.64

1,272.1

2.34%

29.77

1,311.5

2.35%

30.82

13 Taiwan

1,175.0

2.45%

28.20

1,197.3

2.45%

29.33

1,221.3

2.46%

30.04

14 Italy

2,307.0

1.26%

28.39

2,341.6

1.27%

29.74

2,365.0

1.26%

29.80

15 Spain

1,769.0

1.26%

21.81

1,818.5

1.26%

22.91

1,858.5

1.25%

23.23

16 Turkey

2,133.0

0.90%

18.34

2,226.8

0.90%

20.04

2,315.9

0.89%

20.61

915.2

2.10%

18.64

944.5

2.10%

19.83

967.2

2.10%

20.31

17 Netherlands 18 Sweden

521.7

3.31%

16.93

535.3

3.33%

17.82

547.1

3.28%

17.94

19 Switzerland

516.7

2.98%

14.99

528.6

2.98%

15.75

539.2

2.97%

16.01

20 Singapore

513.7

2.62%

13.19%

528.6

2.62%

13.85

542.9

2.64%

14.33

21 Israel

315.6

4.05%

12.53

326.0

4.05%

13.20

337.4

4.04%

13.63

22 Austria

434.1

3.00%

12.68

445.4

3.00%

13.36

453.9

2.98%

13.53

1,631.0

0.77%

11.57

1,696.2

0.78%

13.23

1,764.1

0.76%

13.41

926.1

1.27%

11.46

975.2

1.28%

12.48

1,024.0

1.29%

13.21

23 Iran 24 Malaysia 25 Mexico

2,406.0

0.50%

11.78

2,461.3

0.50%

12.31

2,535.1

0.51%

12.93

26 Belgium

526.4

2.35%

12.18

536.4

2.35%

12.61

545.5

2.35%

12.82

27 Indonesia

3,243.0

0.31%

9.88

3,414.9

0.31%

10.58

3,602.7

0.31%

11.17 11.01

28 Poland

1,111.0

0.90%

9.81

1,156.6

0.91%

10.53

1,197.1

0.92%

29 Qatar

341.7

2.50%

8.51

350.6

2.52%

9.09

370.3

2.50%

9.26

30 Denmark

285.5

3.00%

8.34

291.2

3.00%

8.74

296.7

3.00%

8.90

1,789.0

0.46%

8.09

1,819.4

0.47%

8.55

1,854.0

0.48%

8.90

242.4

3.50%

8.20

248.7

3.50%

8.70

253.7

3.50%

8.88

31 Saudi Arabia 32 Finland

1,199.0

0.60%

7.19

1,261.4

0.60%

7.57

1,330.8

0.59%

7.85

34 Czechia

372.6

1.85%

6.67

385.6

1.85%

7.13

397.2

1.85%

7.35

35 Pakistan

1,056.0

0.60%

6.23

1,115.1

0.63%

7.02

1,167.5

0.62%

7.24

36 South Africa

757.3

0.85%

6.48

768.7

0.88%

6.76

781.8

0.88%

6.88

37 Norway

375.9

1.75%

6.45

383.8

1.75%

6.72

391.9

1.74%

6.82

38 Ireland

344.8

1.75%

5.89

360.3

1.75%

6.31

374.7

1.75%

6.56

39 Bangladesh

686.5

0.70%

4.81

728.4

0.70%

5.10

774.3

0.70%

5.42

40 Argentina

911.5

0.56%

5.00

927.3

0.55%

5.10

957.0

0.54%

5.17

108,239.7

1.88%

2,032.03

112,543.9

1.93%

2,172.14

116,958.5

1.92%

2,249.95

Rest of World

17,344.0

0.41%

70.50

17,925.6

0.41%

74.29

18,591.5

0.41%

76.20

Total All Countries

125,583.7

1.67%

2,102.53

130,469.5

1.72%

2,246.43

135,550.0

1.72%

2,326.15

33 Egypt

Top 40

Source: R&D Magazine, International Monetary Fund, World Bank, CIA World Fact Book, OECD

PPP = Purchasing Power Parity

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GERD = Gross Expenditures on Research and Development

GDP = Gross Domestic Product

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GLOBAL R&D FUNDING FORECAST

largest R&D investing company (Amazon Technologies) with an estimated $32.1 billion in 2019 R&D will invest 12.6% of its annual revenues in R&D. Cisco is expected to invest a slightly higher ratio (12.7% of its 2019 annual revenues) for a new $5.94 billion in 2019 R&D. Obviously, Cisco only has about a sixth of Amazon’s annual revenues.

Over the long term, these strategies have played out in the overall global R&D rankings of individual countries. China has been aggressively investing in R&D for decades at rates several times that of the U.S., which was the traditional R&D giant from World War II until the turn of the century—2000 to 2010.

Chinese R&D, however, was only mentioned in a small sidebar (dramatically titled “Sleeping R&D Giant”) in the 2002 R&D Funding Forecast, yet it had been increasing by about 10% per year throughout the 1990s from a negligible R&D beginning.

The only focus in our R&D forecasts back in those days was on changes in the industrial, government and academic R&D investments in the total U.S. R&D package of just over $300 billion. Even only slight mentions were made of Europeanbased R&D in those days, and primarily were made as specific large European-based companies and not as countries or geographic regions.

Do Stock Market Changes Affect R&D? 61%

No effect Yes, strong decrease

1%

Today, all of that has changed as R&D globalization has become the norm with many foreign companies and countries now having competing technological bases. In some cases, these countries and companies have even become technological R&D equals to the U.S. or even leaders in specific fields.

R&D Types, Funds and Performance

A third basis of global R&D can be seen in the type of R&D performed. These are traditionally broken down into Basic Research, Applied Research and Development disciplines as defined by the U.S. National Science Foundation (NSF). The NSF was an outgrowth of the Office of Scientific Research and Development (OSRD) headed by Vannevar Bush in World War II. Current R&D investment statistics are well documented in the U.S. by the NSF and specifically in its National Patterns of R&D documents. Outside of the U.S., however, foreign countries do not have the resources or infrastructure of the NSF, so relatively few similar R&D statistics are available—some limited statistics are available (on a subscription basis) from the Organization for Economic Cooperation and Development (OECD), the Chinese Academy of Sciences (CAS) and other referenced organizations.

A fourth basis of global R&D can be seen in the source of R&D funds and the actual performance of R&D. R&D in these areas are generally broken down into industry, government and academic resources. The NSF again documents these statistics for the U.S., but few resources are available for non-U.S. regions. R&D source/performance data for non-U.S. regions also are generally outdated, incomplete and of questionable authenticity.

8%

Yes, slight decrease

Distribution of R&D

9%

Yes, strong increase

21%

Yes, slight increase 0%

10%

20%

30%

40%

50%

60%

Overhead

15%

Funding Sources for R&D

Capital spending

17%

Outsourcing Crowd funding

13%

1%

External grants (industrial)

Philanthropic grants State government grants Other

17% 71%

Internal resources Licensing of IP

Materials

30% 20%

External grants (gov)

13% 6% 12% 8%

Supplies/ consumables

15%

Salaries

23%

0% 10% 20% 30% 40% 50% 60% 70% 80% Source: R&D Magazine Survey 2018

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FUNDING FORECAST

U.S. R&D Government Matches Industrial R&D Growth

T

he U.S. is expected to invest $581.0 billion in R&D are U.S.-based. Amazon, Google/Alphabet, Microsoft, Apple in 2019, an increase of 2.7 % over the $565.8 billion and Intel dominate their respective industries. And accordinvested in 2018. A big part of the 2019 increase comes ing to a recent report by PwC (formerly Price Waterhouse from a large increase in federal research funding for the Coopers), these companies individually invested more than $5 FY2019 budget, which was the highest funding increase since in R&D for every $1 invested in R&D by Chinese companies.

2009.

This disparity reflects on the Chinese approach to R&D which The passed appropriations were nearly $12 billion more focuses on applications of existing technologies rather than the than those proposed by the Trump Administration. U.S inU.S. approach which focuses on original research, according to dustrial R&D investments for 2019 in our analysis were actuEdward Tse, CEO of Gao Feng Advisory Company and author ally scaled back partially due to a decline in the International of “The China Strategy.”

Monetary Fund’s (IMF’s) World Economic Outlook for the These U.S.-based ICT companies are also slowly increasing U.S. from a 2.9% increase in 2018 to just 2.5% in 2019. The their R&D propensity by increasing their R&D as a percent implementation of tariffs by the Trump Administration and of sales, according to recent SEC (Securities and Exchange a projection of three Federal Reserve short-term interest rate Commission) filings. Amazon’s R&D, for example, is now increases in 2019 also slightly reduce the economic outlook.

12.7% of sales compared to 11.7% a few years ago. Advanced With the current planned schedule of interest rate increases, technologies, including AI, machine learning, and computer a possible 3.25% interest rate could be seen by the end of vision, are at the core of their R&D investments. Their new 2019—the highest rate in more than ten years. This raises the and advanced core businesses include cloud computing, cost of doing research by increasing the borrowing rate. voice-assisted virtual assistants, cashless stores, drone delivery U.S. R&D in 2018 was driven by the inter-relationships of systems and robotic warehousing. various industries, including information and communication technologies (ICT), automotive, pharmaceutical and aerospace/defense.

These industries are expected to be Billions USD / Percent changes from 2018 the major R&D drivers for U.S. R&D in 2019 as well. Artificial intelligence Federal FFRDC Non(AI) and automation/robotics (which Gov’t Industry Academia (Gov’t) Profit Total are often referred to as ICT components) are likely to be integrally $39.0 $43.0 $16.6 $6.8 $154.4 Federal $49.0 involved in the R&D efforts in each Government 6.5% 9.6% 3.6% 7.1% 3.0% 6.2% of these industries.

Interestingly, the implementation $361.6 $8.0 $3.9 $2.3 $375.8 of automation/robotics is an area Industry that U.S. organizations are currently 1.0% 3.9% 2.6% 4.5% 1.1% trailing foreign technology organizations, specifically in southeast Asia and $22.0 $0.3 $22.3 parts of Eastern Europe, according to a Academia recent report by the Information Tech4.8% 0.0% 4.7% nology and Innovation Foundation (ITIF). “Which Nations Really Lead in $7.4 $7.4 Other Industrial Robot Adoption (November Government 5.7% 5.7% 2018)” ranks the U.S. as sixteenth out of 27 countries in its share of robots. $6.0 $0.2 $14.9 $21.1 According to the report, China’s rate Non-Profit of robot adoption is so high “that by 5.3% 0.0% 1.4% 2.4% 2026 China will lead the world with the highest number of robots as a share of $49.0 $400.6 $86.4 $21.0 $24.0 $581.0 Total industrial workers.”

6.5% 1.8% 4.2% 6.1% 2.1% 2.7% On the positive side, the top five technology companies in the world Source: R&D Magazine Survey 2018, World Bank, CIA Fact Book NSF

2019 U.S. Source-Performer Matrix

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2019

GLOBAL R&D FUNDING FORECAST

Government R&D

The Federal government’s FY2019 Omnibus spending bill passed by Congress a few months ago (and signed by President Donald Trump) gave government-funded R&D its largest increase in more than 10 years.

The year-over-year increase for basic and applied research amounts to 2.4% with a nearly 5% increase for basic research alone. This funding is expected to be distributed to the largest

U.S. industrial R&D spending is expected to increase in 2019 to $375 billion, which is more than any individual country spends overall except China. government funders of basic research: the NSF; the National Institutes of Health; the Department of Energy’s Office of Science; NASA’s Science Directorate and the Department of Defense. All of these will receive increases of at least 2.9%. Even the Department of Defense received larger than normal R&D increases: the Army saw a 6.5% increase to $9.6 billion, the Navy saw a -1.5% decrease to $13.6 billion, the Air Force saw a

whopping 20.4% increase to $18.1 billion and DARPA (Defense Advanced Research Projects Agency) saw a 11.7% increase to $3.4 billion.

Industrial Spending

As noted in the R&D Source-Performer Matrix, U.S. industrial R&D spending is expected to increase in 2019 to $375 billion, which is more than any individual country spends overall except China. U.S. industrial R&D is almost twice that of third place Japan’s overall R&D spending. Industrial R&D of the top five U.S. companies in the ICT industry alone also is more than $95 billion, which is more than the total R&D spending of all countries except China, Japan and Germany.

Collaborations between the leading ICT, aerospace, pharmaceutical, energy and automotive companies, along with support from strong academic and government laboratory facilities also has the effect of building strong technological bases for future industrial and R&D growth.

Some of the strong U.S. industrial R&D companies and centers of excellence are also attracting numerous foreign industrial companies who are establishing their own research facilities in the U.S. and creating technology alliances with U.S. research organizations to support their companies.

Staffing Issues

The unemployment rate in the U.S. fell to 3.7% in mid-2018, which is particularly sensitive for R&D organizations that look to hire highly specialized and skilled researchers. Hiring recently graduated immigrant researchers as interns to offset researcher shortages is also not as easy as it used to be due to tightened immigrant regulations and the increasing trend for interns to return to their home country, rather than seeking to establish a residence in the U.S. Foreign countries still support having their R&D personnel obtain technical degrees at the highly respected U.S. universities, however, they’re now offering lucrative incentives to return home after getting their U.S.-based technical degrees.

