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2018 GLOBAL R&D

FUNDING FORECAST
A Supplement to R&D Magazine WINTER 2018

INSIDE
• U.S. R&D Spending
Expected to Increase
by 2.9% to $553 billion
• China R&D Spending
Expected to Increase
Total R&D Spending by
6.7% to $475 billion
• Asia Continues Strong
PRESENTED BY:
R&D Share Growth to
43.6% of Global R&D

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2018
GLOBAL R&D Tktktkjt tktktk tktktkt
FUNDING FORECAST

The Global R&D Outlook


&D Magazine is proud to present the 59th annual strong driver for increasing innova-

R edition of our exclusive forecast of global research and


development and related trends—including the annual
in-depth surveys of our own audience—providing critical in-
tions. And most researchers expect
to continue increasing their R&D
budgets over the next five years.
sights into the R&D challenges, issues and opportunities facing More than two-thirds of all global
the global R&D community today and in the future. R&D investments are supported by
R&D Magazine introduced these exclusive R&D forecasts industrial organizations. Of these
with its first issue in January 1959, and has been producing industries, information and com-
them ever since. The initial forecasts focused on U.S. R&D munication technologies (ICT)
only, but transitioned to investigating global spending trends is expected to be the main driver
as well. This report has served as a tremendous resource for of innovations among all of them
researchers, economists, policymakers, and R&D leaders over the next ten years. Artificial intelligence, automation and
worldwide for decades, and it continues to offer the latest robotics and associated software involved in ICT will change
outlook on R&D funding. the overall R&D environment—and much of society—by the
Global R&D spending has continued its steady climb with mid-2020s.
more than $2 trillion being invested for the third consecutive Details on all of these insights and specific budgetary infor-
year in 2018. The shifting of R&D investments to Asia is a trend mation on more than 110 global R&D spending countries are
that started several years ago and has continued with 44% of all included in this year’s R&D funding forecast. We invite you to
R&D monies in 2018 being spent in that region—a significant investigate and use this exclusive information to aid in analyzing
trend expected to continue into the future. your own organization’s and your industry’s R&D plans.
Most researchers are positive about many of the upcoming
changes being forecast for their R&D environment. For one, a Bea Riemschneider
20% increase in basic research work is expected which will drive Science Editorial Director
more innovations. For another, more than 40% of the research- R&D Magazine
ers expect to increase their staffing levels in 2018, a similarly www.RDmag.com
www.rdmag.com

CONTENTS
R&D Overview................................................................................ 3-13 Materials Advancements Made Through Collaborations............ 20
Global R&D Continues Growth International R&D ......................................................................21-28
With Less Government Support ..................................................... 3-6
Asia Continues To Shine in Global R&D ........................................ 21
U.S. R&D Builds on Economic Growth ......................................... 7-9
China Plans to be Global R&D Leader .....................................22-23
Surviving the Federal R&D Trauma ............................................10-11
Hot Asia Will Continue Into the Future .....................................24-25
Academic Research Increases
Funding in Nation’s R&D Landscape ........................................12-13 Europe Looking to Stop the Slide.............................................. 26-27
Industrial R&D .............................................................................14-20 R&D in the Rest of the World......................................................28-29
Growth Supports Industrial R&D ..................................................... 14 The Future of R&D .....................................................................30-35
The Sky is Not the Limit...................................................................... 15 Perspectives on the Future of R&D ................................................. 30
Looking to an Electrified World ........................................................ 16 The Global Researcher in 2018 ....................................................... 31
ICT is Building the Future .................................................................. 17 Creating an R&D Budget .............................................................32-33
Growth in Life Science R&D Slowing............................................. 18 The Future of U.S. R&D is Ours to Lose ..................................34-35
Automotive R&D Focusing on New Technologies........................ 19 2018 R&D Global Funding Forecast Resources.................. 36

Editor’s Note: The 2018 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 2017. Specific data points and analyses in this report are proprietary to Advantage Business Media (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 2018.

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2018
GLOBAL R&D
FUNDING FORECAST

Global R&D Continues Growth


With Less Government Support
&D Magazine’s 59th annual Global R&D Funding Fore- editors of R&D Magazine. Economic data are combined with

R cast estimates that global research and development


(R&D) investments will increase by 4.14% in 2018 to
$2.190 trillion in purchasing power parity (PPP) values for
published relationships of each country’s science and technol-
ogy efforts to create the R&D forecasts.
For more than 50 years, the United States has dominated
the 116 countries having significant R&D investments (more R&D spending, however its share of the global R&D pie has
than $20 million). This 2018 R&D growth rate is an increase shrunk from about a third of all global monies spent on R&D
over the 3.4% seen in 2017 due to the increasingly vibrant ten years ago to just slightly more than a quarter in 2018 and
global economy expected in 2018. it is continuing to shrink. The U.S. still spends more than
The annual Global R&D Funding Forecast is created by the any other single country, but China has continued to invest
editors of R&D Magazine and published as a public service larger shares of its’ GDP than the U.S. Despite starting from
for scientists, engineers and research managers in the prepa- a relatively small investment 20 years ago, China’s continuing
ration of their R&D budgets and the evaluation of the global strong investments have caught up so it now invests about
R&D environment. 85% as much in absolute PPP monies as does the U.S. That
Our forecast is a combination of the industrial, government gap is continuing to narrow and China is expected to out-
and academic investments by the R&D spending countries of spend the U.S. in absolute dollars for R&D within ten years.
the world. The investments made by these countries are large- The Asian region, with R&D powerhouses China, Japan,
ly influenced by value and growth of their gross domestic South Korea and India, has grown to now contribute nearly
product (GDP). We base our R&D forecasts for each country 44% of the global R&D investment, up ten percentage share
on economic forecasts and science and technology (S&T) points from ten years ago. U.S., European and other regional
survey data by the International Monetary Fund (IMF), the R&D shares have fallen in lockstep with Asia’s rise. South
World Bank, the Organization for Economic Cooperation America, Africa, Middle East and Russia/CIS regions continue
and Development (OECD), and the U.S. Central Intelligence to languish in R&D investments compared to the amounts
Agency, along with multiple reader surveys performed by the spent in the U.S., Europe and Asia.

Share of Total Global R&D Spending


2016 2017 2018
North America (12 countries) 27.52% 27.60% 27.36%
United States 25.36% 25.60% 25.25%
South America (10 countries) 2.44% 2.40% 2.28%
Europe (34 countries) 21.16% 21.00% 20.52%
As noted in the Table, U.S. and European R&D
Germany 5.60% 5.50% 5.32% investments as shares of the total global R&D
spending have been declining over the past ten years,
Asia (24 countries) 42.72% 42.67% 43.62%
while Asian investments in R&D, especially that of
Japan 9.00% 8.80% 8.52% China, have been increasing such that this country’s
China 20.70% 21.20% 21.68% share is now more than 43% of the global total.
China’s continuing large annual R&D investments
South Korea 4.00% 4.10% 4.03% with increases of 7% per year or more have been
India 3.60% 3.70% 3.80% the driving force in this trend, which is expected to
continue for at least the next five years, as stated in
Africa (18 countries) 0.88% 0.90% 0.92%
China’s current five-year plan. Small R&D regions,
Middle East (13 countries) 2.43% 2.50% 2.51% including Africa, the Middle East and Russia/CIS are
not increasing their R&D at substantial rates and are
Russia/CAS (5 countries) 2.86% 2.90% 2.80%
expected to maintain their comparatively small shares
Total (116 countries) 100.0% 100.0% 100.0% of the overall global R&D.
Source: R&D Magazine Survey 2017

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The R&D Outlook R&D spending has increased as a function of their economic
The global economic forecast, according to the IMF’s Oc- growth, but generally not in a large way. Saudi Arabia is an
tober 2017 World Economic Outlook, sees most regions exception to this rule in that they decided to dramatically
strengthening in 2018 from previous growth estimates. increase their R&D investments to develop new technologies
Global economic growth is estimated to grow 3.7% in 2017 and capabilities that might take over when their natural oil
and 3.8% in 2018, 0.1% higher than the IMF’s April and July production (and subsequent revenues) declined. Even China
2017 reports. Growth outcomes in the first half of 2017 were has maintained an R&D growth momentum that was larger
generally stronger than expected, especially for the Euro area, than most other countries. The U.K.’s Brexit-induced departure
Japan, China, emerging Europe and Russia. These more than from the European Union does not appear to have caused any
offset downward revisions for the U.S., the United Kingdom noticeable change in their R&D investments, or that of the EU
and India. And with increasing GDP growth estimates come as well, but it is still early for this arrangement.
increasing R&D investments as noted earlier.
Momentum, generally ascribed to the movement of physical Changing R&D Environment
elements and systems, can also be applied to economic systems It should be noted that the technological environment for
and R&D in particular. This can be seen in the relative relation- R&D is changing in scope at a rapid pace. The leading in-
ships of the top R&D spending countries in that their standings dustrial science and technology (S&T) organizations, those
have not changed dramatically over the past ten years. Their spending the most on R&D, have changed over the past ten

Finland

Denmark
Singapore

Source: R&D Magazine, World Bank, International Monetary Fund, CIA Fact Book, OECD
Norway
South
United States Sweden Korea
Japan

Canada Austria
Australia
United Taiwan
Kingdom Germany
Belgium
France Switzerland
Russia

Ireland Netherlands
Spain
Czechia

Poland Italy
Israel
Malaysia
Argentina
Turkey
China
Iran Brazil
Mexico Egypt
Saudi Arabia South Africa
Indonesia Qatar
Bangladesh
Pakistan
India

The size of the circles in this Chart reflects the relative amount of annual R&D spending by the indicated country. Note the regional grouping of
countries by the colors of the balls. The horizontal axis reflects R&D spending as a percent share of the countries’ GDP (gross domestic product).
The vertical axis reflects the number of researchers (including scientists and engineers) per million population for the respective countries.

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FUNDING FORECAST

Forecast Gross Expenditures on R&D


2016 Actual 2017 Estimated 2018 Forecast
GDP R&D GERD GDP R&D GERD GDP R&D GERD
PPP as % GDP PPP PPP as % GDP PPP PPP as % GDP PPP
Bil, USD Bil, USD Bil, USD Bil, USD Bil, USD Bil, USD

1 United States 18,569.10 2.81% 521.79 18,996.00 2.83% 537.59 19,471.00 2.84% 552.98
2 China 21,290.00 1.94% 424.86 22,695.00 1.96% 444.82 24,102.00 1.97% 474.81
3 Japan 5,238.00 3.55% 185.95 5,300.90 3.50% 185.53 5,332.70 3.50% 186.64
4 Germany 3,980.00 2.88% 114.62 4,043.70 2.84% 114.84 4,104.40 2.84% 116.56
5 South Korea 1,934.00 4.26% 82.39 1,986.70 4.30% 85.43 2,042.30 4.32% 88.23
6 India 8,662.00 0.85% 73.63 9,155.70 0.84% 76.91 9,796.60 0.85% 83.27
7 France 2,734.00 2.24% 61.24 2,761.30 2.25% 62.13 2,805.50 2.25% 63.12
8 Russia 3,751.00 1.50% 56.26 3,803.50 1.52% 57.81 3,856.70 1.52% 58.62
9 United Kingdom 2,786.00 1.75% 48.76 2,841.70 1.73% 49.16 2,884.30 1.72% 49.61
10 Brazil 3,141.00 1.20% 37.69 3,147.30 1.18% 37.14 3,200.80 1.17% 37.45
11 Australia 1,682.00 1.80% 30.28 1,714.00 1.80% 30.85 1,748.30 1.80% 31.47
12 Canada 1,187.00 2.30% 27.30 1,223.80 2.34% 28.64 1,260.50 2.34% 29.50
13 Italy 2,235.00 1.27% 28.38 2,252.90 1.26% 28.39 2,270.90 1.27% 28.84
14 Taiwan 1,132.00 2.40% 27.17 1,151.20 2.45% 28.20 1,173.10 2.45% 28.74
15 Spain 1,687.00 1.27% 21.42 1,730.90 1.26% 21.81 1,767.20 1.26% 22.27
16 Netherlands 869.40 2.10% 18.26 887.70 2.10% 18.64 903.70 2.10% 18.98
17 Sweden 1,988.00 0.92% 18.29 2,037.70 0.90% 18.34 2,104.90 0.90% 18.94
18 Turkey 498.10 3.28% 16.34 511.50 3.31% 16.93 523.80 3.33% 17.44
19 Switzerland 496.00 2.96% 14.68 502.90 2.98% 14.99 510.90 2.98% 15.22
Source: IRI, R&D Magazine, International Monetary Fund, World Bank, CIA Fact Book, OECD

20 Singapore 492.60 2.60% 12.81 503.40 2.62% 13.19 516.50 2.62% 13.53
21 Austria 300.60 4.10% 12.32 309.30 4.05% 12.53 318.60 4.05% 12.90
22 Israel 417.00 3.00% 12.51 422.80 3.00% 12.68 428.30 3.00% 12.85
23 Belgium 510.00 2.35% 11.98 518.20 2.35% 12.18 526.00 2.35% 12.36
24 Mexico 1,455.00 0.75% 10.91 1,503.00 0.77% 11.57 1,567.60 0.78% 12.23
25 Iran 863.30 1.25% 10.79 902.10 1.27% 11.46 944.50 1.28% 12.09
26 Malaysia 2,316.00 0.50% 11.58 2,355.40 0.50% 11.78 2,402.50 0.50% 12.01
27 Poland 3,032.00 0.30% 9.10 3,186.60 0.31% 9.88 3,355.50 0.31% 10.40
28 Indonesia 1,054.00 0.89% 9.38 1,089.80 0.90% 9.81 1,124.70 0.91% 10.23
29 Qatar 329.20 2.50% 8.23 340.40 2.50% 8.51 349.90 2.52% 8.82
30 Denmark 273.90 3.02% 8.27 278.00 3.00% 8.34 282.70 3.00% 8.48
31 Finland 1,751.00 0.40% 7.00 1,758.00 0.46% 8.09 1,780.90 0.47% 8.37
32 Saudi Arabia 231.40 3.50% 8.10 234.40 3.50% 8.20 237.70 3.50% 8.32
33 Egypt 1,132.40 0.60% 6.79 1,198.00 0.60% 7.19 1,279.50 0.60% 7.68
34 Czechia 739.40 0.85% 6.28 761.90 0.85% 6.48 791.20 0.88% 6.96
35 Norway 988.20 0.60% 5.93 1,037.60 0.60% 6.23 1,091.60 0.63% 6.88
36 South Africa 350.70 1.80% 6.31 360.50 1.85% 6.67 368.40 1.85% 6.82
37 Pakistan 364.40 1.70% 6.19 368.80 1.75% 6.45 375.80 1.75% 6.58
38 Argentina 324.90 1.72% 5.59 336.30 1.75% 5.89 347.10 1.75% 6.07
39 Ireland 628.40 0.70% 4.40 686.60 0.70% 4.81 751.10 0.70% 5.26
40 Bangladesh 874.00 0.58% 5.07 893.20 0.56% 5.00 913.70 0.55% 5.02
Top 40 102,288.00 1,988.85 105,788.70 2,032.03 109,613.40 2,116.55
Rest of World 16,588.00 68.43 17,070.60 71.50 17,715.70 73.08
Total All Countries 118,876.00 2,057.28 122,859.30 2,102.53 127,329.10 2,189.63
Source: R&D Magazine, International Monetary Fund, World Bank, CIA World Fact Book, OECD

PPP = Purchasing Power Parity GERD = Gross Expenditures on Research and Development GDP = Gross Domestic Product

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years and especially over the past five years. That is not to The top five R&D spending organizations are also ICT
say that previously leading organizations have lessened their companies—Amazon, Google/Alphabet, Microsoft, Facebook
investments—they have not. Other organizations, however, and Intel. ICT R&D annual expenditures now range between
have grown their R&D and revenues faster. $10 and $24 billion and these “frightful five” collectively spent
Ten years ago, the largest industrial R&D organizations more than $60 billion on R&D in 2017—about the same as
were automotive and pharmaceutical /biotechnology compa- the U.S. Federal Government spent on non-defense R&D.
nies, dominated by the likes These companies also have stock
of Volkswagen, General Mo- evaluations that dominate the
tors, Pfizer, Roche, Johnson &
ICT looks to change the over- overall stock market with annual
Johnson and Novartis. Their growth valuations between 25%
annual R&D expenditures all technological environment and 50% in 2017. ICT, in fact,
ranged between $1 and $8 has become a global driving
billion. The life science com- within 10 to 15 years. force. With its artificial intelli-
panies are still responsible gence (AI), autonomous systems,
for more than $180 billion in robotics and virtual environ-
R&D in 2018. But R&D in the life science industry is grow- ment systems, ICT looks to change the overall technological
ing at about 4% per year, while the aggregate R&D in the environment within 10 to 15 years. It has been noted that
Information & Communication Technology (ICT) industry is about 60% of the children being born today will work in jobs
growing at more than 5% per year, with global R&D spending in 20 years that don’t even exist today.
of more than $225 billion—nearly 30% more than that of the Another continuing trend is that on a global level—not
life science industry. just in the U.S.—government support of R&D has declined
by 2.4% since 2010, according to data collected by the
Organization for Economic Cooperation and Develop-
Issues/Concerns With 2018 R&D Budget ment (OECD). Businesses during this same accounting
period (2010 to 2014) also were noted as increasing
their R&D spending by 2.5%, with most advanced
economies providing preferential tax treatment to
Aging Infrastructure 29% industrial R&D investments. This particular trend is
expected to continue into the foreseeable future.
Changes in Org Strategies 29%
Economic Disruption 22%
Increasing Costs 43%
Distribution of 2018 R&D
Increasing Domestic Competition 18%
Increasing Foreign Competition 16%
Increasing Regulations 24% Capital
Overhead spending
Fast-Changing Technologies 21% 14% 17%
Insufficient R&D Budget 35%
Outsourcing
Insufficient R&D Staff 31% 14% Materials
Insufficient R&D Project Time 27% 17%
Materials Shortages 7%
Supplies/
consumables
Shortages in Adv. Instrumentation 16% Salaries
15% 23%
Slowing Market Growth 7%
No Significant Concerns 10%

0 10 20 30 40

Source: R&D Magazine Survey 2017 Source: R&D Magazine Survey 2017

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U.S. R&D Builds on Economic Growth


he U.S. will invest about $553 billion in all aspects of over what the Federal Government supplied to industrial

T R&D (Basic Research, Applied Research and Devel-


opment functions) in 2018. This is a 2.9% increase
over the $537 billion invested by industry, government and
organizations in 2017.
In the Source-Performer matrix, the “Other Government”
R&D sources represent those monies supplied by state and
academia sources in 2017, according to the authors
of R&D Magazine’s 2018 Global R&D Funding Fore-
cast. The U.S. economy (as measured by its gross The government’s share
domestic product, or GDP) grew at nearly 3% in
2017 and at year end economists expect that trend to of R&D funding has been
expand going into 2018. R&D investments, particu-
larly those in the industrial sector, are closely linked
to a country’s GDP and when GDP expands, then
slowly declining in the U.S.
R&D investments similarly expand.
In the U.S., industry-funded R&D accounts for ap-
over the past several years.
proximately 67% of all R&D monies invested, while
government-funded R&D contributes about 25% of
the total and academia contributes about 4%. The govern- local governments for R&D work primarily to academia.
ment’s share of R&D funding has been slowly declining in The “Non-profit” funding sources and performer R&D sec-
the U.S. over the past several years (and in other advanced tors in the matrix represent non-profit R&D organizations
economies as well). By default, the industrial share of R&D such as Battelle, Southwest Research Institute (SwRI), SRI
funding is increasing, again slowly. Industry, government International, Howard Hughes Medical Institute (HHMI),
and academia-funding of R&D are
each forecast to grow by 5.8%, 2.8%
and 6.2% respectively in 2018 over the 2018 U.S. Source-Performer Matrix
amounts that were invested in R&D in
2017. The breakdown of where these Billions USD / Percent changes from 2017
funds come from and where they are
spent are shown in R&D Magazine’s Federal FFRDC Non-
exclusive R&D Source-Performer Ma- Gov’t Industry Academia (Gov’t) Profit Total
trix shown on this page.
While the R&D amounts sourced Federal $43.5 $32.0 $39.0 $16.0 $6.5 $137.0
by the different sectors are noted Government
0.7% 6.7% 1.3% 3.2% 8.3% 2.8%
above, the R&D amounts actually
performed by those sectors are shown $355.5 $6.0 $3.9 $2.3 $367.7
in this Matrix (and their changes Industry
from those amounts performed in 5.6% 15.4% 8.3% 9.5% 5.8%
2017). As shown, the Federal Govern-
ment constributes about 25% of the $20.0 $0.5 $20.5
R&D funds, but only performs about Academia
8% of the work, primarily at govern- 5.3% 66.7% 6.2%
ment labs like the Defense Advanced
Research Projects Agency (DARPA), Other $7.0 $7.0
the Naval Research Lab (NRL), the Government
30.0% 0.0%
National Institutes of Health (NIH),
etc. Industrial organizations, on the $5.7 $0.1 $15.0 $20.8
other hand, invest nearly $368 billion Non-Profit
of their resources in R&D, while per- 3.6% 0.0% 2.0% 2.5%
forming about $388 billion in actual
R&D work, $32 billion of which is $43.5 $387.5 $77.7 $20.5 $23.8 $553.0
Total
funded by the Federal Government.
0.7% 5.6% 3.3% 5.1% 4.4% 2.9%
That $32 billion is a 5.6% increase
Source: R&D Magazine Survey 2017