According to R&D Magazine’s Global R&D Funding Forecast survey about 45% of the readers surveyed expect to hire researchers in 2019. An equal 11% number see no change in their staffing requirements and only 10% expect to 6% reduce their research staffs in 2019. To offset the expected R&D staffing shortages, the survey respondents expect to Slight Strong decline decline utilize a wide range of tools to still satSource: R&D Magazine Survey 2018 isfy their R&D workload requirements.

R&D Performance 2015 to 2018 40%

Survey Respondents

30%

32%

34%

20%

17% 10%

0% Strong improvement

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No change

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GLOBAL R&D

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Nearly half of the survey respondents expect to more accurately prioritize their R&D projects, while another half will establish research collaborations to spread out their workloads.

About a third of the survey respondents expect to outsource some of their research work while another third will hire consultants to offset the staffing shortages. The smallest group, 20%, will look to utilize computer-based resources to offset staffing shortages—the computer-based lab of the future still isn’t quite there yet.

According to recent NSF studies, micro, small and medium sized companies (up to 250 employees) performed about 11% of the business in the U.S. in 2016. R&D in these companies was about 7.8% of their sales and the companies employed

Nearly half of respondents expect to more accurately prioritize their R&D projects, another half will establish research collaborations to spread out their workloads.

Funding Sources

According to our survey conducted by R&D Magazine editors in August 2018, the funding for U.S. industrial R&D comes predominately from the survey respondent’s own internal resources (71% of the survey responses). Secondary R&D funding comes from external government grants (30% of the survey responses), such as research grants from the National Institutes of Health (NIH) to pharmaceutical and biotechnology companies.

Government agencies with strong external R&D grant programs to industrial organizations include the NIH, National Science Foundation (NSF), NASA, National Institutes of Standards and Technology (NIST), all DOD agencies, EPA and the Department of Energy (DOE). External grants from other companies are also a strong source of R&D funding (20% of the survey respondents). Other R&D funding sources include the licensing of intellectual property (13% of survey responses), state government grants (12%) and philanthropic grants (6%).

about 20% of the U.S.’s industrial researchers. Larger companies (up to 25,000 employees) accounted for about 49% of sales and these companies employed about 54% of the U.S.’s researchers. The largest companies performed about 36% of the nation’s sales and employed the remaining 26% of the U.S.’s industrial researchers.

R&D Changes Since 2016 5%

Less successful now than in 2016

21%

More successful now than in 2016

11%

Less administrative support than in 2016

12%

More administrative support than in 2016

7%

Less important now than in 2016

40%

More important now than in 2016

39%

No changes 0%

5%

10% 15% 20% 25% 30% 35 % 40% 45% 50% SURVEY RESPONDENTS Source: R&D Magazine Survey 2018

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2019

GLOBAL R&D Federal R&D FUNDING FORECAST

Changes in Federal R&D Rules

W

ith the R&D budget increases noted in the previous sections which were approved for FY2019, the primary focus of research managers in government labs changes from struggling to meet tight budgets to now one of struggling to actually perform the research.

Meeting the staffing levels necessary to accomplish those tasks has also become more difficult as the unemployment rates have fallen.

For security reasons, government research labs are often located in out of the way sites and distant from traditional centers of commerce. This further increases the R&D manager’s problems in trying to recruit and retain research personnel. The security restrictions inherent in governmentbased R&D further limit the pool of potential candidates and raises the costs of finding and hiring qualified researchers.

Some federal labs, tasked with increased funding for increased research workloads, now also find themselves looking for work spaces where they might house new R&D employees without discouraging or depressing the new

U.S. Federal Government 2019 R&D R&D Survey Responses 2019 R&D Bil, US$

Difference from Proposal Bil, US$

Difference from 2018 Bil, US$

DHS

0.813

0.230

0.000

DOD

15.973

2.300

1.100

DOE

6.585

1.200

0.325

EPA

0.489

0.065

0.000

HHS

0.338

0.338

0.004

NASA

21.323

1.431

0.587

NIH

39.234

4.500

2.000

NIST

1.038

0.409

-0.839

NOAA

0.549

0.227

0.005

NSF

8.069

0.597

0.301

USDA/ARS

1.301

0.280

0.043

USGS

1.148

0.288

0.000

VA

0.779

0.052

0.057

Total

97.639

11.917

3.583 Source: AAAS

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researchers that they worked so hard to find. Some research managers may find themselves creating temporary research and office facilities in which to house their new employees until they find more permanent solutions.

Another issue in this scenario is that the unique government funding increase created for FY2019 may not be continued with a new funding cycle due to political changes. Solving the current hiring and housing situations would be doubly worrisome if a specific funding process was discontinued in just one or two short years.

More Basic Research

Just a few years ago, researchers were lamenting about the continuing decline of basic research in the United States. A MIT report, “Why Declining Investment in Basic Research Threatens a U.S. Innovation Deficit,” noted that countries such as China were continuing to commit more resources to research.

Fiscal cuts in the U.S. could cause long-term damage to the U.S. Basic Research was at the lowest fraction of the federal budget since World War II. Issues such as leadership in supercomputing, data theft, quantum computing, robotics and cyber security were in dire need of basic research funding according to the report.

Some of those concerns were addressed in the FY2019 R&D budgets as the NSF, NIH, DOE/OS, NASA and DOD all received basic research increases of at least 2.9%. The DOD, for example, was scheduled to receive a 19.4% basic research

The U.S. cannot afford less than a “full court press” against deadly and debilitating health threats. increase or $455 million, which equated to $529 million above the Pentagon’s budget request.

Some changes seen: • The DOD received a 7.6% overall R&D increase to $15.973 billion, $2.3 billion more that was proposed and $1.1 billion over their FY2018 R&D budget.

• The DOE received a 5.2% R&D increase to $6.585 billion, $1.2 billion more than was proposed and $0.325 billion over their FY2018 R&D budget.

• The NIH received a 5.2% R&D increase to $39.234 billion, $4.5 billion more than was proposed and $2 billion over their FY2018 R&D budget.

• The Department of Homeland Securities declined 3.3% www.rdmag.com

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GLOBAL R&D

FUNDING FORECAST

to $0.813 billion, which was above the 30.6% budget reduction that was originally proposed.

• The DOE’s Office of Science Advanced Scientific Computing Research (ASCR) program received a 15.5% increase over its FY2018 R&D budget to $0.936 billion.

Coal generation technologies

Fiscal cuts in the U.S. could cause long-term damage to the U.S. Basic Research was at the lowest fraction of the federal budget since World War II.

The DOE’s Office of Fossil Energy recently announced that as part of its FY2019 R&D budget that it will fund R&D to “advance first-of-a-kind coal generation technologies.” The program will develop the technologies needed to provide secure stable and reliable electrical power. The program office also stated that it wants to support R&D in coal-fired power plants capable of flexible operations to meet the needs of the electrical grid. The office wants to use innovative and cutting-edge components that improve the plant’s operating efficiency while reducing emissions.

Furthermore, it also wants to provide resilient power systems that are small compared to current conventional utility-scale coal plants. It also wants to transform how coal technologies are designed and manufactured. Analysts have recently stated that coal plants must adapt and become more flexible to survive in the current and future energy landscape.

The DOE also recently announced that it has won 32 R&D 100 Awards from 12 different DOE national labs in the 2018 R&D 100 Awards event in November. The DOE has now won more than 800 of these awards over the 56-year history of this awards program. Founded in 1963, the R&D 100 Awards program is created by R&D Magazine—the same organization that creates this annual Global R&D Funding Forecast.

The TOP500 list of the 500 most powerful supercomputers in the world saw the Summit system at the DOE’s Oak Ridge National Laboratory regain the top position from China’s Sunway TaihuLight system which had held that position for the past three years until June 2018. Five DOE supercomputers were listed in the top 10 positions—China’s system was pushed into the third position behind ORNL’s Summit and the Sierra supercomputer system at the DOE’s Lawrence Livermore National Laboratory. The Summit and the Sierra systems are both manufactured by IBM. China’s Sunway system was developed completely by Chinese researchers and computer developers.

The leaders in this competition have traditionally alternated between U.S. and foreign supercomputers. Winning systems are parallel-based computers with several million cores (microprocessor chips). The computing systems are generally used to simulate complex mathematical operations such as www.rdmag.com

nuclear explosions.

Total medical and healthcare R&D in the U.S. grew by 27% from 2013 to 2017, according to a recent report by ResearchAmerica. Industry accounted for 67% of that R&D, while the federal government accounted for 22%. The NIH was responsible for the lion’s share of the federal investment, with 82%, or $32 billion spent in 2017 alone. Federal R&D investments in medical and healthcare were found to be uneven across federal health agencies during the five-year study period.

Agencies such as the Centers for Disease Control and Prevention (CDC) were found to have stagnant or even reduced funding cycles for two years or more. The study stated that the U.S. cannot afford less than a “full court press” against deadly and debilitating health threats.

The Bipartisan Budget Act of 2018 lifted the austerity-level budget caps for FY2018 and FY2019, so these issues have been relieved for at least the next two years.

Did 2018 Tax Cuts Affect R&D Investments?

Yes, slight increase in R&D investment

20%

Yes, strong increase in R&D investment

5%

No effect

75%

Source: R&D Magazine Survey 2018

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2019

GLOBAL R&D Academic FUNDING FORECAST

Academic R&D

T

he increased R&D funding for the NIH, DOE, NASA and NSF mentioned earlier in this report has been a boon for U.S. academic research in the form of increased grants from these agencies to the nation’s universities. There already are 12 U.S. universities with total R&D budgets for each that exceed $1 billion, with Johns Hopkins University (JHU) leading the group with an annual R&D budget of $2.4 billion.

JHU actually has a science R&D budget of $1.4 billion and an engineering R&D budget of $1 billion.

Interestingly, JHU has been the top U.S. university in research spending for 38 consecutive years. JHU’s R&D for the latest year is up 5.4% from the previous year, nearly twice the percentage increase from the previous year. JHU researchers excel at winning federal funding, which accounted for 87% of its latest R&D expenditures.

Research at Johns Hopkins is also funded by income from licenses of past and present business enterprises, which accounted for $58 billion in revenue in 2016. JHU also earned a consistent 8% more patents than the previous year, which

The total R&D investment for the top 25 U.S. universities is more than $26 billion… helped launch 22 new companies in 2016 and 18 more in 2017. Part of JHU’s R&D is supported by the 1979 inclusion by the NSF of the Applied Physics Laboratory (APL) to JHU’s R&D investments.

The total R&D investment for the top 25 U.S. universities is more than $26 billion, which averages to more than $1 billion for R&D for each. Fifteen of the top 25 universities in the world as determined by the 2019 Times Higher Education research ranking are also U.S. R&D universities.

The top two universities of 1,250 global universities evaluated in the Times study are the University of Oxford and the University of Cambridge, both in the U.K. JHU is listed as the 12th best university in the Times rankings. The Times ranking utilize 13 calibrated comparisons, including teaching, research, citations, industry income, international outlook and global perception.

The top five “richest and most endowed” universities in the world are also in the U.S. as researched by thebestschools.com: Harvard University, Yale University, the University of Texas system, Stanford University and Princeton University. The total wealth of just these five schools is more than $125 billion. As noted in this study, the wealthier the university, the better its

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facilities are likely to be—and better facilities mean more upto-date technology and research opportunities.

China Ascendant

China’s Tsinghua University has become the best university in Asia, moving up eight places in rank and now ranked 22nd in the Times list, replacing the National University of Singapore as the best university in Asia. China has 13 universities, including National Taiwan University, in the top 200 of the Times rankings. Peking University is ranked 31st and the University of Hong Kong is ranked 36th.

A study by the Massachusetts Institute of Technology (MIT) noted that the U.S. is missing out on cutting-edge technological developments and is in danger of falling behind other countries, such as China, because of reduced federal

Academic Spending on R&D 2015 Total R&D

2016 Total R&D

All institutions

68,566,890

71,833,308

1

Johns Hopkins University

2,305,679

2,431,180

2

U. Michigan, Ann Arbor

1,369,278

1,436,448

3

U. Pennsylvania

864,068

1,296,429

4

U. California, San Francisco

1,126,620

1,294,261

5

U. Washington, Seattle

1,180,563

1,277,679

6

U. Wisconsin-Madison

1,069,077

1,157,680

7

U. California, San Diego

1,101,466

1,087,117

8

Harvard U.

1,013,753

1,077,253

millions USD millions USD

9

Stanford U.

1,022,551

1,066,269

10

Duke U.

1,036,698

1,055,778

11

UNC, Chapel Hill

966,781

1,045,338

12

UCLA

1,021,227

1,037,528

13

Cornell U.

954,412

974,199

14

MIT

930,719

946,159

15

U. Minnesota, Twin Cities

880,618

910,181

16

Texas A&M

866,678

892,718

17

U. of Pittsburgh

861,205

889,793

18

Yale U.