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GLOBAL R&D
FUNDING FORECAST

Dana Farber Cancer Institute, Research


Triangle Institute International (RTI 2018 R&D Changes Compared to 2017
International), SEMATECH (Semiconduc- R&D Survey Responses
tor Manufacturing Technology), Brigham Increase No Change Decrease
and Women’s Hospital, and many others.
Non-profit organizations are responsible R&D Expenditures 42% 48% 8%
for nearly $21 billion in 2018 R&D invest-
ments and cover a wide range of topics, R&D Capital Spending 27% 56% 12%
including life science, ICT (Information
and Communication Technologies), ma- R&D/Sales Ratio 11% 55% 14%
terials, and aerospace/defense. Non-profit
Participation in R&D Alliances 21% 50% 4%
U.S. organizations are expected to increase
their R&D investments by about 2.5% in Participation in R&D Consortia 13% 48% 4%
2018, and increase their R&D performance
by about 4.4% to nearly $24 billion. Acquisition of IP Through M&A 11% 38% 4%
The “FFRDC” performer section of the
Source-Performer Matrix represents the In-bound IP Licensing 11% 41% 5%
R&D performed by Federally Funded
R&D Centers. FFRDCs are public-private Out-bound IP Licensing 10% 43% 4%
partnerships which conduct R&D for
the government and are administered by Academic Contracts/Grants 20% 41% 5%
universities and corporations. These labs
Government Lab Contracts 15% 44% 6%
are responsible for about 3.7% of the total
R&D performed in the U.S. FFRDC’s con- Non-profit Lab Contracts 12% 42% 6%
sist of the 16 main Department of Energy
(DOE)-sponsored national laboratories, Source: R&D Magazine Survey 2017

eight Department of Defense (DOD)-


sponsored labs, and several Department of Homeland tiums of two to three organizations/universities and operate
Security (DHS) and National Science Foundation (NSF)- the FFRDCs for contractual periods of about five years. The
sponsored labs. FFRDC administrators are often consor- administrators are responsible for the total operation of the
labs with some organizations such
as Mitre, Rand and Battelle, man-
R&D Changes Expected in 2018 aging multiple FFRDCs. Safety,
especially for those labs working
with nuclear materials, such as the
60% DOE’s Los Alamos National Lab,
55% 54% has been a concern for some ad-
50% ministrators over the past several
50% 47% 47% years.
41% 43%
40% Changes in 2018
Most researchers (42%) expect
their R&D expenditures will
30%
26% 27%
be increased in 2018 over that
23% invested by their organizations in
20% 2017, according to a recent R&D
Magazine reader survey. All of the
10% 9% 8%
items shown in the attached chart
6% of R&D changes in 2018 reveal
4% 4%
increasing R&D aspects, except
0% that of the R&D to sales ratio,
Applied Basic Development Science/ Technical which more respondents indicate
Research Research Engineering Service
Consulting will decline that those respondents
Q Increase Q Decrease Q No Change
indicating it will increase. Possibly
Source: R&D Magazine Survey 2017

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the reason for this result is that the respon-


dents’ sales will increase faster than their Changes in the Type of R&D for 2018
R&D will increase, which reflects the overall
increasing economic growth forecast for 2018 Survey Respondents
and a somewhat lower level of R&D increases. Increase Decrease No change
It is encouraging to note the high level Applied research 41% 4% 47%
expected of increased capital spending,
participation in R&D alliances and increased Basic research 23% 9% 55%
academic grants/contracts—all aspects of
increased long-term R&D efforts and par- Development 50% 4% 43%
ticipation.
In the U.S., about 18% of all R&D work Science/engineering consulting 26% 8% 47%
(from a monetary standpoint) is focused
on basic research, while 22% is focused on Technical Service 27% 6% 54%
applied research and the remaining 60% is
Average 33% 6% 49%
focused on the development of new products
and processe. In the basic research arena, Source: R&D Magazine Survey 2017
academia performs the largest share (60%)
with industry performing about 20%. In applied research, indicated that their basic research work would increase in
industry has the largest share (72%), while academia per- 2018, while 9% said it would decline. 41% of the survey re-
forms about 13%. And in the development sector of R&D, spondents stated that their applied research would increase
industry performs about 91%, while the federal government
performs about 8%.
In R&D Magazine’s survey, about 23% of the respondents In R&D Magazine’s Survey,
about 23% of the respon-
R&D Staffing Changes dents indicated that their
Expected in 2018 basic research work would
increase in 2018, while 9%
Substantial Decrease Expected 1%

Substantial
said it would decline.
Slight Increase
Decrease Expected
11% 6% in 2018, while only 4% said it would decline. Development
work was even more positive with half of the respondents
stating their development work would increase and only 4%
Slight stating it would decline. About half of all respondents stated
Increase
Expected that there would be no change in their basic research, ap-
plied research or development efforts in 2018 (about typical
34% for this question in previous years’ surveys).
No Change
In the Trump Administration’s FY2018 budget request,
48% it was estimated by the AAAS (American Association for
the Advancement of Science) that basic research in the
federal budget would be decreased by about 16%, most of
that coming from a 25% overall reduction in the budget for
the National Institutes of Health (NIH). Applied research
was expected by the AAAS to see a 13.5% reduction, while
development work in R&D would actually see an increase of
about 6%, most of that being seen in an overall increase in
the DOD’s R&D budget.
Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 9


2018
GLOBAL R&D
FUNDING FORECAST

Surviving the Federal R&D Trauma


s noted in the previous section, the U.S. Federal House and Senate Omnibus Bills

A Government is expected to invest about $137


billion in R&D in 2018, a 2.8% increase over the
actual $133 billion it spent in 2017. The Trump Admin-
The U.S. House of Representatives approved an FY2018 om-
nibus spending package in September 2017 which contains 12
(total agency) funding bills approved by the House Appro-
istration’s FY2018 budget proposal outlined substantial priations Committee. However, the DOD’s overall spending
cuts in federal agency budgets which are show n in the bill is larger by $72 billion than the spending caps mandated
Table below. The budgets shown are in “budget authority” by the Budget Control Act of 2011, which would trigger
values which are larger than actual spending values due an agency sequestration if enacted. Therefore, the House’s
to the funding of projects being approved that extend into FY2018 omnibus requires negotiations between the Senate
future budget years: and the Trump Administration to resolve the House’s plans
and the Administration’s proposal, which is not likely to be
completed until early 2018.
Trump Administration’s While the proposed NIH budget was initially reduced by
22% ($7.5 billion), for example, the House omnibus bill ac-
FY2018 R&D Budget Proposal tually increases it by 3.2% to $35.2 billion, which alleviated
(R&D Budget Authority) concerns by research universities who were concerned with
the drastic cuts in their research funds in the Administra-
FY2017 FY2018 tion’s proposal.
Actual Proposed The Senate also created their own spending bills for
Federal Agency Billions USD Billions USD FY2018, but failed to complete them in time for committee
Department of Defense $76.70 $85.20 votes by December 1. Both Senate and House appropria-
tion bills increased R&D funding over what was proposed
National Institutes by the Trump Administration, although both are roughly
$32.80 $26.10
of Health
flat from what was spent in FY2017, hence our estimate for
Department of Energy $16.00 $13.40 a 2.8% net increase, minus the 2017 expected 2.0% inflation
rate—yielding a modest 0.8% net increase. The Senate’s R&D
NASA $13.60 $10.30 funding figures are slightly larger than the House’s spend-
National Science ing numbers due to extra funding for the NIH in the Senate
$6.10 $5.40 bill along with an extra $1 billion for applied low-carbon
Foundation
technology research.
USDA $2.60 $2.10 Summarizing the House and Senate authorization bills:
NOAA $0.80 $0.70

NIST $0.80 $0.70 R&D Authorization Bills


Request Senate House
Department of
$1.00 $0.90
Transportation Basic Research - 17% + 3% + 2%

Department of
$0.60 $0.60 Applied Research - 14% + 6% + 2%
Homeland Security
Department of Development + 6% + 11% + 5%
$1.00 $0.80
the Interior
Source: AAAS
Environmental
$0.50 $0.30
Protection Agency
Mixed Bag and Cuts for Agencies
Other $4.30 $3.10 The Dept. of Defense’s FY2017 R&D budget was $76.7 billion
and proposed to grow to $85.2 billion in FY2018 which will
Total $156.80 $149.60 likely be shaved to about $80 billion for an increase of about
4.3% (in authorized values) when the overall DOD spending
Defense $83.7 $92.5
bill is renegotiated to be within Budget Control Act guidelines.
Non-Defense $73.1 $57.1 It should be noted that the DOD’s $80 billion R&D budget is
larger than all but the top six countries of the world.
Source: R&D Magazine Survey 2017

10 R&DMagazine WINTER 2018 www.rdmag.com


2018
GLOBAL R&D
FUNDING FORECAST

The Dept. of Energy’s (DOE) National Nuclear Security USDA, but still see a 16% reduction in overall funding. NIST’s
Administration is expected to benefit from the proposed Scientific and Technical Research Services would likely have to
increases in defense spending for its research, development, test cut about 10% of its workforce and reduce funding in advanced
and evaluation (RDT&E) work. Large DOE facilities, such as materials funding, semiconductor measurements, cyber secu-
the National Ignition Facility (NIF), are expected to see small rity and quantum science. Forensic, manufacturing and other
increases. Advanced Scientific core programs would also be
Computing Research work within reduced or eliminated.
the DOE is expected to see a
Climate research, weather The National Oceanic and
11.6% R&D funding increase Atmospheric Administration
along with a 19.9% increase in its and air chemistry research, (NOAA), another DOC agency
exascale computing programs. would also see a 16% reduction
Brookhaven’s Center for Func- and even the National in funding from $804 million to
tional Nanomaterials and the $671 million under the Trump
Center for Integrated Nanotech- Weather Service, would Administration’s proposed bud-
nologies co-operated by Sandia get. Climate research, weather
National Laboratories and Los
Alamos National Laboratory
see many of their and air chemistry research, and
even the National Weather Ser-
would be shut down under the
Administration’s budget proposal.
programs terminated. vice, would see many of their
programs terminated.
The National Aeronautics and The Centers for Disease
Space Administration (NASA) is Control and Prevention (CDC)
expected to see stronger FY2018 budget increases compared to would also see a 17% reduction from its FY2017 $7.1 billion
most other federal agencies. A change in focus away from earth budget to $5.9 billion in FY2018. Multimillion reductions
science and more to planetary science would result in overall would be seen in HIV, STD and tuberculosis prevention
reduction of 2.9% according to the Trump Administration’s pro- (-$186 million). Immunization programs would be cut.
posal. NASA’s Astrophysics division would see a 8.9% increase Colon and skin cancer prevention programs would be elimi-
in funding to develop the Wide-Field Infrared Survey Telescope, nated and tribal health funding would be reduced.
while planetary science programs would receive a 4.5% budget
increase. Earth science programs would be reduced by 8.7%
below FY2017 levels along with reductions in several major
instrument development programs. The James Webb Space Tele-
Will Federal Changes Affect
scope would be fully funded to maintain a 2018 launch schedule. Your 2018 R&D Budget?
The Space Launch System (SLS) and Orion Multipurpose Crew
Vehicle are trimmed below FY2017 levels, but strong Congres-
sional support may override those cuts.
The National Science Foundation (NSF) may struggle with
the Administration’s proposed 11% budget reduction, which Significant
Reduction
would bring its inflation-adjusted budget down to FY2002
levels. Having fewer supporters than its sister agency, the NIH, 13%
the NSF supports about a quarter of the federal budget for ba-
sic research, which as noted earlier was supported with small
increases by both the Senate and House appropriation bills. Slight
About 90% of the NSF’s budget supports grants or cooperative No Change Reduction
agreements, of which about 75% goes to academic institutions. 56% 24%
The U.S. Dept. of Agriculture (USDA) and its Agricultural
Research Service (ARS) would see some of the largest R&D
cuts of any federal agency if the Administration’s budget pro-
posals are approved. While overall funding would be reduced
by 19%, the cuts would result in the closure of 17 research Increase
labs, representing about a fifth of all USDA/ARS locations. The
7%
overall reductions would bring USDA R&D to its lowest level
since 1989.
The Commerce Department’s National Institute of Standards
and Technology (NIST) would fare slightly better than the Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 11