803,004

881,765

19

U. of Texas

833,406

852,095

20

Columbia U.

868,159

837,312

21

Penn State U.

791,031

825,561

22

Ohio State U.

817,881

818,464

23

NYU

602,041

809,739

24

U. of Florida

739,522

791,294

25

Georgia Tech

765,370

790,706

26

U. California, Berkeley

788,505

774,255

27

U. California, Davis

721,077

741,892

28

Washington U., Saint Louis

694,069

741,115

29

Northwestern U.

656,167

713,491

30

U. Southern California

691,031

702,866 Source: NSF

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GLOBAL R&D

FUNDING FORECAST

funding of basic research in academia. The MIT study authors examined 15 different technology fields. The study noted that research in computer technology in U.S. universities is lagging due to insufficient funding in areas that include cyber security, quantum computing, robotics, battery technologies and big data analytics.

U.S. research in robotics is particularly sensitive, where no U.S.-based company is a market leader in designing and manufacturing robotic systems. Most robotic technologies and components come from Japan or Europe with South Korea and China also quickly becoming leaders.

The MIT report states that the EU has committed $3 billion in a combined public-private effort designed to ensure that the EU retains a 30% to 40% market share in the global robotics industry, which is estimated to reach more than $70 billion by 2020. While U.S. industries are strong users of robotics in many different industries, they rely on external companies to provide the industrial robots.

China has a goal of beating the United States in the quantity and quality of papers published in STEM (science, technology, engineering and math) journals. China currently accounts for about 23% of scientific publications in international journals.

While U.S. academia, such as MIT, CalTech and JHU, is still within the top 1% of the most highly cited STEM journal publications, researchers at Oxford University report that China’s Tsinghua University is on track to be the number one publisher of STEM papers in “five years or less.”

The means by which this will be accomplished is often nefarious, according to a recent report. A group of U.S. top academics have presented a report to the U.S. government indicated the unprecedented scale of infiltration activity that China has been engaging in universities, media, think tanks and corporations to a level that far exceeds anything envisioned by Russia in the past. The report was presented to the government prior to the G20 economic meeting in late November 2018.

Medical R&D

A study by Research!America also revealed that U.S. investments in medical and health research in the U.S. grew by 27% from 2013 to 2017, led by industry and federal-financed R&D. Industry accounted for two-thirds of this funding while the government contributed 22%. While funding is increasing, the study questions if the investment is enough to overcome some of the major health threats facing the U.S. Federal R&D investments were uneven across the study period with some life science-based agencies actually experiencing stagnant or even reduced funding during the five-year study period. According to the study authors, “sequestration (automatic spending cuts) could return in 2020, resulting in deep cuts in federal agency budgets”—and particularly to the academic research labs they support.

Harvard University, one of the leading academic institutions in the life science and medical field, has been having particularly worrisome concerns of its own. Harvard uses its endowments to support its research staff, programs and infrawww.rdmag.com

Academic R&D by Funding Source Basic Research

Applied Research

Experimental Development

All Sources

64.0%

26.3%

9.7%

Federal Sources

65.9%

26.3%

7.8%

Source: National Science Foundation

structure. The 8% return on Harvard’s endowments continues to trail that of other institutions which generally are in the 12% range.

While Harvard has one of academia’s largest endowments— it rose in 2018 to $39.2 billion which exceeded its record year in 2008—the current return still lags other institutions by about 2% with its current 10% yields. Harvard’s current endowments have been improved with philanthropic gifts to support a return to higher yields and to support ongoing operations. Additionally, Harvard’s management of its endowment funds has been dramatically modified over the past several years.

2019 World University Rankings Research Ranking

THE Rating

Overall Ranking

1

U. Oxford, U.K.

99.5

1

2

U. Cambridge, U.K.

98.8

2

3

Harvard U., U.S.

98.4

6

4

California Inst Tech, U.S.

97.2

5

5

Stanford U., U.S.

96.8

3 22

6

Tsinghua U., China

94.1

7

Princeton U. U.S.

93.6

7

8

Yale U., U.S.

93.5

8

9

MIT, U.S.

92.7

4

10

U. California, Berkeley, U.S.

92.3

15

11

ETH Zurich, Switzerland

91.4

11

12

Johns Hopkins U., U.S.

90.5

12

13

U. Chicago, U.S.

90.1

10

14

UCL, U.K.

90.1

14

15

U. Pennsylvania, U.S.

89.2

12

16

National U. Singapore

88.8

23

17

U. California, Los Angeles

87.9

17

18

Imperial College London, U.K.

87.7

9

19

U. Tokyo, Japan

87.2

42

20

U. Toronto, Canada

86.3

21

21

U. Michigan, U.S.

85.9

20

22

Cornell U., U.S.

85.4

19

23

Northwestern U., U.S.

83.6

25

24

Columbia U., U.S.

83.1

16

25

London School Economics, U.K.

83.1

26

Overall Ranking based on Teaching, Research, Citations, International Outlook and Industry Income Source: 2019 Times Higher Education

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R&D Investment Alone Doesn’t Crea 2019

GLOBAL R&D Industrial R&D FUNDING FORECAST

R&D Investment Alone Doesn’t Create Innovation

I

ndustrial R&D in the United States accounts for the sourcing of approximately two-thirds ($400 billion) of all U.S. R&D funding and just slightly less than that ($376 billion) for the actual R&D performance as shown in the SourcePerformer matrix on page 7 of this report. Government, academic and non-profit funding accounts for the remaining sources of R&D monies.

On a global perspective, industrial sourcing for a country’s R&D varies from 30% (Russia) to 75% (South Korea and Japan), with the majority of countries surveyed averaging about 50% and with government sourcing of R&D funding making up the other 50%. There is a relatively wide disparity for these industrial funding sources, even in similar geographic regions.

Industrial R&D is often related to a country’s or an organization’s ability to innovate. However, increasing the amount of monies invested in industrial R&D does not automatically raise the innovation level.

To create new innovations, countries need continued R&D investments, an established science and technology infrastructure as well as the social desire. The Global Innovation Index (GII) 2018, which is co-published by Yale University, the World Intellectual Property Organization (WIPO) and INSEAD (a graduate business school based in France with campuses in Europe, Asia and the Middle East), ranks countries according to their innovation.

Published annually since 2007, the 2018 version of the GII specifically focuses on innovation in energy-related areas. The report states that continued R&D investments are needed to create the innovations that will drive the future growth needed to avert an environmental disaster (i.e., global warming from the over-use of fossil fuels) and supply future energy needs.

Richer economies, with more diverse industry and export portfolios, are more likely to score high in innovation, according to the GII. Absolute innovation and R&D performance rely primarily on large high-income economies, which is more related to

Top Innovators 2018 GII 2018 Score

Rank Country 1.

Switzerland

68.40

2.

Netherlands

63.32

3.

Sweden

63.08

4.

United Kingdom

60.13

5.

Singapore

59.83

6.

United States

59.81

7.

Finland

59.63

8.

Denmark

58.39

9.

Germany

58.03

10.

Ireland

57.19 Source: GII 2018

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the rankings in R&D Magazine’s Global R&D Funding Forecast than the rankings in the GII. The data inherent in the large high-income economies are the number of researchers, R&D expenditures, patents (by origin) and scientific and technical publications.

China leads the U.S. in the number of researchers (2015) with 1.6 million compared to 1.4 million for the U.S. The UK is a distant third with about 240,000 researchers. The U.S. continues to lead China (for the present) in the amount of R&D expenditures as shown on the table on page 5 of this report.

China also leads the U.S. in the number of patents (by origin) with 1.2 million patent applications compared to 300,000 patent applications in the U.S. And again, China leads the U.S.

To create new innovations, countries need continued R&D investments, an established science and technology infrastructure as well as the social desire. in the number of scientific and technical publications with about 270,000 in 2017 compared to 220,000 in the U.S., and the U.K. again a distant third with about 70,000 publications.

Harvard Business School’s Professor of Management Practice Willy Shih has stated that the U.S. has lost its “industrial commons” or indispensable production skills and capabilities. Shih says that the U.S. has lost the underlying production capacity to make many products from flat panel displays, cell phones and laptops—products now almost exclusively made in Asia in centers established by U.S.-based companies with U.S.-developed technologies. Offshoring practices that originally were done to save startup and shortterm production costs evolved into policies that included the contracting of design and product development activities which has continued.

A recent study on National Competitiveness by MForesight (Alliance for Manufacturing Foresight) cites four approaches that countries (not just the U.S.) can make to regain their manufacturing and production capabilities which will also result in greater innovation proficiencies. These approaches include: 1) Don’t fear picking winners (invest in translational research).

2) Invest in hardware startups and scale-ups.

3) Respect and support small and medium enterprises (SMEs).

4) Support students from an early age in manufacturing technologies and policies. www.rdmag.com

ate Innovation

2019

R&D Industrial R&D GLOBAL FUNDING FORECAST

Advanced Materials & Chemicals

A

dvanced materials and chemicals are the basis of most new products and technologies. The advances seen in these materials create the capabilities that are desired and designed by researchers. Nowhere is this more true than in the semiconductor and solid-state industry. New deposition and etching processes are constantly evolving for materials whose properties change as they are layered in ever thinner films. And that’s where the real challenges appear when non-visible and ill-placed defects can destroy the performance, operation and production yields of semiconductor devices.

Applied Materials, one of the leading developers of the equipment for fabricating these devices recently announced plans for their Materials Engineering Technology Accelerator (META) Center. The center is an expansion of the company’s R&D capabilities aimed at creating new ways to drive innovation as classic Moore’s Law scaling becomes more challenging.

The primary goal of the center is to provide new materials and processes that enable future breakthroughs in device performance, power and costs. This first of its kind research center will be located at the State University of New York Polytechnic Institute in Albany, New York.

A multitude of polymer-based materials are also being developed for a wide range of applications. Dow recently won several R&D 100 Awards at R&D Magazine’s 2018 Awards event. The strong materials developed for these products include a cool coating for bedding materials; a silicone-based adhesive for

Industrial R&D Spenders - Advanced Materials & Chemicals (Billions USD) 2017

2018

2019

Bayer AG

5.415

5.743

6.083

DowDuPont

2.110

2.263

2.448

BASF

2.270

2.268

2.267

3M

1.850

1.879

1.913

Monsanto

1.584

1.556

1.528

13.229

13.709

14.239

Total

Source: R&D Magazine Survey 2018

printed circuit board assemblies; a sustainable textile treatment for brighter colors; a polyolefin elastomer for photovoltaics; a stronger biaxially orientable polyethylene; and a downhole (for oil drilling systems) radium sequestration material.

Germany’s Merck KGaA also recently announced that it was collaborating with China’s Visionox Technology to accelerate the development of organic light-emitting diodes (OLEDs) in China. This development expands on Merck’s materials R&D operations in China, which have been in place for more than five years. Merck has a wide range of technology services in China, including manufacturing, supply chain, quality, R&D, sales, technical service and after-market support.

China itself is one of the strongest global developers of new materials and technologies.

It is already the leading publisher of advanced Billions USD materials technology papers, exceeding that of all other countries by a wide margin. \41.0 With its large manufacturing base, China is also the world’s largest market for chemicals, requiring all producers to provide extensive technical support to the region. BASF, for example, has a global center of excellence for advanced materials and system research in Shanghai and nowhere else in the world.

Two examples of BASF materials markets are in flame retardants and polyurethane-based materials used in sport shoe soles. Historically, BASF conducted all of its R&D at its giant complex in Ludwigshafen, Germany.

11.5 10.8 Companies that think through their China R&D and support strategies generally move their decision-makers to China. Germany’s Wacker Chemie, for example, has two manu2018 U.S. 2019 Global 2019 U.S. facturing plants in China and created an R&D facility in Shanghai to support them.

Source: R&D Magazine Survey 2018

Advanced Materials & Chemicals Industry R&D Spending 40

41.7

40.9

30

20

10

11.3

0 2017 Global 2017 U.S.

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Aerospace & Defense

M

ore than most other industries, the aerospace landscape has been rapidly changing over the past two decades. What was once a government dominated environment for development of new products and systems has been mostly overwhelmed by a plethora of industrial developers and suppliers.

A one-time philosophy of take-it or leave-it policy of space launch systems developed by the government now consists of highly competitive industrial launch systems that are reusable, lower in cost and have expanded capabilities. Even ten years ago, launching a car into space would have been inconceivable. But today it’s fact. Ten years ago, recovering the first stage of a launch vehicle by having it land on a barge in the middle of the ocean would have been considered impossible.

And today it’s fact with several suppliers—not just SpaceX— considering it to save costs.

Surprisingly, the technologies to develop these capabilities have not been all that intimidating. Most of the new systems being developed have been accomplished with the utilization of off-the-shelf technologies (OTS) and the courage and knowledge of a few entrepreneurs.

At one point, researchers considered China and Russia to be the main competitors in the race for space. That scenario has changed with fast-reacting industrial suppliers lining up to compete for the lucrative space market that is developing far faster than anyone would have believed.