2018
GLOBAL R&D
FUNDING FORECAST

Academic Research Increases


Funding in Nation’s R&D Landscape
cademic research is an important component of the Some U.S., U.K., South Korean and German institutions have

A overall R&D environment. Globally, academia per-


forms between 5% and 68% of a country’s R&D, with
an average of 23%—the average of 37 countries for which data
dropped in rankings due to lower institutional income, lower
research quality than other institutions and lower research
income per staff member. Overall, U.S. and U.K. academic
is available. In the U.S., about 15% of the R&D is performed rankings currently appear stable. The latest rankings suggests
in academia. About half of that funding comes from gov-
ernment sources such as the NIH, NSF and DOD, another Top 10 Times Higher Education
8% comes directly from industrial sources and more than a
quarter is funded by the academic institutions themselves. (THE) Universities
U.S. academia is expected to increase its funding of R&D in
2018 by 6.2% to $20.5 billion. The actual performance of R&D Rank University

in academia is expected to increase by 3.3% in 2018 to $77.7 1 University of Oxford, United Kingdom
billion (see the R&D Source-Performer Matrix for details on 2 University of Cambridge, United Kingdom
page 7 of this report). 3 California Institute of Technology, Pasadena, CA
Fully eight academic institutions in the U.S. spend more 4 Stanford University, Palo Alto, CA
than $1 billion annually on R&D, as shown on the Table. 5 Massachusetts Institute of Technology, Cambridge, MA
Johns Hopkins University actually is the first institution to 6 Harvard University, Cambridge, MA
spend more than $2 billion on R&D. Johns Hopkins is located 7 Princeton University, Princeton, NJ
in Baltimore and its proximity to the National Institutes of 8 Imperial College London, United Kingdom
Health in Rockville, Maryland, has resulted in substantial 9 University of Chicago, Chicago, IL
10 ETH Zurich, Swiss Fed. Inst. of Tech., Zurich, Switzerland
U.S. academia is expected to Source: The Times Higher Education World Rankings 2018

increase its funding of R&D in Top 10 Times Higher Education


2018 by 6.2% to $20.5 billion. (THE) Universities in Asia
Top 1,000
Rank University Ranking
1 National University of Singapore 22
research funding from that organization. As noted on this 2 Peking University, China 27
Table, most of the R&D performed by these academic institu- 3 Tsinghua University, China 30
tions is in the science arena, rather than in engineering. For 4 University of Melbourne, Australia 32
these listed institutions, the average amount funded for sci- 5 University of Hong Kong 40
ence R&D is 80% for science and 20% for engineering. Most 6 Hong Kong University of Science and Technology 44
of the science funding is focused in life science applications. 7 University of Tokyo, Japan 46
8 Nanyang Technological University, Singapore 52
Academic World Rankings 9 Chinese University of Hong Kong 58
The Times Higher Education (THE) World University Rank- 10 Kyoto University, Japan 74
ings 2018 (www.timeshighereducation.com) lists the top 10 Seoul National University, South Korea 74
1,000 universities in the world located in 77 different coun- Source: The Times Higher Education World Rankings 2018
tries. THE uses 13 performance indicators for its ranking,
which has been performed annually for the past 14 years. that U.S. and Australian standings in future years could be
The top 1,000 institutions represent no more than 5% of the threatened. Reduced levels of federal funding under the Trump
20,000 higher education institutions in the world. European Administration also put future U.S. rankings in doubt.
institutions occupy half of the top 200 places, while U.S. Chinese universities have improved their reputations for
institutions occupy about a third. About 40% of the top U.S. teaching and research over the past year. Asia’s top universi-
institutions have dropped in positions. THE noted that Asian ty, National University of Singapore, now outranks Carnegie
institutions have moved up significantly in the rankings and Mellon University. China is now the sixth most represented
look to improve their standings in the years to come. nation in the top 200.

12 R&DMagazine WINTER 2018 www.rdmag.com


2018
GLOBAL R&D
FUNDING FORECAST

Federal reductions in research funding could


have long-lasting repercussions, according to U.S. Academic R&D Distribution
analysts. The cuts would affect all universi- Share of R&D R&D Performance
ties, but not all equally. The problem is more Government Academia Other
pronounced at public universities than private Basic Research 17% 22% 12% 54% 12%
universities, and especially at public universities Applied Research 19% 64% 12% 18% 6%
in the U.S.’s Midwest. Midwestern universities Development 64% 89% 8% 2% 1%
are already weakened by deep state budget cuts. All R&D 100% 72% 8% 16% 4%
Threats to university pensions and tenure could
Source: BestColleges.com
portend an exodus of faculty and their all-im-
portant research funding. Midwestern universities have already government, but they surely are not insignificant. The Bill and
Melinda Gates Foundation, for example, has devoted more
than $40 billion on research for malaria and other infectious
Big pharma is the major diseases, much of the work being performed in academia and
focused on third world locations. Facebook founder Mark
driver behind the recent Zuckerberg and his wife Priscilla Chan announced late last year
that they would spend $3 billion to cure, prevent or manage
jump in corporate funding all diseases by the end of the century. The Chan Zuckerberg
Initiative (CZI) has created research on 38 pilot projects being
of basic research. managed by the Broad Institute of MIT and Harvard Universi-
ty. The Michael J. Fox Foundation has also collected more than
$300 million for research on Parkinson’s disease. And the non-
profit Howard Hughes Medical Institute will spend more than
been poached by better funded and higher-paying institutions, $600 million this year on a wide range of life science research
industry and international competitors. Chinese universities, endeavors as well.
in fact, have already sent recruiting teams to many U.S.
schools with lucrative offers of high-paying research Academic Spending on R&D
positions in China. Total R&D Science Engineering
millions USD
Basic Research 1 Johns Hopkins Univ. $2,106.2 $1,233.4 $859.6
For the first time since World War II, the federal 2 Univ. of Michigan, Ann Arbor $1,322.7 $1,026.6 $221.1
government no longer is the majority funding source 3 Univ. of Wisconsin, Madison $1,169.8 $916.8 $113.7
for basic research performed in the U.S. Data from the 4 Univ. of Washington $1,109.0 $961.2 $104.2
National Science Foundation (NSF) reveals that federal 5 UC-San Diego $1,073.8 $939.2 $126.1
agencies only funded 44% of the basic research funding 6 UC-San Francisco $1,032.7 $1,032.7 $0.0
in 2015. This drop in funding is the result of a flatten- 7 Duke Univ. $1,009.9 $946.2 $58.6
ing of federal spending on basic research over the past 8 UC-Los Angeles $1,003.4 $898.9 $70.8
decade and a significant rise in corporate funding of 9 Stanford Univ. $903.2 $722.4 $131.4
basic research since 2012. 10 Columbia Univ. $889.5 $788.6 $59.2
Big pharma is the major driver behind the recent jump 11 Univ. North Carolina, CH $966.8 $934.2 $5.0
in corporate funding of basic research. These invest- 12 Univ. of Pittsburgh $884.8 $860.8 $4.0
ments soared from $3 billion in 2008 to more than $8 13 Univ. of Pennsylvania $847.1 $767.4 $45.8
billion in 2014. Spending on basic research by all U.S. 14 Univ. of Minnesota, Twin Cities $826.2 $715.8 $91.0
industries doubled over the same period from $13.9 15 MIT $824.1 $405.2 $365.2
billion to $24.5 billion. The NSF data also reveals that 16 Cornell Univ. $802.4 $711.9 $87.9
there is a slow, but steady rise in basic research funding 17 Harvard Univ. $799.4 $706.0 $48.0
by universities and private foundations. Their combined 18 Pennsylvania State Univ. $797.7 $485.1 $298.8
investment of $22 billion in 2015 represents a 25% share 19 Ohio State Univ. $766.5 $570.7 $149.3
of the U.S. total, up from 21% in 2010 and 17% in 1995. 20 UC-Berkeley $730.3 $524.5 $172.4
21 UC-Davis $713.3 $621.9 $83.1
Philanthropic Funding 22 Washington Univ., St. Louis $706.4 $668.9 $20.1
Increasingly, private funders are starting to support 23 Univ. of Florida $697.0 $562.1 $87.9
big research projects. These new funding sources 24 Texas A&M Univ. $693.4 $413.9 $256.1
may not offset some of the budget cuts by the federal 25 Georgia Inst. of Technology $688.9 $201.1 $482.8
Source: BestColleges.com

www.rdmag.com WINTER 2018 R&DMagazine 13


2018
GLOBAL R&D
FUNDING FORECAST

Growth Supports Industrial R&D


rom Russia to China to South Africa and

F Sweden, most industrial R&D has become


the mainstay of a country’s research and
development efforts. Industry is now generally
Primary Industrial Organization
Innovation Goals
responsible for two thirds or more of a country’s
R&D performance. That R&D may be funded by Create more efficient products 48%
industry and may just as well be funded by the Create more user-friendly products 30%
specific government. Globally, the sourcing of Create more unique products 37%
R&D funds has been split nearly equally by gov- Create new capabilities 43%
ernment and industry, except for the top players—
Create new features 31%
U.S., China, Japan, Germany, South Korea and
France—where industry supports R&D at twice Eliminate scarce materials in products 17%
the level as government does. Fulfill unmet customer needs 28%
Over the past 30 to 40 years, total global R&D has Create an innovation strategy in the organization 22%
been funded almost exclusively by government and
Improve the performance yield of new products 28%
private industry. Except in cases of severe disruption,
Improve product time/production 22%
the trends in these sources have been relatively stable,
although over the past 15 years, the funding and Meet the needs of expanding customer base 21%
performance trends have been shifting slightly more Reduce hazardous operations 18%
in favor of private industry. Reduce manpower requirements 21%
As shown in the Chart xx, most R&D funding
Replace poorly designed products 25%
(76%) is obtained from the organization’s internal
Utilize new materials in existing products 18%
resources, according to a recent R&D Magazine
reader survey. The secondary R&D funding sourc- 0 10 20 30 40 50
es include external grants (32%) such as those Source: R&D Magazine Survey 2017
obtained in the U.S. from NIH or NSF grants.
External grants can also mean “funds from abroad,” which California and Michigan. These R&D funds are likely to have
includes R&D support from multinational corporations sta- greater fluctuations than traditional organizations.
tioned in the host country but headquartered elsewhere, such Shifts in the distribution of global industrial R&D funds
as R&D at Honda in Ohio, BMW in Georgia and Toyota in should be loosely interpreted since changes may be a reflec-
tion of the changes in national policies, priorities and
budgets. Changes in the U.S. industrial R&D sourcing,
for example, away from government funding and greater
Industrial R&D Funding Sources reliance on industrial funding currently can be attributed
to changes in the government administration and its
80 76% “temporary” 10% to 20% agency budget reductions.
The U.S. government continues to invest about $140
70
billion in R&D or 0.7% of its GDP (total R&D invest-
60 ment with industry is 2.8% of GDP). On the other hand,
changes in Argentina’s industrial R&D funding can be
50
attributed to political instability, a huge inflation rate
40 (26%) and negative economic growth—the govern-
32%
29% ment cannot afford to support its R&D efforts and only
30
invests about $5 billion in R&D or 0.6% of its declining
20 14% 16% GDP (approximately one-third of Argentina’s R&D is
11%
industry-funded and two-thirds is government funded).
10 5%
The U.S. and Argentina are, of course, extremes with
0 most other country economies falling between them.
External External Internal Licensing Philan- State Other In general, the global economy is growing at an
Grants Industrial/ Resources of IP thropic Govt.
Govt. Grants Grants increasing rate since the Great Recession of 2010. This
Contract means that both governments and industry are more
Source: R&D Magazine Survey 2017 able to support increasing R&D investments.

14 R&DMagazine WINTER 2018 www.rdmag.com


2018
Aerospace/Defense Industry GLOBAL R&D
FUNDING FORECAST

The Sky is Not the Limit


ndustrial R&D in the aerospace and defense sectors has been

I relatively stable for the past several years, both globally and
in the U.S. R&D in this sector is driven primarily by defense
spending by governments, the commercial airline industry and
Industrial R&D Spenders –
Aerospace / Defense
2016 2017
Billions USD
2018
satellite/rocket programs (excluding electronics). Industrial sup-
pliers in this sector supporting the defense, airline and satellite Boeing $4.627 $4.961 $5.347
subsectors and are shown in the Table. Also included in this
sector are companies involved in navigation, instrumentation, BAE Systems $1.693 $1.670 $1.607

and communication equipment, along with companies engaged Lockheed Martin $0.988 $1.074 $1.167
in defense and homeland security-related activities. The DOD
also funds a wide variety of contract research activities that are Raytheon $0.755 $0.867 $0.967
outside the scope of this report.
These industrial sectors have been declining in a consistent Northrop Grumman $0.705 $0.796 $0.861

and expected manner. Over the past decade there have been a Total Top 5 $8.768 $9.368 $9.949
number of mergers and acquisitions that have compressed the
overall industry and shrunken the total R&D base. Concerns Source: R&D Magazine Survey 2017

over the shrinking aerospace and defense sector has troubled being developed by China, Russia and a new Airbus/Bombar-
this industry over the past 10 years. Only with the Trump dier alliance, along with a new Boeing aircraft to replace its 737
Administration has there been a resurgence in government model. All of these are drivers for increased commercial aircraft
funding in this area. The U.S.’s FY2018 budget is expected to see R&D for the next decade.
significant increases in the DOD which will support increased
aerospace/defense R&D. Disruptive Technologies
Growing demand for commercial aircraft that are fuel ef- A recent market analysis by the Bank of America Merrill Lynch
ficient, with low operating costs and with improved long-range (BofAML) also noted that the size of the space industry is ex-
performance and amenities is driving R&D for new aircraft, pected to octuple over the next 30 years to at least $2.7 trillion.
especially for the Asian market. New commercial aircraft are The BofAML joined with Morgan Stanley to estimate the value
of the space market in 2017 at $350 billion.
The development of reusable launch vehicles
Aerospace/Defense R&D Spending by SpaceX, the growth of private ownership in
the market and expanded investment by now
Billions USD more than 80 countries have reduced launch
and vehicle costs. Space is now being touted as
30
30.5 a “hotbed of disruptive technologies,” according
30.0 29.8 to the report.
25 Development of space equipment and hard-
ware is one of the few areas left untouched by
the Trump Administration’s budget cutting axe
20 with numerous programs being continued—
admittedly, a few space programs in their early
development stages have been cut or reduced.
15 NASA large James Webb Space Telescope has
14.9 15.1 15.3 been immune to cuts and is still expected to
launch in late 2018.
10
There is no letup from global launch developers
and services. China continues its aggressive inde-
5 pendent launch schedule for satellites and lunar
plans. Russia is continuing to upgrade its launch
vehicle family. Boeing and SpaceX are continu-
0 ing their independent development of manned
2016 Global 2016 U.S. 2017 Global 2017 U.S. 2018 Global 2018 U.S. vehicles to support the ISS and NASA’s 2020 Mars
spacecraft continues its development as well.
Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 15


2018
GLOBAL R&D Energy Industry
FUNDING FORECAST

Looking to an Electrified World


ithium-ion batteries were one of the hot energy products

L of 2017 and look to continue their strong R&D invest-


ments through 2025 as global demand for their use in
electrified cars and trucks gathers steam along with rising
Industrial R&D
Spenders – Energy
2016 2017
Billions USD
2018
consumer demand for cheaper power sources. Surprisingly,
only a handful of global companies are currently involved General Electric $4.782 $4.195 $3.668
in the development of the lithium-ion cells that make up the
batteries, following a rash of overheating-based failures in Petrochina $2.530 $1.777 $1.055

computers, cell phones and vehicles that soured the market a Exxon Mobil $1.058 $0.622 $0.206
few years ago, but have since been resolved. Even Tesla’s Mega
Battery Factory in Nevada purchases the lithium-ion cells Total SA $1.050 $0.877 $0.711
from Korean suppliers such as Panasonic, LG Chem and Sam-
sung. Efforts to develop lithium-ion cells are hindered by low Royal Dutch Shell $1.014 $0.905 $0.799

margins and the large existing supplier base. Tesla explored Total Top 5 $10.434 $8.376 $6.439
this option but declined as being unprofitable.
Source: R&D Magazine Survey 2017
Global solar photovoltaic installations are being driven
by China and the U.S. China is expected to install about 22
GW of photovoltaic (PV) systems in 2017, with an expected Spain and the Netherlands exceeding 1 GW in 2018.
installed capacity of 125 GW by year’s end. The U.S. is the All of these installations are being put in place with exist-
second largest installer of PV systems with 12.5 GW being ing materials and technologies and relatively little new R&D.
installed in 2017. India is in third place, followed by Japan. The R&D that is being invested is going into increasing the
Germany and France are the only two countries in Europe efficiency of the existing systems and tweaking the overall
expected to exceed 1 GW of PV installations in 2017, with performance and operating life. However, the fact that so much
installed capacity is being put in place drives
the development of new PV materials and
Industrial Energy R&D Spending technologies. Wind power installations also
continue to see steady, albeit slow, growth in in-
Billions USD stalled systems. At the end of 2016, total global
25 installed capacity was approximately 500,000
GW with annual installations exceeding 60
GW. As a result, R&D investments for solar and
22.5 wind energy systems both globally and in the
20
20.6 21.4 U.S. are only expected to increase about 1.5%.
Oil and natural gas suppliers have been
buoyed by the return to $60/barrel pricing,
which gives these companies some breath-
15 ing room to increase their R&D invest-
ments. Shale and oil sand developers have
also been buoyed by R&D that has allowed
them to be profitable at production values
10 of less than $50/barrel, a level never envi-
sioned just 10 years ago.
Systems research being developed in aca-
8.1 8.3 7.7 demia has also resulted in the development of
5 smart greenhouses that capture solar energy
for electricity without reducing plant growth,
according to researchers at the University
of California, Santa Cruz. The new system
0 utilizes wavelength selective photovoltaic sys-
2016 Global 2016 U.S. 2017 Global 2017 U.S. 2018 Global 2018 U.S.
tems which works out to be less expensive and
more efficient than traditional PV systems.
Source: R&D Magazine Survey 2017

16 R&DMagazine WINTER 2018 www.rdmag.com


2018
Information and Communication Technologies Industry GLOBAL R&D
FUNDING FORECAST

ICT is Building the Future


nformation and Communication Technologies (ICT) is the

I largest industrial R&D sector, demonstrates the strongest


projected growth and is the future. The top five ICT R&D
companies have a combined R&D investment for 2018 of
Industrial R&D Spenders – Information and
Communication Technologies
2016 2017
Billions USD
2018
more than $82 billion—up more than 11% from 2017. That’s
more than the total R&D of every country in the world except Amazon $16.085 $19.217 $22.398
South Korea, Germany, Japan, China and the U.S. It is more
Alphabet/Google $13.948 $16.111 $18.154
than the expected R&D spending by the U.S. Dept. of De-
fense. And what’s more, it is likely understated for 2018. Intel $12.740 $13.493 $14.187
These five companies, seen in the Table, are the largest R&D
spenders on the planet and they are all associated with ICT Microsoft $12.500 $12.942 $13.384
technologies. They are all within the Fortune 50, they have
Apple $10.495 $12.365 $14.235
combined 2017 revenues of nearly $600 billion and their
CEOs are listed as some of the richest people on the planet as Total Top 5 $65.768 $74.128 $82.358
well—including Bezos, Page/Brin, Krzanich, Gates (ret.) and
Source: R&D Magazine Survey 2017
Cook—all of whom firmly believe that the federal govern-
ment should invest more in R&D. years—by 2022—digitization will be integrally involved in 90%
The technologies that these and other ICT companies are of the product development work.
working on are having and will have a huge impact on society. Globally, R&D in the overall ICT industry is expected to grow
Amazon is the global leader on cloud computing services and about 4.6% in 2018 and about 3% in the U.S. A recent report in
makes more than 40% of its profit from it. And while these ICT Nature reveals that millions of jobs will be eliminated, created
leaders categorically state that the federal government must in- and needed with the disruptions caused by ICT technologies
vest more in ICT technologies—and in artificial intelligence (AI) over the next ten years. Understanding their implications will
technologies in particular—to avoid losing American leadership, require more research.
they are not waiting. These companies are con-
tinuing their R&D investments and it is they,
not the federal government, who will decide
Information & Communication R&D Spending
how to use them.
Billions USD
While the companies shown here are cur-
rently large global and U.S. players in the ICT 250
marketplace, China and India are expected to
become cloud powerhouses in the Asia-Pacific 228.3
region with CAGR of 27% and 24%, respec- 218.3
200
tively, through 2020. Government-led cloud 207.0
initiatives to inspire innovation are the driving
forces in these countries. The technology
leaders in this region include China Telecom,
150
China Mobile, Tata Communications, Tencent,
Hitachi, Huawei and NxtGen. There is cur-
rently no market leader in either China or 125.9
India. IBM (currently # 3 in cloud computing 116.3 122.2
100
behind Amazon and Microsoft) is partnering
with India’s Reliance Communications to build
their services in the region.
According to a report from PriceWater- 50
houseCoopers, the next five years in the
aerospace/defense industry (see section page
15) will be dominated and driven by ICT
and digitization technologies. Digitization is 0
currently involved in 49% of A/D’s product 2016 Global 2016 U.S. 2017 Global 2017 U.S. 2018 Global 2018 U.S.
development work, including R&D. In five
Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 17