The development of electronically-driven autonomous sys-

Industrial R&D Spenders – Aerospace/Defense (Billions USD) 2017

2018

2019

Boeing

3.179

3.180

3.180

BAE Systems

1.713

1.632

1.550

Lockheed Martin

1.200

1.339

1.485

Raytheon

0.734

0.830

0.891

Northrop Grumman

0.639

0.673

0.700

Total

7.465

7.654

7.806

Source: R&D Magazine Survey 2018

tems for space systems, military hardware and combat systems has been traveling along on its own path at breakneck speed as well. A mostly separate set of industrial equipment suppliers and developers (mostly U.S.) has been creating these systems, using mostly OTS equipment, components and systems.

Russia recently announced that it was planning on establishing a manned lunar colony by 2040, with first construction by 2025. Their technological capabilities are reliable, highperforming and supported in part by a long-time established launch infrastructure. However, the Russians don’t have the responsiveness, real-time technological capabilities, creativity and aggressiveness that the U.S.’s aerospace entrepreneurs have created over the past ten years.

Even established U.S. aerospace firms are getting into the act. Boeing is now developing Billions USD a reusable business jet-sized launch vehicle that 32.0 will have the first stage glide back for a runway landing like the space shuttle. First flight is scheduled for two years from now. DARPA first funded this system, termed the “Phantom Express,” in 2017. Boeing’s long-term goal is to have daily Phantom Express flights.

The battle for the mega-launch vehicles is also proceeding with multiple participants including NASA (Space Launch System or SLS), China 15.9 15.3 (Long March 9) and SpaceX (Big Falcon Rocket or BFR, designed for Mars landing). First launches of most of these systems are scheduled for within the next 20 months.

The establishment of a U.S. Space Force as early as 2020 also bodes well for increased aerospace R&D with the development of new satellites and technologies to help the military win conflicts in space. This new branch of the 2018 U.S. 2019 Global 2019 U.S. military is the first formed since the Air Force was formed in 1947.

Source: R&D Magazine Survey 2018

Aerospace/Defense R&D Spending 30

30.5

29.8

25

20

15

15.1 10

5

0 2017 Global

16

2017 U.S.

R&D Magazine

2018 Global

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R&D Industrial R&D GLOBAL FUNDING FORECAST

Automotive R&D

A

utomotive-based R&D is going through one of it largIndustrial R&D Spenders – Automotive (Billions USD) est technological transitions ever. One of the drivers for this transition is going from an almost universally 2017 2018 2019 implemented internal combustion (IC) drive system to an Toyota 10.369 10.848 11.327 electrical motor/battery drive system due the air pollution and global warming effects of burning fossil fuels.

Volkswagen 11.572 10.915 10.258 The other R&D driver is transitioning from manual control Honda 7.541 8.180 8.818 of vehicles (human driver) to the implementation of autonomous systems due to safety and efficiency improvements. And, Ford Motor 8.000 8.305 8.647 of course, both of these technology drivers are occurring simulGeneral Motors 7.300 7.278 7.257 taneously—although they can be implemented in automotive fleets in a staggered sequence and the autonomous systems do Total 44.782 45.526 46.307 not have to be usable 100% of the time.

Source: R&D Magazine Survey 2018 The complexity, R&D costs and implementation resources have often become too large for an individual car manufacturer focus their available R&D monies to autonomous vehicles to accommodate on their own, especially for those companies and electric drive systems. General Motors is also creating a who started their system development later than other comnew R&D facility in South Korea to support its four existing panies. As a result, there have been numerous acquisitions, production plants in that country and to add to their global alliances, partnerships and collaborative investments. development of emerging new technologies.

On the autonomous side, Honda and General Motors have Daimler is refocusing its R&D efforts with the creation of a a long-term multi-billion-dollar partnership. Toyota is worknew R&D center in Beijing, China—its second in China—to ing with ride-sharing companies Uber and Lyft. Volvo is also help accelerate localized development of Mercedes-Benz working with Uber. Ford is working with self-driving startup vehicles in China, its single largest global market. The new Argo AI. BMW and Fiat Chrysler are collaborating together R&D center is scheduled to open in 2020; Daimler’s first China with Intel/Mobileye. Fiat Chrysler is also working indepencenter was opened in 2014. dently with Google/Alphabet self-driving subsidiary Waymo. Hyundai and Volkswagen are partnering with another self-driving startup, Billions USD Aurora Innovation. Nissan is partnering with 100 NASA. And Daimler is working with Bosch, just to name a few.

103.1 99.8 98.2 Automotive companies are investing record high levels of R&D with up to a third of the 80 investments going towards autonomous driving alone—in part to compete with foreign technology companies and even large market Chinese developers. Yet, while large car manufacturers 60 are investing record amounts in R&D, their resources still lag behind the R&D investments of other non-automotive companies such as Google and Apple who are investing in this booming 40 long-term market potential.

Toyota, for example, is worried about Volk37.1 35.9 35.4 swagen’s market inroads into China—the largest car market in the world—and where Toyota’s 20 sales efforts are lagging. Toyota is trimming its R&D efforts for conventional car development and instead putting those investments in the new technologies. General Motors and Ford as well 0 are slashing R&D investments in conventional 2017 Global 2017 U.S. 2018 Global 2018 U.S. 2019 Global 2019 U.S. vehicle development—and in some cases, cutting Source: R&D Magazine Survey 2018 model lines and even production facilities—to

Automotive R&D Spending

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Energy R&D

T

here are two primary criteria for evaluating development efforts in energy R&D—climate change and costs. For climate change, the R&D is generally focused on the minimization of carbon emissions. For costs, the R&D is generally focused on products, processes and systems that reduce or minimize the energy costs required to accomplish certain tasks—creating sustainable energy resources. Energy sources consist of fossil fuels (based on coal and petroleum), solar (based on wind and photovoltaic [PV] systems and devices), hydroelectric, nuclear (fusion and fission nuclear systems) and geothermal.

The U.S. Dept. of Energy (DOE) Office of Science has a FY2019 R&D budget of $6.6 billion, an increase of $1.2 billion over the Administration’s proposal and 5.2% more than their FY2018 budget. Every basic science program gained in the FY2019 budget approval. Even the contribution to the ITER— the world’s largest tokamak fusion research experiment located in southern France—got a 144% U.S. increase to $122 million.

The DOE’s Office of Fossil Energy recently announced that it will fund R&D efforts that will “advance first-of-a-kind coal generation technologies.” The DOE’s FIRST (which stands for flexible, innovative, resilient, small and transformative) program will develop the coal plant of the future needed to provide secure, stable and reliable power. The program is expected to

Industrial R&D Spenders – Energy (Billions USD) 2017

2018

2019

General Electric

4.803

5.053

5.256

Petrochina

3.085

3.279

3.506

ExxonMobil

1.063

1.102

1.132

Royal Dutch Shell

0.922

0.824

0.728

Total SA

0.930

0.812

0.696

Total

10.803

11.070

11.318

Source: R&D Magazine Survey 2018

support coal-fired electric power plants that are capable of flexible operations to meet the needs of the electric grid; use innovative and cutting-edge components that improve efficiency and reduce emissions; and are smaller than current utility-scale coal systems. Funding for this program is for FY2019.

Design criteria for the FIRST program include minimized water consumption, near-zero carbon emissions (including the possibility of retrofitting carbon capture devices), small (50 to 350 MW), capabilities of natural gas co-firing, reduced design, construction and commissioning schedules, and integration with thermal or other energy storage systems.

The European approach to energy R&D has Billions USD taken a different path. The European Energy Research Alliance (EERA) recently made a drive to coordinate the renewable energy R&D of European member states, industries and 22.5 research institutes to accelerate their goals of meeting the EU’s 2050 climate change energy targets (net-zero carbon emissions). A number of European states have already committed to 100% renewable energy implementation well before 2050.

Some U.S. states have already committed to reducing their carbon emissions, going against the federal government’s actions. Northern Indiana Public Service company, for example, has said it will retire its last five coal-fired 9.0 units over the next decade as it transforms to renewable sources.

Even ExxonMobil, which had dramatically reduced its R&D investments during the oil price wars a few years ago, has resumed its R&D. It recently announced its first energy center partnership outside the U.S. in Singa2019 Global 2019 U.S. pore with the Nanyang Technological University and the National University of Singapore.

Source: R&D Magazine Survey 2018

Industrial Energy R&D Spending 25

20

21.4

20.6

15

10

8.3

7.7

5

0 2017 Global

18

2017 U.S.

R&D Magazine

2018 Global 2017 U.S.

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R&D Industrial R&D GLOBAL FUNDING FORECAST

Information & Communication Technologies (ICT)

I

nformation and communication technologies (ICT) is a Industrial R&D Spenders – Information & wide-ranging industry that includes most things electronic Communication Technologies (Billions USD) and their associated software systems. It includes cell phones and their networks, telecom satellites, artificial intelligence (AI) 2017 2018 2019 and machine learning software, the cloud, supercomputers and Amazon 22.620 26.750 30.500 all types of electronic workstations.

ICT has also become interspersed with the automotive Alphabet/Google 16.625 18.796 21.004 industry as it transitions from the conventional manual driving mode to the futuristic autonomous driving mode. Strong Apple 12.185 14.037 15.890 ICT leaders such as Microsoft, Google, Apple and Intel have Intel 13.098 13.701 14.234 all become integrally involved in this automotive transition as suppliers, integrators and systems developers. The big five ICT Microsoft 13.176 13.558 13.940 companies in the Table have become the largest R&D investors Total 77.704 86.842 95.568 in the world.

The technologies that are expected to have the largest and Source: R&D Magazine Survey 2018 most lasting effects include AI and supercomputing. AI and its associated companions—machine learning and knowledge Potential customers are not likely to appreciate the bulk of management systems—are already in use by various induscurrent 5G antennae systems in their phones, especially when trial organizations and government agencies for applications their service supplier doesn’t fully offer it yet. Once implethat include autopilot functions on planes, voice recognition mented, 5G systems will offer download speeds that are more and autonomous cars. than 10 times faster than current 4G systems. Test systems “Whoever becomes the leader in this area will become the evaluated in 2018 revealed response rates that are more than 7 ruler of the world,” said Russian President Vladimir Putin. Rustimes faster than 4G systems. Analysts don’t expect 5G to really sian military leaders fully expect to have more than one third take off until 2020 when all the glitches are worked out. Asian of their combative power residing on autonomous, AI-driven customers are likely toget systems and hardware earlier than robotic platforms by 2030. the U.S., which will only see rollouts in city-by-city stages.

The U.S. government and military organizations have already created groups of academics and private industry experts to Information & Communication R&D Spending explore the untapped potential of AI and implement them.

Billions USD France also has stated that it will invest 250 more than $1.5 billion on research and in supporting AI startups over the next five 239.0 years. France regrets missing out on becom228.3 218.3 ing a leader in robotic technologies and vows 200 not to do the same with AI systems.

South Korea has stated that they will create six new AI schools by 2020 with plans to 150 educate more than 5,000 of its engineers in the systems.

130.0 125.9 In the telecom arena, most cell phone 122.2 100 developers are ramping up their designs for the introduction of the next generation of operating systems—5G. Some companies such as Apple are holding off implementing 5G 50 into their cellular systems until the designs are reduced in size, become more reliable and with service that’s widely available. Apple will 0 2017 Global 2017 U.S. 2018 Global 2018 U.S. 2019 Global 2019 U.S. likely wait until 2020 to introduce 5G phones, while Samsung may introduce phones in the Source: R&D Magazine Survey 2018 first half of 2019.

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Life Science Technologies

A

recent report by PwC (formerly PriceWaterhouse Coopers) states that healthcare, or life science R&D, will outspend all other industries by 2020. Life science currently ranks second behind computing and electronics (ICT), but PwC expects that to change by 2020. PwC’s forecast reflects on the strong pace of life science innovation from digital healthcare startups to tech giants to drug and medical device companies.

Specific areas expected to see strong growth include precision medicine, healthcare robotics, machine learning, AI (artificial intelligence) and big data-based analytics. Total global life science R&D investments are expected to exceed $190 billion in 2019, up from just $86 billion in 2005.

Despite the recent advances in the development of new pharmaceuticals, the time to bring a new biological to market is not changing. A recent report by the UK’s Institute for Cancer Research found the average time from Phase 1 through clinical trials and to a marketing license being granted by the European Medicines Agency grew to 9.1 years in 2009 to 2016 from 7.8 years in 2000 to 2008. The report also found big differences in the development of new cancer drugs. Fifteen drugs for breast cancer were licensed in Europe from 2000 to 2016, while none at all were licensed for brain tumors.

Driving change may be the implementation of AI in drug discovery. Pfizer is now using IBM’s Watson, which uses machine learning to power its search for immune-oncology drugs. Roche subsidiary Genentech is using an AI system

Industrial R&D Spenders – Life Science Technologies (Billions USD) 2016

2017

2018

Roche Holdings

11.596

12.284

12.962

Merck & Co.