2018
GLOBAL R&D Life Science Industry
FUNDING FORECAST

Growth in Life Science R&D Slowing


ife science R&D involves the development of pharmaceu-

L ticals, biotech products, agricultural products, medical


instruments, and animal testing and research. Combined
R&D in these areas is expected to increase by 3.8% in 2018,
Industrial R&D Spenders –
Life Science
2016 2017
Billions USD
2018
both globally and in the U.S. by the same rate. R&D in these
Roche Holdings $11.350 $11.542 $11.769
areas is dominated by the large pharma listed in the Table who
cumulatively invest nearly $50 billion annually in R&D. The Merck & Co. $10.124 $10.155 $10.187
high cost of developing new pharmaceuticals and the declining
yields on the research has led to a relatively slow rate of increase Johnson & Johnson $9.124 $9.191 $9.223
for their R&D work—only a 1.4% increase over the past two
Novartis $9.039 $8.704 $8.407
years for these particular companies.
Pharmaceutical R&D is the lion’s share of this industry’s R&D Pfizer $8.375 $8.738 $9.084
investment accounting for more than 80% of the total. About a
third of these companies are headquartered and have research Total Top 5 $48.012 $48.330 $48.670
facilities in the U.S. An equal portion are headquartered and have Source: R&D Magazine Survey 2017
research facilities in Europe, and about a quarter of them are
headquartered/research labs in Asia. On average these compa- Senate appropriations committees overrode this proposal and
nies invest more than 15% of their revenues in R&D programs. actually increased NIH R&D funding by 3.2% to $35.2 billion
for FY2018. Of course, these appropriations have to be com-
Research Funding Threatened bined and submitted to the President for approval before they
The new Trump Administration, in their FY2018 budget pro- become law. NIH uses its budget to support grants to research-
posal, threatened to reduce National Institutes of Health (NIH) ers in numerous academic institutions for various life science
research funding by about 22% to $27 billion. The NIH has research programs.
the largest R&D budget of any non-defense agency. House and The total investment in U.S.-based medical and health R&D
grew by about 20% from 2013 to 2016,
two-thirds of which came from industrial
Life Science R&D Spending sources. Despite these massive investments,
medical and health R&D continues to
Billions USD account for less than 5% of the total $3.5
200 trillion spent on U.S. health programs, ac-
cording to a report by Research!America.
Innovations are an important source of
184.3
177.6 new products in the life science arena. The
160 170.0 sources of these innovations for the Tktktkt
tktktk tktktkt according to an R&D Maga-
zine reader survey was noted as in-house
development (59% of the survey respon-
120 dents), industrial collaborations (45%) and
academic collaborations (30%).
Unlike the ICT industry, there are rela-
tively few new technologies that support or
80
will enhance the research and development
of new life science products. Gene develop-
72.1 74.6 77.4 ment technologies created from the Hu-
man Genome Project have really failed to
40
create breakthroughs as many might have
expected. Additionally, the complexities of
the human genome and the massive varia-
tions in systems biologies have minimized
0
2016 Global 2016 U.S. 2017 Global 2017 U.S. 2018 Global 2018 U.S. the effect that AI computer systems have
on creating solutions.
Source: R&D Magazine Survey 2017

18 R&DMagazine WINTER 2018 www.rdmag.com


2018
Automotive Industry GLOBAL R&D
FUNDING FORECAST

Automotive R&D Focusing on New Technologies


lobal R&D investments by automotive and truck

G companies is expected to increase by about 1.6% in


2018 to $99.8 billion. U.S. R&D in the same areas will
increase by about 1.4% to $3.9 billion. Outside of traditional
Industrial R&D Spenders –
Automotive
2016 2017
Billions USD
2018
development work performed by these companies on new Volkswagen $12.144 $11.572 $10.915
model and new product introductions, the car manufacturers
are investing substantial resources in the development of 100% Toyota $9.666 $10.018 $10.370
electric vehicles and in autonomously driven vehicles. General Motors $8.100 $8.344 $8.620
Complicating the overall picture is the introduction of a com-
pletely new line of vehicles named Lynk from China’s Zhejiang Ford Motor Co. $7.300 $7.521 $7.754
Geely. Initial Lynk models will be conventional with electric ver-
Honda Motor Co. $6.642 $6.988 $7.333
sions that will be introduced later. The upscale brand is expected
to match foreign rivals. China’s Zotye Auto also introduced a Total Top 5 $43.852 $44.443 $44.992
new electric car brand in November in a joint venture with Ford.
Source: R&D Magazine Survey 2017
Export versions of these electric vehicles (EVs) are expected to
Industry analysts are noting that General Motors (GM) is mak-
Japan is recognized for its ing significant progress on electrification and autonomy and is
likely to catch and surpass Tesla in the production, performance
technological expertise in and quality of electric vehicles where Tesla is currently struggling
with quality issues. While GM has excelled in the EV’s R&D
the automotive industry. arena and looks to surpass Tesla in the future, Ford has fallen sig-
nificantly behind GM in the technology. For its part, Ford’s new
CEO Jim Hackett has stated that his company is looking beyond
compete on a pricing standpoint with U.S. and European vehicles. the autonomous car and focusing its R&D on mobility issues.
R&D investments by the largest car manufac-
turers are shown in the Table. All manufacturers
are shown with increasing R&D investments Automotive R&D Spending
from 2016 to 2018, except for Volkswagen (VW).
Billions USD
VW reduced its R&D temporarily following its
100
recall of diesel vehicles for falsifying emission
testing results. The company experienced large 98.2 99.8
96.7
government fines and a substantial drop in sales.
80
Japan is the Leader
Japan is recognized for its technological exper-
tise in the automotive industry. The automotive
industry is the lone area where the U.S. is not 60
recognized as the technological leader—Japan
takes that honor for this industry. In its continuing
R&D for improving the quality and performance
of its vehicles, Toyota recently announced the 40
development of a new solid-state lithium battery
system for electric vehicles. Toyota has stated that 34.8 35.4 35.9
it plans to bring solid-state electrolyte batteries to
the marketplace by 2020 with a charge time that is 20
measured in minutes. These new batteries use thin
separators between the battery cells. The new bat-
teries could hold up to twice the charge of conven-
tional lithium-ion batteries, weigh less, are more 0
durable and are not prone to catching fire in the 2016 Global 2016 U.S. 2017 Global 2017 U.S. 2018 Global 2018 U.S.
same way as conventional lithium-ion batteries.
Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 19


2018
GLOBAL R&D Chemicals & Advanced Materials Industry
FUNDING FORECAST

Materials Advancements Made Through Collaborations


he development of advanced materials and chemicals

T is often considered to be an enabling technology


for many other industries including ICT, aerospace/
defense, life science, energy and automotive. Without the
Industrial R&D Spenders – Chemicals
& Advanced Materials Billions USD
2016 2017 2018
new materials, innovations in those other industries would
not be possible. But the advanced materials industry has Bayer $4.924 $5.052 $5.193
struggled with a couple of leaders currently finalizing
their mergers—Dow Chemical and DuPont finalized their BASF $1.966 $1.773 $1.584

merger in August and Bayer and Monsanto are currently 3M $1.735 $1.688 $1.642
in negotiations for finalization in early 2018. State-owned
ChemChina’s $43 billion purchase of Switzerland’s Syn- DuPont $1.641 $1.502 $1.324
genta was finalized last May.
As a result, we forecast that the global advanced materials Dow Chemical $1.584 $1.512 $1.445

and chemicals industry will reduce its R&D by about -1.9%, Total Top 5 $11.850 $11.527 $11.188
while the U.S. portion of that industry will cut R&D
investments by -4.8%. As noted in the Table the top compa- Source: R&D Magazine Survey 2017

nies in the advanced materials industry will collectively take advantage of non-overlapping technologies and build
reduce their R&D investments by about -2.9% over the $11.5 on economies of scale. Commodity operations in both
billion they invested in 2017. companies had already been spun off in earlier actions.
The ChemChina/Syngenta deal was focused on upgrad- The still-to-be finalized Bayer/Monsanto was targeted at
ing China’s agricultural capacity following years of abuse enhancing Bayer’s crop and seed protection products with the
and over-farming left only 10% of its farmland effective. resulting combination having about a third of the market for
The Dow-DuPont marriage of equals was consummated to corn and soybean seed. The combined R&D of both compa-
nies is estimated at $6.5 billion. The current
anti-trust investigations into the merger are
Chemicals & Advanced Materials reported to be quite rigorous, but the merger
Industry R&D Spending is still expected to be approved by early 2018.

50
Billions USD Nanoscale Materials
Labs Affected
As an indicator of the severity of the prob-
46.3 lems engulfing this industry, the Trump
Administration recommended closure in the
40 41.7 \40.9 FY2018 federal budget proposal of two
federal nanoscale labs associated with the
National Institutes of Standards and Technol-
30 ogy (NIST). Japan and South Korea continue
to support their nanoscale materials labs.
The federally supported National Nano-
technology Initiative (NNI) coordinates
20 nanotechnology R&D among the 20 federal
agencies and departments that are involved.
Its operating budget has been in the range of
$1.5 billion.
10 12.5 Advanced materials research is essential
11.3 10.8 to the development of new and enhanced
lithium-ion batteries. Lockheed Martin, for
example, recently collaborated with Elcora
0 Advanced Materials to acquire refined high
2016 Global 2016 U.S. 2017 Global 2017 U.S. 2018 Global 2018 U.S. purity graphite from Sri Lanka for use in
lithium-ion battery cathodes.
Source: R&D Magazine Survey 2017

20 R&DMagazine WINTER 2018 www.rdmag.com


2018
International R&D GLOBAL R&D
FUNDING FORECAST

Asia Continues to Shine in Global R&D


lobal R&D is expected to increase by 4.1% in 2018 all the R&D invested in this region.