10.208

11.323

12.273

Johnson & Johnson

10.962

11.493

12.111

Novartis

8.972

8.934

8.905

Pfizer

7.657

7.942

8.114

Total

49.395

51.976

54.365

Source: R&D Magazine Survey 2018

from GNS Healthcare in Cambridge, Massachusetts, to look for cancer treatments. Most large biopharma companies now have similar collaborations or internal programs. AI and machine learning are expected to usher in a new era of faster, less expensive and more effective drug discovery. When coupled with automation systems, these techniques are expected to be a boon to drug researchers.

While using AI for drug discovery is currently a complex endeavor, computer software is likely to automatically perform many of the currently required coding efforts, making it much easier to perform in five to ten years.

Data management techniques and strategic decision-making in the development Industrial R&D Spenders — Life Science Technologies of a new biologic continue to be convoluted, leading to time-consuming overall Billions USD development programs. Machine learning 193.0 techniques can also improve these stages of drug development.

200 The National Institutes of Health (NIH), the largest government funding agency 184.3 177.6 for life science research, got a $2 billion boost in the final FY2019 spending bill to 150 $39.1 billion. The 5% budget increase caps the fourth year in a row that the NIH has received a substantial increase, after more than a decade of flat budgets.

100 The spending bill provides increases in many high-profile areas, including $425 81.2 77.4 74.6 million more for Alzheimer’s disease and 50 related dementia, a $100 million increase for the cancer moonshot, and a $86 million increase for the “all of us” precision medicine study. The FY2019 budget is also 0 the first time in 22 years that Congress ap2017 Global 2017 U.S. 2018 Global 2018 U.S. 2019 Global 2019 U.S. proved a NIH funding bill before the fiscal year begins (October 1).

Source: R&D Magazine Survey 2018

20

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International R&D

GLOBAL R&D

FUNDING FORECAST

International R&D Competition Heats Up

T

he globalization of research and development efforts tries ranked. The U.S. is ranked 6th, Japan is 13th, China is 17th has become a process that enhances a country’s producand Russia is ranked 46th. A loose relationship exists between tion capabilities, educational infrastructure, economic R&D Magazine’s Global R&D Funding Forecast ranking (shown well-being as well as the overall global human experience. It on page 5 of this report) and the GII rankings—countries with pits country against country in a mostly peaceful competitive low levels of R&D investments (Africa, South America, Caribmanner and drives each country to excel in all of its endeavors. bean and some Asia) also have low GII rankings.

Japanese automotive R&D, for example, forces American Technology Leaders cars to be more fuel efficient, more reliable and less costly.

As noted in the accompanying charts, the U.S. continues to Chemical research in China provides raw materials with fewer lead the world in specific technology sectors, overall R&D production emissions, higher quality levels and ones which are investments and also in gaining the most in R&D. U.S. is less reliant on natural resources. U.S. R&D on new computing second behind top responded China. These charts are the technologies and products advances the global knowledge base results of R&D Magazine’s annual reader surveys performed and step-wise improvements for all future technologies. And during August 2018. As can be seen, China is gaining fast on U.S. agricultural R&D gives the underprivileged third world the U.S.’s lead—and over other countries—and this is due to a populations enough food to survive another day. variety of reasons.

But while fully globalized R&D is a theoretically desirous These reasons include continued strong R&D and science/ outcome, it is often viewed with some naivete. The technologitechnology (ST) investments, hacking/theft of external IP, and cal capabilities of one country have often been stolen or raided an educational system that is producing scientists and engiby other country’s agents without due compensation or legal neers at a faster rate than anywhere else in the world. China is procedures. Specifically, China has been accused of spying on ranked second in six technology sectors for our 2019 Global and stealing industrial and military secrets from the United R&D Funding Forecast, and this country was only ranked secStates and European technology organizations. ond in fi ve technology sectors in our 2018 Global R&D Funding China has done this to more rapidly advance their industrial Forecast.

Also, China leaped over Germany in the energy sector and military capabilities without going through the time-conin our 2019 study. suming and expensive processes of R&D required to produce As the production of consumer and industrial products an end product. Russia (Soviet Union), Germany and Japan has been completely globalized, the globalization of R&D has have also been accused (and often convicted) of similar activisimilarly spread out technological expertise around the world. ties in the past to gain a competitive advantage.

Additionally, China’s immense government-controlled economy and consumer base has often resulted in trade deals that are heavily biased in favor of China. Specifically, if an outside company wants to do business 80 in China, they are first required to build a production facility in China and then provide 70 China with the proprietary knowledge of 72% how to produce those products. The outside 60 company thereby gains access to the Chinese marketplace, but loses much of its intellectual 50 property (IP). Few countries have this type of consumer-supplier leverage. And fewer still 48% 40 become this parochial in their trade dealings between countries.

30 Many of these situations arise due to the in31% 32% 30% herent innovation and educational capabilities 26% 20 of the countries. As noted earlier in this report (Industrial Section, page 14), the Global In14% 13% 10 novation Index 2018 (GII) provides a ranking 12% 9% of the specific innovation capabilities of most 0 global countries (126).

U.S. Canada U.K. Germany France China Japan India S. Korea Russia The higher-ranking countries are predomiSource: R&D Magazine Survey 2018 nantly European, with 23 of the top 34 coun-

Countries Gaining the Most in R&D

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GERD, BIL USD

The U.S. maintains commanding leads in most U.S./China/Euro GERD Trends categories now and is expected to maintain those leads for at least the next five years.

900 China, Germany and Japan are slowly gaining 800 in technological expertise in some of those areas.

700 Left out of this year’s survey was a representation 600 of India’s technological expertise. India passed 500 South Korea in 2019 for the amount of money 400 they invest in R&D, and that trend is expected 300 to continue into the foreseeable future. India is 200 now ranked 5th in the amount of R&D spending 100 and has made definite gains in its overall R&D 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 infrastructure. The country’s population is also n U.S. n China n Europe expected to exceed that of the leader China by 2025, according to the World Health Organization (WHO), which will also increase India’s GDP. India will be years between the big three, there will likely be no shifting of included in our next 2020 Global R&D Funding Forecast.

R&D technologies to any major degree outside of those groups.

As noted in the other sections of this report, there will be Technology Regions dramatic technology changes over the next five years that will The R&D world is dominated by the big three—the U.S. (25% dominate the R&D investments and technological growth of R&D share), China (22% share) and Europe (20% share). The the big three groups. These include: U.S. continues to increase its R&D spending, but is losing • Aerospace R&D and technologies will advance as excurabout 1% share every year due to spending increases in Asia sions are made to the Moon and Mars and as new launch that exceed those of the United States. China and Asia overall technology platforms are introduced. Within five years, are each gaining about a 1% share every year, while Europe is R&D investments and experiments will be performed on losing about 0.5% share per year. The emerging and third world the Earth, in space and on the Moon and Mars. countries/regions (Africa, South America, Caribbean, Middle • Automotive R&D will change dramatically with the East and some parts of Asia) are mostly stagnant in their R&D implementation of electrified and autonomously driven spending shares—they have not changed in the past five years car and truck fleets. and are not expected to change in the next five years.

• Artificial intelligence and advanced automation will The big three also dominate the specific technologies produced make further inroads into areas that are not currently in the world. While some shifting may occur over the next five being implemented.

Leading Countries in Specific Technology Sectors U.S.

China

France

Germany

Japan

Russia

S. Korea

U.K.

Advanced Materials

60%

20%

2%

17%

16%

3%

4%

3%

Agriculture/Food

74%

18%

3%

6%

3%

2%

1%

3%

Automotive

31%

12%

2%

33%

36%

0%

10%

2%

Commercial Aerospace

75%

10%

13%

7%

3%

6%

1%

4%

Computing/IT

61%

30%

1%

3%

14%

5%

7%

4%

Energy

51%

21%

9%

19%

8%

5%

3%

6%

Sustainability

33%

7%

20%

36%

11%

1%

3%

9%

ICT

60%

25%

3%

7%

13%

6%

12%

5%

Instrumentation

48%

23%

3%

15%

24%

1%

13%

3%

Life Science/Healthcare

67%

4%

10%

17%

12%

1%

2%

15%

Military/Space/Defense

82%

23%

4%

4%

3%

13%

4%

3%

n Leader n Runner-Up 22

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FUNDING FORECAST

North America

W

ith $581 billion in R&D investments, the U.S. dominates the North American region with a 92.2% share of the total $629.6 billion R&D invested in the region. Canada, globally ranked #11 in R&D spending, has a 5.2% regional share with $33.1 billion in R&D, while Mexico, globally ranked #25 in R&D spending with $13 billion in R&D, has a 2% regional R&D share.

The remaining nine countries, concentrated in Central America (six countries) and the Caribbean (three island countries) invest a combined $3.8 billion in R&D for a regional R&D share of just 0.6%.

Those nine countries only increased their combined R&D by $40 million from 2018 to 2019 with two countries (Cuba and Puerto Rico) seeing cuts in their 2019 R&D investments. Little R&D is performed in Central America with continuing political turmoil and social unrest affecting the operation of even minimal services. R&D in Caribbean nations is minimal at best with most R&D operations focused on environmental studies.

The Government of Canada supports R&D through its Scientific Research and Experimental Development (SR&ED) Tax Incentive Program. SR&ED provides tax incentives for the direct in-house costs of performing eligible R&D work in Canada.

The top industrial R&D spenders in Canada include Bombardier, Magna International, Valeant Pharmaceuticals, Canadian Natural Resources, BCE, Pratt & Whitney Canada, IBM Canada, Constellation Software, Ericson Canada, General Motors Canada and Atomic Energy of Canada. About 52% of Canada’s GERD is performed by industrial companies, 38% by academia and 9% by the provincial governments.

Mexico has been urged by the Inter-American Development Bank (IDB) to invest more in R&D… The country has nearly 15,000 researchers, according to Statistics Canada. The government’s National Research Council of Canada (NRC) has 14 research programs and technology centers affecting the competitiveness of the country. Some of these programs/centers involve advanced electronics and photonics; aerospace; aquatic and crop resources; automotive and surface transportation; energy, mining and the environment; nanotechnology; and ocean, coastal and river engineering.

Mexico has been urged by the Inter-American Development Bank (IDB) to invest more in R&D, blaming the lack of investment on a drop in Mexico’s productivity. Mexico www.rdmag.com

spends much less than 1% of its GDP on R&D. Its productivity cannot be raised unless more private companies participate in their R&D, noting that more than 60% of Mexico’s current R&D is funded by the government.

With $581 billion in R&D investments, the U.S. dominates the North American region with a 92.2% share of the total $629.6 billion R&D invested in the region.

The lack of R&D has led to fewer introductions of new products and processes, which has curtailed productivity in all sectors. Mexico is a member of the Organization of Economic Cooperation and Development (OECD) and of all the OECD countries, Mexico and Chile spend the least on R&D. Brazil, by comparison, spends more than 1.2% of its GDP on R&D. More than 70% of R&D investments in OECD countries comes from private companies, while in Latin America only 40% of the companies in those countries invest in R&D.

North American R&D Investments 2018

2019

GDP BIL USD

R&D BIL USD

GDP BIL USD

R&D BIL USD

United States

19,921.0

565.76

20,458.9

581.03

Canada

1,801.0

32.42

1,837.0

33.07

Mexico

2,461.3

12.31

2,535.1

12.93

Cuba

135.6

0.57

138.3

0.55

Puerto Rico

122.7

0.53

121.2

0.48

Costa Rica

88.5

0.44

92.0

0.46

Dom Republic

178.2

0.36

184.8

0.37

Panama

103.3

0.31

107.4

0.32

Guatamala

143.7

0.14

149.5

0.21

El Salvador

59.1

0.09

61.5

0.09

Honduras

47.5

0.08

49.4

0.08

Trinidad/Tobago

44.4

0.02

46.0

0.02

25,106.3

613.03

25,781.2

629.61

Total

Source: R&D Magazine Survey 2018

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2019

GLOBAL R&D International R&D FUNDING FORECAST

South America

L

atin American countries generally lack the large and dynamic markets of advanced economies, they have no scientific infrastructure and few specialized industrial clusters that typically attract foreign investments in R&D. The United Nations Economic Commission for Latin America and the Caribbean found that these regions only attract about 3% of all global R&D foreign direct investment (FDI) projects.

On the flip side, China was found to attract more than 30% of FDI. Two of the weaker South American countries, Chile and Peru, have created International Centers of Excellence (ICEs) and have invited foreign research organizations and industrial firms to participate. On the first call for proposals to the ICE in 2009, each organization was offered a grant of up to $20 million for a ten-year period. Participants were also expected to contribute up to 60% of the grant value. A second call for proposals lowered the grant to $13 million and the cofinancing was increased to 88%.

The result was that 12 centers were established in the Chilean program with participants that included eight research organizations and four multinational corporations from seven countries. Most of the centers have shown visible results with patents, independent spin-off companies, published scientific papers and partnerships with various domestic industries. Peru followed Chile’s program and has started a similar program.

Brazil has about half the population of South America and about 85% of its gross economy ($3.4 trillion vs. $4 trillion).

South American R&D Investments 2018 GDP

2019 R&D

GDP

R&D

BIL USD BIL USD BIL USD BIL USD

Brazil

3,293.0

38.53

3375.3

39.15

Argentina

927.3

5.10

957.0

5.17

Chile

467.5

2.10

482.9

2.12

Columbia

731.7

1.61

755.9

1.66

Venezuela

331.0

1.26

311.1

1.09

Peru

440.3

0.99

457.9

1.01

Ecuador

193.2

0.68

197.5

0.69

Uruguay

81.1

0.41

83.6

0.42

Bolivia

86.8

0.28

90.1

0.30

Paraguay

71.1

0.07

74.0

0.07

6,623.0

51.03

6785.3

51.68

Total

Source: R&D Magazine Survey 2018

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Its overall R&D infrastructure is strong. About 60% of its $39 billion in 2019 R&D comes from government sources and 38% from industry. Research is concentrated in universities and other federal and state institutions. There are about 300 public universities and 2,100 private universities.

There also are 40 federal institutes of S&T education where R&D is performed.

While Brazil is 10th in the world in terms of R&D investments, it ranks fairly low on the innovation list, 64th,

While Brazil is 10th in the world in terms of R&D investments, it ranks fairly low on the innovation list, 64th, below the rankings of its neighboring countries, Uruguay and Colombia. below the rankings of its neighboring countries, Uruguay and Colombia. Several major companies have located R&D centers in Brazil. IBM Research Brazil was established in June 2010, with locations in Sao Paulo and Rio de Janeiro.

Developers, engineers, scientists and other experts at these labs are working on artificial intelligence, nanotechnology and visual analytics, as well as Internet-of-things solutions and cloud services.

China’s BYD Auto Co. has also installed its first overseas facility for photovoltaic research at Brazil’s University Campinas (Unicamp) to support local sales of solar modules, energy storage and electric vehicles. Unicamp and BYD collaboration falls under Brazil’s Program of Support to the Technological Development of the Semiconductor Industry and Displays, with the goal to develop and bolster Brazil’s solar PV knowledge. BYD has a global staff of more than 20,000 engineers and researchers.

French energy group Engie also recently committed to setting up a research center in Brazil to act as the company’s regional hub for wind, solar, biogas and hydrogen projects as well as new technologies for Smart Cities.

The opening of Engie Lab Brasil by late 2018 follows the opening of a similar lab in Chile, which opened in 2014.

Boeing’s acquisition of Brazil’s Embraer aerospace firm is also likely to embolden their R&D efforts. www.rdmag.com

2019

GLOBAL R&D

FUNDING FORECAST

Asia

W

ith four of the top six R&D spending countries located in Asia—China, Japan, India and South Korea—it is easy to claim that this region is THE global R&D driver. Those four countries by themselves have nearly 40% of the total global R&D pie. And there’s still 20 other countries in the region generating a combined $129 billion in R&D in 2019.

This group of countries, however, is not as well recognized for their innovation capabilities. The best GII 2018 ranking for Asia is Singapore (#5, just ahead of the U.S. at #6). Only seven Asian countries are in the GII’s top 25 and only 15 in the top 100. Europe, by comparison, has 15 countries in the GII’s top 25.

China continues to grow its investment in R&D at nearly 7% levels, while the U.S. annual R&D growth is less than 3%.

At the current rates, which we’ve seen continue for the past 10 years, Chinese R&D is expected to exceed that of the U.S. in absolute Purchasing Power Parity (PPP) dollars by about five years (2024). China’s R&D investments cover a broad range of technologies, including that of the basic sciences.

Their goals are exemplified with the recent announcement

by Beijing’s Institute of High Energy Physics of the building of the world’s largest high-energy particle collider or the China Electron Positron Collider (CEPC). The 100-km circumference facility would dwarf the 27-km Large Hadron Collider at CERN in Geneva, Switzerland. China’s CEPC would open in 2030 with energies up to seven times that of the Large Hadron Collider (LHC), today the world’s largest and most powerful particle accelerator. With European and possibly U.S. scientific partnerships, the CEPC would help China to become more internationalized and more open to the world.

Japan’s R&D is expected to grow at a modest 1% rate in 2019 to $193 billion. Japan’s Ministry of Education (MEXT) has asked for an ambitious budget increase of 10% to bring back basic research to Japan in “a big way.” The increase would allow Japan to compete for the world’s fastest supercomputer program, which has been won recently by the U.S. and China in alternating years.

The request is likely to be scaled back during government reviews as Japan’s population continues to shrink and age, leading to declining tax revenues amid increasing costs for social program increases. Changes in Japan’s military programs as a result of expiring export bans have the potential to increase international joint research on military systems, which Japan has extensive resources to fulfill other than how to sell it to other countries.

R&D in India continues to increase at a larger pace than in the past to the point that their ranking in our 2019 Global R&D Funding Forecast (page 5 of this report) has moved up and past the R&D ranking of South Korea with slightly more than $94 billion forecast in R&D spending for 2019. At issue www.rdmag.com

still in India is the low ranking of their universities, while their geographic neighbor China has steadily increased the rankings (and respect) of their universities, especially that of Tsinghua University which is now ranked #1 in the world in terms of math and computing research, exceeding that of even the U.S.’s MIT and Stanford Universities.

Asian R&D Investments 2018

2019

GDP BIL USD

R&D BIL USD

GDP BIL USD

R&D BIL USD

China

24,646.00

485.53

26,223.30

519.22

Japan

5,469.90

191.45

5,519.10

193.17

India

10,146.10

86.24

10,937.50

94.06

South Korea

2,087.80

90.19

2,148.35

93.46

Australia

1,272.10

29.77

1,311.54

30.82

Taiwan

1,197.30

29.33

1,221.25

30.04

Singapore

528.60

13.85

542.87

14.33

Malaysia

975.20

12.48

1,023.96

13.21

Indonesia

3,414.90

10.58

3,602.72

11.17

Pakistan

1,115.10

7.02

1,167.51

7.24

728.40

5.10

774.29

5.42

1,276.90

4.47

1,325.42

4.64

Hong Kong

469.30

3.33

484.32

3.49

New Zealand

191.10

2.46

196.64

2.56

Vietnam

686.40

2.20

731.02

2.34

Philippines

933.10

1.49

996.55

1.59

Myanmar/Burma

351.10

1.05

373.22

1.12

Sri Lanka

300.70

0.48

319.64

0.51

Nepal

83.40

0.25

88.65

0.27

North Korea

40.00

0.20

40.00

0.20

Cambodia

68.10

0.15

72.39

0.11

Afghanistan

72.80

0.15

76.15

0.15

Macau

78.80

0.04

83.61

0.04

Laos

52.20

0.03

55.49

0.03

Total

56,185.3

977.84

59,315.5

1,029.19

Bangladesh Thailand

Source: R&D Magazine Survey 2018

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2019

GLOBAL R&D International R&D FUNDING FORECAST

Europe

T

he 34 countries residing in Europe—including the U.K. and the Slavic countries in eastern Europe—make up $472.5 billion of our global R&D forecast for 2019, a 1.92% increase over what was invested in 2018. This includes Germany’s $123 billion (4th largest GFF spender) and BosniaHerzegovina’s $50 million (112th largest GFF spender). While Germany has just 11% of the EU’s (European Union’s) population, it is responsible for 17% of the EU’s economy (GDP) and 26% of its overall R&D investment. About two-thirds of Germany’s R&D is invested by industry, with 18% invested by academia and 14% by federal and state research institutions.

Germany is Europe’s technological powerhouse with over 1,000 R&D institutions, 400,000 researchers and nearly 500 research and innovation networks and clusters.

The top three European countries in terms of R&D investment are Germany (# 4 - $123 billion), France (# 7 - $62 billion) and the U.K. (# 9 - $51 billion) for a combined 50% share of all European R&D and 10.1% share of global R&D. The top four countries in terms of the Global Innovation Index ranking are Switzerland (#1), Netherlands (#2), Sweden (#3) and the U.K. (#4).

The top two academic institutions in the world also reside in Europe, according to the Times Higher Education 2019 listing — # 1 University of Oxford, U.K. and # 2 University of Cambridge, U.K. with # 9 Imperial College London, U.K., # 11 ETH Zurich, Switzerland and # 14 UCL, U.K. Overall European R&D as a percentage of GDP continued its steady rise to a ten-year high in 2017, according to Eurostat. This increase continued despite no increases in European governments, universities or non-profits over the past 10 years. Increasing industrial R&D investments accounted for the overall increases. Overall European R&D rose to 2.07% of GDP in 2017 from 2.04% in 2016, which was far short of the EU’s target of 3.0%. Only four countries have reached the 3.0% target—Sweden (3.33%), Austria (3.15%), Denmark (3.06%) and Germany (3.02%). Industrial R&D investments rose to 1.36% in 2017, while government contributions have fallen from 0.26% in 2009 to 0.23% in 2017.

European countries are implementing more R&D tax credits to incentivize their R&D investments. Austria recently increased its 12% tax credit for R&D work to 14%. Denmark has proposed a schedule to increase its existing R&D expense deduction from 100% to 110% over several years. Germany’s new coalition government has also proposed brand new breaks for R&D, particularly for small and medium enterprises (SMEs).

And the UK has increased its tax credit from 11% to 12% and created a capital allowance for companies that invest in green technologies. The rationale for these tax credits is that by boosting innovation and productivity, the resulting R&D efforts increase living standards.

The continuing Brexit discussions are likely to have an impact on U.K.’s R&D and a slightly smaller effect on continental R&D. A recent report by Science noted that researchers at the U.K.’s

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European R&D Investments BIL USD 2018

2019

GDP R&D GDP R&D BIL USD BIL USD BIL USD BIL USD

Germany

4,253.8

120.81

4,338.9

123.22

France

2,885.4

64.92

2,943.1

66.22

United Kingdom

2,926.1

50.33

2,970.0

51.38

Italy

2,341.6

29.74

2,365.0

29.80

Spain

1,818.5

22.91

1,858.5

23.23

Turkey

2,226.8

20.04

2,315.9

20.61

Netherlands

944.5

19.83

967.2

20.31

Sweden

535.3

17.82

547.1

17.94

Switzerland

528.6

15.75

539.2

16.01

Austria

445.4

13.36

453.9

13.53

Belgium

536.4

12.61

545.5

12.82

1,156.6

10.53

1,197.1

11.01

Denmark

291.2

8.74

296.7

8.90

Finland

248.7

8.70

253.7

8.88

Czechia

385.6

7.13

397.2

7.35

Norway

383.8

6.72

391.9

6.82

Ireland

360.3

6.31

374.7

6.56

Portugal

318.8

4.59

324.5

4.54

Hungary

294.4

4.18

303.2

4.31

Ukraine

378.1

3.02

390.6

3.12

Romania

498.2

2.99

515.6

3.09

Slovenia

73.2

1.89

75.5

1.89

Greece

305.5

1.89

311.0

1.87

Slovak Republic

185.8

1.40

193.6

1.45

Belarus

180.8

1.36

185.1

1.37

Poland

Serbia

110.3

1.00

114.2

1.04

Bulgaria

158.2

0.98

163.1

0.98

Luxembourg

67.2

0.94

69.7

0.98

Lithiuania

93.5

0.84

96.3

0.87

Croatia

103.0

0.77

105.7

0.79

Estonia

42.8

0.68

44.2

0.71

Iceland

18.3

0.47

18.9

0.47

Latvia

55.6

0.33

57.6

0.35

Bosnia/Herzegovina Total

45.7

0.05

47.4

0.05

25,198.0

463.63

25,771.6

472.47

Source: R&D Magazine Survey 2018

www.rdmag.com

2019

GLOBAL R&D

FUNDING FORECAST

Francis Crick Institute—the U.K.’s largest biomedical research lab—say they are much less likely to remain in the U.K. when looking at their next career step. Half of the researchers say they are less likely to stay in the U.K., while only 7% are confident that the U.K. will continue to attract top scientific talent. Only 10% feel confident in the future of U.K. science.

European countries also lead the world in the percentage of their populations that are employed in manufacturing, according to the International Labour Organization. Poland (20.2%), Germany (19%), Italy (18.5%) and Turkey 18.1%) lead the world in this area. China and Japan both have 16.9% of their workforces employed in manufacturing and the U.S. has 10.5%.

Russia/CIS

R

ussia is forecast to invest $61.94 billion in R&D in 2019 with an expected economy of $4.129 trillion. Russia has the 8th largest R&D budget in the world, above that of the U.K. and Brazil who have significantly smaller economies than that of Russia. It has a population of 144.5 million, about the same as it had in 2005—the country actually had a negative population growth from the end of the Soviet Union in 1990 through 2012 when its birth rate increased to equal its death rate.

Additionally, Russia ranks 46th in the Global Innovation Index 2018, just below Vietnam and the Ukraine rankings, but

About 70% of Russia’s R&D funding comes from the government, with much of it utilized by their public research institutes, such as the Russian Academy of Sciences. well below the GII rankings of the major European and Asian economies. Russia lacks many of the modern trappings of today’s high-growth economies. A recent visit by a journalist to Moscow noted that there was not a single full-time MBA school in Russia that the global economy could tap into.