G to $2.19 trillion. Outside of North America, the in-


crease is expected to be 4.7% for a total investment of
$1.6 trillion—China being the largest contributor with a 6.7%
No significant growth trends or deviations in each of the
global regions have been seen over the past five years. Each year
reveals more of the trends seen in previous years.
increase to $475 billion in 2018. More than 90% of the global China and Asia continue to outpace the rest of the world in
R&D is invested by the 70 countries that we monitor for R&D their R&D investments. The U.S. continues to grow its R&D at
in North America, Asia and Europe. Only 8.5% of the total a steady pace, but below that of the Asian region and ahead of
is invested by the 46 countries that we monitor for R&D in that of the European region. European countries continue to
South America, Africa, the Middle East and Russia/CIS. The invest in R&D and make statements about how they want to
global share of these 46 rest-of-world (ROW) countries has grow at a significantly faster rate, but when the numbers are tal-
actually dropped from 8.7% in 2017 to 8.5% in 2018 as the lied they still fall behind Asia and the U.S., although their rate
other countries grew their investments at accelerated rates. of decline to Asia and the U.S. has slowed in recent years.
Several Middle East countries (Israel and Iran) and African
countries (South Africa and Nigeria) are growing their R&D North American R&D Investments
investments beyond the 4.1% global average. However, the 2017 2018
region they reside in is dwarfed by the U.S./Asian/European Global GDP R&D GDP R&D
large R&D investors and they then become just a blip on the Rank BIL USD BIL USD BIL USD BIL USD
overall R&D screen. 1 United States $18,996.0 $537.59 $19,471.0 $552.98
The global technology leaders, according to a recent reader 12 Canada 1,714.0 30.85 1,748 31.47
survey by R&D Magazine, is shown in the Table. As in previous 24 Mexico 2,355.4 11.78 2,403 12.01
Global R&D Funding Reports, the U.S. dominates most of the 78 Cuba 134.4 0.56 137 0.58
12 categories shown except for automotive technologies where
80 Puerto Rico 127.1 0.57 124 0.53
Japan is the leader with vehicle production known for high
quality and price to value ratios. In the Table, China is noted as 85 Costa Rica 85.8 0.43 91 0.46

the runner-up in five technology categories (materials, agricul- 91 Dom Republic 174.2 0.35 187 0.37
ture, computing, ICT and military/defense), while Germany is 95 Panama 96.6 0.29 101 0.30
the technology runner up in four categories (energy, sustain- 103 Guatamala 136.8 0.14 142 0.14
ability, life science and pharmaceutical/biotech). 108 El Salvador 56.9 0.09 59 0.09
109 Honduras 44.9 0.08 47 0.08
Trends Continue
Also shown here is the distribution of R&D investments by 115 Trinidad/Tobago 44.6 0.02 47 0.02

the 12 countries we monitor for R&D in the North Ameri- Total 12 countries $23,966.7 $582.75 $24,557.1 $599.03
can region. The U.S., Canada and Mexico comprise 99.5% of Source: R&D Magazine Survey 2017

Which country has technology leadership?


U.S. China France Germany Japan Russia S. Korea U.K.
Advanced Materials 53% 19% 1% 18% 15% 1% 3% 2%
Agriculture/Food 71% 11% 5% 5% 4% 1% 1% 4%
Automotive 29% 5% 1% 28% 42% 0% 8% 0%
Commercial Aerospace 73% 7% 10% 6% 2% 8% 1% 2%
Computing/IT 62% 22% 1% 3% 9% 6% 4% 0%
Energy 48% 14% 8% 21% 7% 4% 1% 5%
Sustainability 33% 4% 20% 31% 9% 1% 2% 9%
ICT 64% 17% 3% 5% 15% 6% 6% 5%
Instrumentation 47% 16% 2% 14% 28% 1% 8% 2%
Life Science/Healthcare 65% 4% 8% 14% 8% 1% 1% 12%
Military/Space/Defense 81% 14% 2% 4% 2% 12% 3% 1%
Pharmaceutical/Biotech 69% 6% 8% 16% 6% 1% 1% 7%
Q Leader Q Runner-Up Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 21


2018
GLOBAL R&D International R&D
FUNDING FORECAST

China Plans to be Global R&D Leader


hina is now referred to as a research superpower with survey respondents stated that China is the one country that is

C numerous completed big science projects, an improving


scholarly impact rating, a growing academic infrastruc-
ture, more scientists and engineers than any other single
currently gaining the most in R&D. That is significantly better
than the 43% of the survey respondents who stated that the U.S.
is gaining the most in R&D. Germany ranks third in those
country, a dynamic and aggressive space program, and a surging responses (35%), followed by India (32%) and Japan (30%).
share of the world’s research articles. China actually graduates China moved on the path to becoming a life science
more new engineers annually than currently reside in the U.S. research superpower when its’ BGI company purchased 128
While the U.S. and European R&D organizations struggle state-of-the-art gene sequencers in 2011 to garner half of the
with thinning research budgets to support their R&D infra- world’s capacity at that time for decoding DNA in one fell
structures, China has no such qualms. China’s leadership firmly swoop. With hits and misses, sequencing firms then sprang
believes that one of the shortest routes to global leadership is up throughout China and now the country is estimated to
through global leadership in technology and innovation. And have about 30% of the world’s total sequencing capacity.
they have been working that belief tirelessly for more than 20 “Sequencing capacity is rising everywhere, but it’s rising
years with annual R&D increases that are always three or more faster in China than anywhere else,” says a BGI executive. The
times those of the rest of the world, including the U.S. China’s Chinese government is integrally involved in this development.
R&D investments have now surpassed the total R&D invest- Its China National Genebank in Shenzhen houses millions of
ments of the European Union including the U.K. And Chinese gene samples from people, animals, plants and microbes—and
R&D is now expected to surpass the total R&D spending of the the Genebank is now operated by BGI.
U.S. by mid-2026 or sooner, as seen in the Chart. In the physics arena, the Chinese Academy of Sciences (CAS)
At that point and with current trends, China will rightly be looked at the existing basic research tools around the world and
referred to as “THE” research superpower. According to a decided to build many of their own, only bigger and better. One
recent reader survey by R&D Magazine, two-thirds of the of these is the 500-meter aperture spherical radio telescope in

Countries Gaining the Most in R&D


80

70

67%
60

50

40
43%

30 35%
30% 32%

20 25%

18%
16%
10
11%
9%
0
U.S. Canada U.K. Germany France China Japan India S. Korea Russia

Source: R&D Magazine Survey 2017

22 R&DMagazine WINTER 2018 www.rdmag.com


2018
International R&D GLOBAL R&D
FUNDING FORECAST

Guizhou called the FAST (Five hundred meter Aperture Spheri- enacted into five new categories of projects and funds.
cal Telescope) project which was completed last year. Similar to The MoST also announced in November the creation of six
the 300-meter radio telescope in Arecibo, Puerto Rico—which new national research centers being built in Beijing, Wuhan,
was battered but survived Hurricane Maria in August 2017—the Shenyang and Hefei. The centers will be based on current pilot
FAST project has an active reflecting surface that can help change national labs and discipline clusters. They will target frontier
the focus of the telescope to different areas of the sky. science and technology as well as China’s major economic
China also has a Pandex dark matter detector located in the concerns, including basic research.
world’s deepest underground laboratory. It has a neutrino China’s industrial firms are also modifying their R&D plans.
detector, several synchrotron radiation facilities, and a new Alibaba, China’s large e-commerce firm, recently announced
neutrino observatory under aggressive plans to invest $15
construction that is scheduled to
be completed by 2020. The CAS
China’s industrial firms are also billion in new R&D projects. The
plan will include the opening of
has 1,224 institutions operating
directly under it, 104 research
modifying their R&D plans. seven new research labs—two in
China, with others in Singapore,
institutes, five universities and Moscow, Seattle and Silicon
supporting organizations, 12 Valley. The scope of the research
management organizations, along with 25 affiliated legal being performed in these labs will be focused on foundational
entities and 22 invested holding enterprises. and disruptive technologies including the Internet of Things,
In September, China had its’ once every five years party data analysis, artificial intelligence and quantum computing.
congress with plans to continue growing its economy and The goal for the work being performed in these labs is to
research infrastructure. Earlier, China announced plans to serve two billion customers and create 100 million new jobs
reconfigure its science research funding bureaucracy. Projects by 2036. Alibaba uses Amazon as a target to shoot for.
that proliferated under the 12th Five Year Plan (2011-2015) Currently, Alibaba’s cloud services has revenues of about $250
are being streamlined into a new simpler funding arrange- million/quarter during which time Amazon’s Web Services
ment. To accomplish this the Ministry of Science and makes 16 times as much or $4 billion.
Technology (MoST) upgraded and consolidated the National China’s increasingly strong emphasis on R&D is working. It
Key Technologies R&D Program. Larger, horizontal, inter- was noted earlier this year that China already leads the U.S. by a
ministerial science and technology programs are now being large margin in government funding for food and agricultural
implemented in the 13th Five Year Plan (2016-2020). The R&D. China currently invests more than twice as much as the
clean-up and abolition of the old funding channels are being U.S. in these areas.