Russia’s investment in R&D is only about 1.5% of its overall economy, significantly lower that the ratios of most top R&D spending countries, except for India whose large economy and population biases its R&D investment statistics. About 70% of Russia’s R&D funding comes from the government, with much of it utilized by their public research institutes, such as the Russian Academy of Sciences. The RAS was founded in 1724 and currently includes 1,008 institutions employing 47,000 research scientists in a total staff of about 125,000 people. Russia’s research infrastructure was severely battered in the 1990s by a decline in funding and the accompanying brain drain.

Even in the current industries where Russia partially excels www.rdmag.com

such as in its space exploration programs, Russia lags behind its competitors due to a severe lack of innovation. Its rocket engines are still among the most powerful and most reliable, but it has no reusable systems or deep space exploration systems and is not pushing any technological frontiers. Many of its major industries, such as defense, transportation and energy remain largely state-owned and operated with low productivities that affect the rest of Russia’s economy.

Russia continues to collaborate with other countries to advance its technological areas of expertise. China and Russia are jointly developing a widebody passenger aircraft, the CR929. The development project, including the development of a brand-new engine, is expected to take at least 10 years to complete. First flights are expected by 2025 to 2028. Some systems, such as the landing gear have already been designed.

China Russia Commercial Aircraft International Corp. opened its Shanghai office for the CR629 project in 2017. The project expects to target markets in China, Russia and other Asia-Pacific countries after it is put into commercial use.

The combined economies of the four CIS (Commonwealth of Independent States) countries in our R&D listing is only about $1 trillion and their combined R&D investments is about $3 billion for a combined R&D as a percent of GDP of only 0.30%. Some of these countries have received support from organizations like the World Bank to be able to bring their scientific products to market since little science infrastructure exists.

Russia/CIS R&D Investments 2018 GDP

2019 R&D

GDP

R&D

BIL USD BIL USD BIL USD BIL USD

Russia

4,068.0

61.83

4,129.0

61.94

Kazakhstan

489.5

1.37

503.2

1.46

Uzbekistan

232.8

0.63

244.4

0.66

Azerbaijan

170.1

0.51

176.7

0.53

Turkmenistan

109.9

0.27

116.1

0.29

5,070.3

64.61

5,169.5

64.88

Total

Source: R&D Magazine Survey 2018

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2019

GLOBAL R&D International R&D FUNDING FORECAST

Middle East

T

he 13 countries of the Middle Eastern region of our 2019 Global R&D Funding Forecast’s grouping has a combined $58.08 billion in R&D investments and a $7.948 trillion combined economy for an R&D as a percent of GDP of 0.73%. This ratio is biased somewhat by Israel’s large ratio of 4.04%, the second largest in our listing—second only to South Korea’s 4.35%.

South Korea and Israel, in fact, often work together. They established the Korea-Israel Industrial R&D Foundation in 2001. Samsung’s first R&D centers outside of South Korea were set up in Israel to work on camera and semiconductor technologies. Israel’s S/T policies are aimed at enhancing its competitive position. Israel’s industrial R&D as a percentage of its GDP is 3.39% compared to only 2% in the U.S. Israel’s universities have a strong reputation for technological advancement. All government ministries employ chief scientists from the universities. Israel’s lack of natural resources has resulted in research policies that are geared towards alternatives for raw materials. It also has military research that’s

focused on its regional threats from Iran and Palestine.

Israel has attracted the opening of more than 20 new multinational R&D centers on an annual basis. Multinational corporations also now operate more than 400 R&D centers in the country, two-thirds of which are U.S.-based. The R&D centers run the gamut of technologies including semiconductors, the Internet, computer technologies, software, telecom, automotive, pharmaceuticals, medicinal and software. More than 20 countries participate in these R&D centers including China, Russia, France, U.K., Finland, Germany, U.S. and India.

Many Middle Eastern countries have large oil reserves and are using their established wealth to build R&D resources to support their economies when their oil reserves die out.

One of these unique Middle Eastern countries that is a strong supporter of R&D is Qatar. The Qatar Foundation for Education, Science and Community Development (QF) is a private, chartered, non-profit organization founded in 1995 by the ruling family of Qatar. QF leads the effort to make Qatar and international center for R&D and innovation. Part of its S/T strategy is to rapidly improve its overall university

Israel’s universities have a strong reputation for technological advancement.

Middle Eastern R&D Investments 2018

2019

GDP

R&D

GDP

R&D

BIL USD

BIL USD

BIL USD

BIL USD

326.0

13.20

337.4

13.63

1,696.2

13.23

1,764.1

13.41

350.6

9.09

370.3

9.26

Saudi Arabia

1,819.4

8.55

1,854.0

8.90

Egypt

1,261.4

7.57

1,330.8

7.85

UAE

705.7

1.41

726.9

1.45

Iraq

681.2

1.36

714.6

1.43

Oman

193.2

0.68

199.6

0.70

Kuwait

306.4

0.61

318.0

0.64

Jordan

91.2

0.36

93.7

0.37

Lebanon

89.2

0.27

90.8

0.27

Bahrain

71.8

0.14

74.2

0.10

Yemen

70.9

0.07

73.2

0.07

7,663.2

56.54

7,947.5

58.08

Israel Iran Qatar

Total

Source: R&D Magazine Survey 2018

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Many Middle Eastern countries have large oil reserves and are using their established wealth to build R&D resources to support their economies when their oil reserves die out system. In 2016, Qatar University topped the list of the world’s most international universities as noted by The Times Higher Education rankings.

Another unique R&D approach was Saudi Arabia’s creation of the King Abdullah University of Science and Technology (KAUST). This new building was opened in 2009 and is the largest LEED Platinum research laboratory in the world. Built in just two years, it cost more than $2 billion to create with more than $1 billion of research instrumentation in it. It has more than 1 million sq. ft. of lab space and accommodates more than 1,200 students, researchers and staff. It also has rapidly become a leader in the number of highly qualified research papers being created. www.rdmag.com

2019

GLOBAL R&D

FUNDING FORECAST

Africa

A

frica is one of the largest groupings of countries in our report, however it also has the unique distinction of having the smallest combined R&D investment with just $20.24 billion for a combined economy of $4.8 trillion with a net R&D and a percent of GDP of 0.42% (another low value). No country on this continent has an R&D as a percent of GDP that exceeds 1%.

South Africa is the strongest R&D investor in this group with $6.88 billion in R&D for 2019, just 1.8% more than its investment in 2018. Nigeria actually has a larger economy than South Africa due to its large population and large oil export revenues. Innovation rankings on the African continent are relatively low with South Africa having the highest ranking of 58, followed by Morocco at 76 and Kenya at 78. Nigeria is ranked on the GII 2018 list at 118th.

The government is the major funder of research in South

African R&D Investments 2018 GDP

2019 R&D

GDP

R&D

BIL USD BIL USD BIL USD BIL USD

South Africa

768.7

6.76

781.8

6.88

1,141.5

3.42

1,163.2

3.49

Morocco

309.4

1.39

321.8

1.45

Tunisia

139.2

1.39

143.2

1.43

Algeria

648.2

1.30

665.7

1.33

Kenya

172.4

0.95

182.7

1.00

Tanzania

173.2

0.90

184.6

0.96

Ethiopia

212.4

0.85

230.0

0.92

Cote d'Ivoire

103.4

0.52

110.7

0.55

Sudan

193.7

0.45

200.5

0.46

Ghana

138.4

0.42

148.9

0.45

Angola

196.2

0.43

200.9

0.44

Uganda

93.2

0.33

98.6

0.35

Libya

65.5

0.20

67.5

0.20

Cameroon

84.9

0.17

88.7

0.15

Botswana

40.8

0.16

42.2

0.07

Congo, Dem. Republic

70.6

0.07

73.4

0.07

Zambia

71.7

0.04

74.9

0.04

4,623.4

19.75

4,779.5

20.24

Nigeria

Total

Source: R&D Magazine Survey 2018

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Africa at 46%, followed by industrial companies at 39%. Research staffs employed by industrial companies has remained flat for the past ten years at about 12,500. Academia has seen significant growth in the same period, increasing from 11,500 to 22,100. Overall the number of South African researchers has increased to 42,500 in the 2016-2017 period from 41,500 in the 2015-2016 period.

Life science research has been a major emphasis recently, in spite of a targeted focus on ICT technologies. Life science R&D has garnered almost twice the funding levels of ICT with results that revealed breakthroughs in gene studies. The largest share of R&D funding has now been focused on TB, HIV/AIDS and malaria.

A problem in South Africa and in other African countries as well is that many science graduates are unemployed, according to Professor Kelly Chibale at the University of Cape Town, South Africa. This African unemployment problem is increasing, which in turn fuels a brain drain to Europe, the U.K. or North America. Continuing to emphasize postgradu-

The largest share of R&D funding has now been focused on TB, HIV/AIDS and malaria. ate and postdoctoral training without coupling it to the creation of career opportunities merely serves to worsen the unemployment and make science unattractive as a career option. Chibale wants to solve this by having the governments invest more in R&D, along with the private sector, donors and other partners.

In Nigeria, the inability to transition research products into tangible, commercial products is hurting the country’s growth, according to the government. The reasons for this lack of commercialization trend is the low quality of R&D results, and innovations coming from universities and research institutes, coupled with insufficient management of IP assets by the managing organizations.

The overall commercialization process is also too complex in Africa, requiring the skills and expertise of professionals and economists who don’t exist in large enough numbers in the country. The low rate of R&D investments has been a critical bottleneck in these areas and needs to be doubled to make meaningful progress. Most research now going on in African universities is also now funded by foreign donors and focused on specific programs that are not tied to the local environment, further lessening the value and resulting research outcomes.

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Current R&D Challenges

A

ccording to R&D Magazine’s 2019 Global R&D Funding Forecast reader survey performed in the summer of 2018, most researchers have seen significant technology changes over the past year (August 2017 to August 2018). Those changes have involved how researchers work and what they actually work on daily.

The reasons behind these changes, according to the survey, have been conventional technology evolution (50% of the respondents) and the development of new processing techniques (45%). The development of other supportive technologies (35%) and increased competition (35%) have also been major factors for the changes.

The evolution of new technologies appears to be accelerating. Czech philosopher Radovan Richta was the first to coin

The evolution of new technologies appears to be accelerating.

Technology Changes Over the Past Yeat Technology development slowing

No changes

4%

6% Significant technology growth

33% Slight technology growth

56%

Source: R&D Magazine Survey 2018

the term “technological evolution” in his ground-breaking papers on “Man and Technology” published in 1963 and 1966 which analyzed the social implications of a technological revolution. This was reiterated with futurist Ray Kurz-

Is It More Difficult to Find Skilled Staff?

weil’s “Age of Spiritual Machines.”

The current rapid implementation of artificial intelligence (AI) into all aspects of society and technologies, including areas such as drug discovery, transportation systems and mechanical design is likely to have profound changes in the future in R&D, society and our overall cultures. Kurzweil created a timeline in his book which was published in 1999.

For 2019, the 1999-created timeline predicted that “computers are now largely invisible and are embedded everywhere,” which cloud systems (unknown in 1999) now emulate.

Highly-skilled Researchers Sought

No problems in finding skilled staff

35%

Yes, in some categories

40%

Yes, in most categories

25%

Source: R&D Magazine Survey 2018

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The current unemployment rate of just 3.7%, which is forecast to drop further in 2019 to 3.5%, poses problems for R&D managers who continue to look for highly-skilled researchers, and they have encountered issues in finding them. The government’s increased regulations on immigration has exacerbated this situation where in the past, R&D staffing shortages were accommodated with intern-based immigrants.

Changes in the overall highly-skilled immigration situation has also been affected by foreign countries’ competition for their own technical graduates by offering them lucrative deals to return home rather than look for technical careers in the United States.

While it’s more difficult to find skilled staff right now, most of the research managers (75%) surveyed stated that they don’t currently have an R&D staffing shortage. When an R&D staffing shortage does exist and R&D managers cannot find the appropriately skilled staff to fill the positions, they are www.rdmag.com

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utilizing a variety of vehicles to satisfy their R&D needs. These include outsourcing (35% of the survey respondents), utilizing consultants (36%), creating new R&D collaborations (42%), increasing project prioritizations (43%) and employing computer-based resources (20%).

R&D Staffing Changes Expected in 2019 7%%

Substantial increase expected

R&D Budget Planning Challenges

38%

Slight increase expected

When surveyed concerning their 2019 R&D budNo change 45% get planning process, about half of the respon8% Slight decrease expected dents stated that their budgets are more difficult to create now than they were just two or three 2% Substantial decrease expected years ago. Only 10% of the respondents said it was less difficult now, and about a third said there 0% 10% 20% 30% 40% 50% was no change.

Source: R&D Magazine Survey 2018 Making adjustments to account for potential staffing shortages is one factor that complicates the creation of a 2019 R&D budget. Potential technology applied research and development. changes that include cloud computing, automation and AI The overall economy is expected to see slightly lower growth can also complicate the creation of a new budget—factors in 2019 than was seen in 2018—2.5% growth in 2019 versus 2.9% growth in 2018. The October 2018 International Monetary Fund’s (IMF’s) economic forecast for 2020 is lower still (2% GDP growth forecast). The global economy and even China’s economy are expected to slow over the next two years.

While a new recession is not being considered, steadily declining growth from that seen over the past 10 years following the recovery from the 2009 recession is a consensus forecast. Most R&D managers are likely to be slightly conservative in their long-term R&D budgeting and in their staffing requirements to avoid having to reduce their staffs in just a year or two.

More than a third of the survey respondents expect their applied research work to be increased…

that were not as strong just three years ago.

While R&D staffing concerns and their potential solutions are mentioned above, the continuing strong economy and strong R&D growth also work to increase the overall staffing requirements for 2019. According to our survey, nearly half of the survey respondents expect to increase their R&D staffs in 2019. Most of those expecting an increase (38%) only expect a slight increase (less than five positions), while about 7% of the survey respondents expect a substantial staffing increase (25 or more positions) in their new R&D budgets.

The new R&D research positions will be used to develop new technologies and support collaborations with academia, other industrial technology organizations and the support of R&D outsourcing efforts.

The changes expected in 2019 R&D work are likely to be spread across all R&D functionalities. More than a third of the survey respondents expect their applied research work to be increased, while a quarter of the respondents will see their basic research work increased. More than half of the respondents expect their development work to be increased. Less than 10% of the respondents expect to see drops in basic or www.rdmag.com

Difficulty Creating an R&D Budget Substantially more difficult than in 2016

Slightly less difficult than in 2016

3%

8%

Substantially more difficult than in 2016

15% No difference than in 2016

39%

Slightly more difficult than in 2016

35%

Source: R&D Magazine Survey 2018

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Planning an R&D Budget

T

he major issues that R&D managers are concerned with when planning their next R&D budgets involve the costs of doing research. The top two factors shown in the Chart are the operating costs of the research lab (selected by 57% of the survey respondents) and the capital requirements (50%).

Lab operating costs include heating/air conditioning, water/sewer, waste disposal (including that for any special materials), consumables, facility overhead/maintenance, general telecom and taxes/special permitting. These cost trends generally follow standard inflationary based cost increases.

Planning an R&D budget can also include the hiring, training and retention costs of highly-skilled staffing, along with administrative approvals which involve a plethora of issues specific to the organization, industry and specific management. Regulations, safety/security and sustainability also may need to be considered as R&D cost drivers.

Separate issues that can affect the R&D budget development factors include the current facility’s technological capabilities,

33%

Changes in strategies

32%

Increasing costs

42%

Insufficient budget

35% 31% 40%

Materials shortages

9%

Instrumentation shortages

14%

Slowing market growth

10%

No significant concerns

13% 0%

10%

20%

30%

40%

Source: R&D Magazine Survey 2018

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12%

Inflation

57%

Operating costs

19% 27% 28%

Regulations

39%

Revenue growth

25% 43%

Staffing

16% 32% 37% 14%

Technology licensing

22%

Insufficient time

16%

Globalization

Technology costs

19%

Insufficient staff

30%

General economy

Technology changes

16%

Increasing technologies

12%

Energy requirements

Sustainability

14%

Increasing regulations

25%

Competition

Safety and security

24%

Increasing foreign competition

50%

Capital requirements

Patent protection

Aging infrastructure

Increasing domestic competition

42%

Admin approval

Outsourcing

2019 R&D Budget Concerns

Economic disruptions

Factors When Creating the 2019 R&D Budget

0%

10%

20%

30%

40%

50%

Source: R&D Magazine Survey 2018

such as instrumentation, regulatory status, economic environment, workload and the time needed to complete a budget. Special-use research labs may also have their own complex factors, such as radiation labs, biohazard labs, classified military support

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labs, animal testing labs and extreme environmental testing labs.

The overall industry and environment that you’re working in can also have an effect on R&D funding. Your company’s organizational strategy may affect what R&D areas you will be focused on, what your competitors are pursuing also may have an effect, your position within your industry (improving or declining) may have special considerations, and your organization’s sales and sales support situation may need to be considered.

Potential mergers and acquisitions your company may be involved in and what new technologies have been developed over the past year or are anticipated in the next year may also affect your R&D budgeting. Telecom and electronic equipment companies, for example, who are involved in the finalization and implementation of 5G systems are likely to have substantial short-term glitches in their R&D budgets over the next two years in order to compete or even stay in business.

Special Considerations

The building of a completely new research facility or the extensive renovation of an existing facility can have short- or medium-term glitches to an R&D budget during the construction transition period, and again after the construction is completed. These are almost always special considerations and being successful at creating an appropriate R&D budget for these situations can be really difficult.

Temporary research considerations always have problems in transportation, regulatory approval, construction delays,

Maintaining a modicum of your existing R&D capabilities during the construction process is always considered to be a smart decision.

The overall industry and environment that you’re working in can also have an effect on R&D funding. and fires. R&D operations can be vulnerable to materials shortages or delivery disruptions.

Additionally, R&D operations can be vulnerable to social upheavals, tariff-induced cost changes and rapid technological changes.

All of these and more considerations must be evaluated and adjusted for, in one way or another, in a new R&D budget. The lessons of hurricane Katrina in 2005 and Harvey in 2017 in the Houston area for example, are reminders of the level of damage that can be experienced and may be seen in an increasingly violent weather-related future.

Effects on R&D Funding Administrative support

25%

Competitors’ investments

25%

Global competition

17%

Inflation

10%

Mergers/acquisitions

11%

New technologies

43%

Organizational growth

31%

Organizational strategy

35%

Patents/licenses

personnel issues, product and testing quality issues, materials deliveries, safety, security and cost-containment (and especially the areas that you don’t consider). You’re almost guaranteed to be over budget for the first iteration in these situations—this is the perfect situation for contingency budgets. Maintaining a modicum of your existing R&D capabilities during the construction process is always considered to be a smart decision.

16%

Industry position

15%

Product market share

13%

Staffing

25%

Sales

26%

Technology costs

26%

Non-stop R&D During Difficult Times

We live in a period of change. Research labs can be vulnerable to extreme weather disturbances such as hurricanes, flooding www.rdmag.com

0%

10%

20%

30%

40%

Source: R&D Magazine Survey 2018

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The 2019 R&D Budget

A

s noted in the Chart, most R&D-related areas are expected to improve or increase in 2019, according to the respondents to our 2019 R&D Magazine Global R&D Funding Forecast reader survey. Nearly 90% of the respondents expect their total R&D budgets to increase, while only a slightly smaller number (83%) expect their technology-based capital spending levels to increase.

A smaller number (70%) expect the ratio of their organization’s R&D as a percent of sales to increase, while more than 80% of the organizations expect their participation in alliances and their acquisition of intellectual property (IP) to increase in 2019 from what they did in 2018. All the budgetary changes one can measure are improving substantially in 2019, according to these survey results.

R&D budgets consist of about six major components as shown on page 6 of this report—salaries, supplies, materials, outsourcing, capital spending and overhead. Researchers creating a 2019 R&D budget can obtain local cost increases and availabilities for each of these items (they do vary based on location). This R&D distribution has not changed dramatically over the past 15 years.

Salaries are always the largest portion of the budget— at 23% for 2018. R&D salaries are generally expected to

increase about 4% per year, but with researchers demanding a premium due to staffing shortages, this ratio may increase faster over the next several years to entice highly qualified personnel to the company. A special budget line item can be created for these situations. The relationship of the other components (which is averaged for our report) will vary between industries with the distributions being different between

Salaries are always the largest portion of the budget—at 23% for 2018.

industries, i.e., life science, automotive, materials and others.

As in all industrial budgets, the relationships between budget components depends upon the specific organization.

Overhead, for example, is most times a fixed percentagebased component that varies from company to company, and even division to division within the same company. Outsourcing, on the other hand, is often flexible and monies can be added or subtracted from it R&D Budgetary Changes Expected in 2019 and put into the budgets of other components.

The definition and criteria of capital spending also varies 50% Total R&D - Increase between organizations. Some Total R&D - Decrease 7% companies put any device or instrument costing more than 36% Capital spending - Increase $10,000, such as a high-end Capital spending - Decrease 7% GCMS analytical instrument, into the capital budget while other organizations increase or 23% R&D/sales - Increase decrease these cut-off points.

R&D/sales - Decrease 10% New R&D lab construction can also be accommodated 24% Participation in alliances - Increase as an addition to a corpo5% Participation in alliances - Decrease rate R&D budget, a general construction fund or a special 14% building fund. These decisions Acquisition of IP - Increase are done primarily for taxes 2% Acquisition of IP - Decrease and/or depreciation reasons.

R&D operations involving 20% Contracts with academia - Increase outside contributions from 6% Contracts with academia - Decrease collaborators are often handled as contractual arrangements 0% 10% 20% 30% 40% 50% that are separate from the conSource: R&D Magazine Survey 2018 ventional R&D budget.

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The Future of R&D

T

he U.S. and global economies are slowing from their peaks in 2018 and they are expected to Biggest R&D Threats in the Future slow a bit more in 2020. But they’re still expected to grow and a recession is not in any economist’s schedule at this time. This is a unique economic Domestic competitors 49% situation because the U.S. and the world have been on European competitors 22% a non-stop recovery and growth splurge for more than 10 years since the 2009 recession.

Non-China Asian competitors 15% More economists are now stating that there is enough economic capacity to see another five years Chinese competitors 45% of economic growth. There is also a plethora of new technologies that look to be supported over the near 0% 10% 20% 30% 40% 50% term as well.

Source: R&D Magazine Survey 2018 These include: 1) the explosion of AI-based technologies and applications; 2) the automotive transition to 100% electrical power systems with no let-up in sight; were on equal footing as U.S. technology companies, but now 3) the simultaneous automotive transition to autonomous no longer. There are still some European companies, espedriver controls; 4) the explosion of technologies for manned cially in the aerospace, automotive and materials industries, exploration and excursions to the moon and Mars; and 5) the that are close in technologies and standing to U.S. technology continued growth of robotics and automation into all aspects companies, but not as many overall as was the case. of society with the inclusion of AI systems.

This is all great news for many R&D organizations’ R&D budgets which could Most Important Technologies by 2021 see very reasonable increases for at least another five years.

Additive manufacturing 27% The most important technologies by 2021 (three years from now), according Artificial intelligence 30% to our survey, mirror these new R&D Big data 30% technologies. Information technologies (IT) and software are the top two more Bioengineering/biology 29% important technologies chosen by our Bionanotechnology 16% survey respondents. They’re also very visible components of all five of the new Cloud computing 20% R&D technologies. Big data and AI— Embedded processing 12% the next most selected technologies by 2021—are also strong contributors in Information technologies 33% these new technologies.

Genomics/proteomics 16% When queried about who were the Medical diagnostics/healthcare biggest R&D threats in the future, our 23% survey respondents indicated that Nanotechnology 26% domestic and Chinese competitors were Quantum computing 6% the largest R&D threats to their R&D enterprises. That is a startling revelaRenewable energy 18% tion, in that Chinese and domestic U.S. Robotics/automation 28% competitors are for the first time now on the same footing as U.S. R&D compaSoftware 32% nies. It should be noted that the Chinese Space technologies 11% technology companies are far ahead of non-China Asian competitors and even Sustainability 24% European competitors, again for the very 0% 5% 10% 15% 20% 25% 30% 35% first time.

Source: R&D Magazine Survey 2018 In the past, European competitors

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2019 Global R&D Funding Forecast Resources The following organizations and their websites are good resources for information to the global R&D enterprise. Information contained in this report was derived from these sources to forecast research and development trends along with R&D Magazine’s proprietary custom reader surveys.

American Association for the Advancement of Science (AAAS) www.aaas.org Chinese Ministry of Science and Technology (MoST) www.most.gov.cn/eng/ Chinese Academy of Sciences (CAS) english/cas.cn/ Defense Advanced Research Projects Agency (DARPA) www.darpa.mil EU Industrial R&D Scoreboard Iri.jrc.ec.europa.eu/scoreboard.html/ European Commission Research ec.europa.eu/info/research-andinnovation_en European Industrial Research Management Association (EIRMA) www.eirma.org European Union Community R&D Information Service (CORDIS) https://cordis.europa.en/

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Global Innovation Index (GII) www.globalinnovationindex.org

R&D Magazine www.rdmag.com

Information Technology and Innovation Foundation (ITIF) https://itif.org

Research!America www.researchamerica.org

Innovation Research Interchange (IRI) www.iriweb.org International Monetary Fund (IMF) www.imf.org Japan Research Industries and Industrial Technology Association www/jria.or.jp/english/main.html Korean Industrial Technology Association (KOITA) www.koita.or.kr Organization for Economic Cooperation and Development (OECD) www.oecd.org

Schonfeld & Associates https://saibooks.com Strategy & (Global Innovation 1000) www.strategyand.pwc.com The World Bank www.worldbank.org Times Higher Education Rankings (THE) timeshighereducation.com U.S. Department of Energy, Office of Science (DOE OS) science.energy.gov U.S. National Science Foundation (NSF) www.nsf.gov

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