China/U.S./Euro R&D
900

800

700

600
Billions USD

China-U.S.
500 Crossover Date
400

300

200

100

0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

US R&D China R&D Euro R&D

Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 23


2018
GLOBAL R&D Asia
FUNDING FORECAST

Hot Asia Will Continue Into the Future


he Asian region is the world’s fastest growing R&D duced fewer science and technology (S&T) articles in most fields

T region. While the overall gross domestic product of the


region is expected to increase by 5.3% from 2017 to
2018, the R&D spending of those same countries is expected
in 2015 than they did in 2005. And Japan’s share of high-quality
papers included in the Nature Index dropped between 2012 and
2016, while China’s and the United Kingdom’s share of articles
to increase by 6.5% from 2017 to 2018. Four of the top six increased. The U.S. share of these articles, which dominates the
R&D spending countries are in Asia (China, Japan, South Ko- overall output declined from 2012 to 2013, but then steadily
rea and India). Take away China and the remaining 23 Asian increased through 2016.
countries we monitor will still have R&D investments ($480
billion) that surpass that of every country or region other Asian R&D Investments
than the U.S.—its’ R&D will even surpass that of China.
2017 2018
GDP R&D GDP R&D
JAPAN Global
Rank BIL USD BIL USD BIL USD BIL USD
The world’s third largest economy is expected to have 2018
2 China $22,695.0 $444.82 $24,102.0 $474.81
R&D spending that will increase just 0.6% in 2018. That will
put it at 8.5% of the global total, a drop from the 8.8% in 2017, 3 Japan 5,300.9 185.53 5,332.7 186.64
mainly due to the large increase posted by China. Japan’s R&D
is also about 39% of the non-China Asian total investment. 5 South Korea 1,986.7 85.43 2,042.3 88.23
Japan has suffered through a 10-year period of economic 6 India 9,155.7 76.91 9,796.6 83.27
malaise and scientific austerity. The economy improved in 2017
as it saw six consecutive quarters of growth for the first time 11 Australia 1,223.8 28.64 1,260.5 29.50
since 2006. Gross domestic product is expected to be 1.5% in 14 Taiwan 1,151.2 28.20 1,173.1 28.74
2017, but relax again to about 1% in both 2018 and 2019. The
turnaround to positive growth was started in 2016 by Prime 20 Singapore 503.4 13.19% 516.50 13.53
Minister Shinzo Abe who worked with the country’s central
26 Malaysia 902.1 11.46 944.5 12.09
bank to slash interest rates and launch a major stimulus pack-
age. All the economic news was not positive, however, as Japan’s 28 Indonesia 3,186.6 9.88 3,355.5 10.40
exports declined in 2017 for the first time in four quarters, and
37 Pakistan 1,037.6 6.23 1,091.6 6.88
increased consumer spending has not yet led to strong price
gains. And while Japan has a chronic labor shortage, wages for 40 Bangladesh 686.6 4.81 751.1 5.26

42 Thailand 1,200.0 4.20 1,239.6 4.34


The Organisation for Economic
45 Hong Kong 440.0 3.08 451.0 3.20
Co-operation and Development 48 New Zealand 182.5 2.35 187.8 2.42

(OECD) recommends that 49 Vietnam 634.2 2.03 674.2 2.16

Japan’s stimulus package 59 Philippines 860.0 1.29 919.3 1.47

64 Myanmar/Burma 319.9 0.96 336.5 1.01


should remain in place until the 87 Sri Lanka 276.5 0.44 293.9 0.47

2% inflation target is achieved. 99 Nepal 75.9 0.23 80.7 0.24

100 North Korea 40.0 0.20 40.0 0.20


Japanese workers are only growing at a moderate rate.
104 Cambodia 64.4 0.14 70.3 0.15
The Organisation for Economic Co-operation and Devel-
opment (OECD) recommends that Japan’s stimulus pack- 106 Afghanistan 66.7 0.13 69.6 0.14
age should remain in place until the 2% inflation target is
113 Macau 64.4 0.03 65.5 0.03
achieved. Japan’s government debt also poses a serious risk at
220% of GDP—the highest ever recorded by the OECD. 116 Lao P.D.R 44.6 0.02 48.7 0.02
Over the past ten years, Japanese scientific output and perfor-
Total 24 countries $52,098.7 $897.14 $54,843.5 $955.20
mance has similarly declined. Japanese researchers actually pro-
Source: R&D Magazine Survey 2017

24 R&DMagazine WINTER 2018 www.rdmag.com


2018
GLOBAL R&D
FUNDING FORECAST

SOUTH KOREA
Despite the sabre rattling between North Korea and the
U.S., the economy in South Korea continues to expand on
increasing exports and moderating inflation. South Korea’s
economy grew in the third quarter at the fastest rate (1.4%) in
seven years – a 6.1% increase in exports helped third quarter
growth. Provided conflict with North Korea is avoided, South
Korea’s economy is expected to continue to grow strongly
over the next 12 months. Korea’s R&D is forecast to grow by
3.3% in 2018 to $88.2 billion, giving it a 4% share of the global
R&D investment, down slightly from 4.1% in 2017.
Asia’s fourth largest economy (behind China, Japan and
India) has been riding an unexpectedly strong export cycle on
demand for memory chips. Exports grew 13.5% in 2017 from
2016 levels and have posted double-digit growth for three
months in a row from July to October 2017.
A recent OECD report noted that Korea tops the ranks of
direct government funding and tax support for business R&D
in the Asia-Pacific region. Korea and Japan were also listed as
the Asia-Pacific regions top investors in ICT equipment and contributed to make the services sector the largest contributor to
information services, allocating 54% and 26% of total busi- India’s GDP and the presence of multinationals’ R&D centers has
ness R&D expenditures, respectively. The same report notes accelerated beyond the service sector. India’s research output and
that Korea consistently ranks high in terms of creating IP pat- non-technological innovations are still limited. Low graduation
ents—second to the U.S. in mobile communication patents, rates and overall poor quality of education have hampered the
first with human interface patents, second to Japan in imaging development of India’s human resources for innovation.
and second to Japan in information communication devices.
SINGAPORE
INDIA Singapore is the 20th largest investor in R&D with R&D growing
India is ranked sixth in terms of global R&D investments, in- 2.6% in 2018 to $13.5 billion. Like many other Asian countries,
creasing its R&D by 8.3% in 2018 to $83.3 billion. By increas- its economy is expecting 3% growth in 2017—ahead of the fore-
ing its R&D above the global average, India also improved its cast 2% to 3%. The country is in the midst of a $14 billion plan
share of the global R&D total ($2.19 trillion in 2018) from to expand the country’s R&D efforts by 2020. The Research In-
3.7% in 2017 to 3.8% in 2018. India is the world’s seventh novation Enterprises 2020 (RIE 2020) plan seeks to support and
largest economy, but growing faster than any other country translate research into solutions that address national challenges
except for China. And by 2050, India is expected to be the for Singapore, build up innovation and technology adoption
in companies, and drive economic growth. The RIE 2020 plan
And by 2050, India is expected is focusing efforts on supporting advanced manufacturing and
engineering, health and biomedical sciences, services and the
to be the world’s second largest digital economy, and urban solutions and sustainability. These
four domains are being supported by programs in academic
economy behind China. research, manpower, and innovation and enterprise.

TAIWAN
Taiwan is the 14th largest R&D investor with $28.7 billion
world’s second largest economy behind China. India has a expected to be spent on R&D in 2018. It also has the 18th larg-
population of 1.34 billion and will overtake China as the most est weighted fractional count (WFC) of scientific papers, ahead
populous country in just six years by 2024. of most EU countries and just behind Israel, according to the
And by 2050, India is expected to be the world’s second Nature Index. And while China, Japan and Korea overpower
largest economy behind China. most of Taiwan’s R&D efforts due to sheer size, Taiwan has
India has 25 innovation centers throughout the country and more R&D collaborations with the U.S. than does Japan or
has been ranked as the top innovation destination in Asia. A Singapore. Recently, Taiwan established an artificial intelligence
pool of low-cost, highly skilled, English-speaking workers has (AI) industry-academia alliance targeted at bringing Taiwan
attracted massive flows of foreign direct investment (FDI) into onto the AI global stage. AI is seen as a key factor in Taiwan’s
the country. The outsourcing of knowledge-intensive activities national competitiveness goals.

www.rdmag.com WINTER 2018 R&DMagazine 25


2018
GLOBAL R&D Europe
FUNDING FORECAST

Europe Looking to Stop the Slide


urope is a disparate collection of countries, many of

E whom worked tirelessly to create the European Union


of 28 member states. Most EU states have substantial
R&D investments and infrastructures. The only EU mem-
Global
European R&D Investments BIL USD
GDP
2017
R&D GDP
2018
R&D
ber states we do not monitor for R&D activity are Malta Rank BIL USD BIL USD BIL USD BIL USD
and Cyprus. Those European countries that we monitor for 4 Germany $4,043.7 $114.84 $4,104.4 $116.56
R&D, but are not EU members include Turkey (bid to be EU
7 France 2,761.3 62.13 2,805.5 63.12
member), Switzerland (neutral, maintains bilateral relation-
ship), Norway (member European Economic Area), Ukraine 9 United Kingdom 2,841.7 49.16 2,884.3 49.61
(Deep and Comprehensive Free Trade Agreement), Belarus 13 Italy 2,252.9 28.39 2,270.9 28.84
(reform dialogue), Serbia (possible by 2023) and Iceland 15 Spain 1,730.9 21.81 1,767.2 22.27
(accession abandoned).
16 Netherlands 887.7 18.64 903.7 18.98
Countries in the European region are expected to invest
$449 billion in 2018, an increase of 1.83% over the $441 17 Sweden 511.5 16.93 523.8 17.44
billion they invested in 2017. This relates to a 20.5% share of 18 Turkey 2,037.7 18.34 2,104.9 18.94
the global R&D, down from 21.0% in 2017. This also relates
19 Switzerland 502.9 14.99 510.9 15.22
to an R&D as a percent of GDP of 1.84%, slightly above
the global (116 countries) ratio of 1.72%. As shown in the 21 Austria 422.8 12.68 428.3 12.85
Table, the top European countries for investing in R&D 23 Belgium 518.2 12.18 526.0 12.36
include Germany, France, the U.K., Italy and Spain. These 27 Poland 1,089.8 9.81 1,124.7 10.23
top five investors are responsible for 62% of the European
30 Denmark 278.0 8.34 282.7 8.48
region’s R&D and about 57% of the region’s cumulative GDP.
According to the 2017 EU Industrial Investment Score- 31 Finland 234.4 8.20 237.7 8.32
board, the largest contribution to R&D growth among 34 Czechia 360.5 6.67 368.4 6.82
EU-based industrial organizations was in automobiles, ICT
35 Norway 368.8 6.45 375.8 6.58
39 Ireland 336.3 5.89 347.1 6.07
Countries in the European region 41 Portugal 303.8 4.31 308.4 4.44

are expected to invest $449 43 Hungary 278.1 3.89 286.4 4.07


46 Ukraine 360.1 2.88 371.6 2.97
billion in 2018, an increase 47 Romania 460.1 2.76 475.7 2.85

of 1.83% over the $441 billion 51 Greece 295.8 1.83 303.8 1.88
53 Slovenia 67.9 1.75 69.3 1.79
they invested in 2017. 58 Slovak Republic 175.7 1.32 182.2 1.37
61 Belarus 169.6 1.27 170.6 1.28
65 Serbia 104.8 0.95 108.5 0.99

producers and health industries. Negative R&D contributions 67 Bulgaria 148.8 0.92 152.8 0.95
were made by aerospace/defense and chemicals. Germany 69 Luxembourg 62.1 0.87 64.3 0.90
and the U.K. had the highest industrial R&D growth. Com- 71 Lithiuania 88.4 0.80 91.1 0.82
panies in France and the Netherlands also increased their net
73 Croatia 97.9 0.73 100.4 0.75
R&D investments but at a slower rate. The growth in R&D for
some of these companies was increased through acquisition, 75 Estonia 39.4 0.63 40.5 0.65
such as Nokia’s acquisition of Alcatel-Lucent. Among the top 83 Iceland 17.4 0.44 18.0 0.46
50 global industrial R&D investors, 16 were based in the EU, a
93 Latvia 52.1 0.31 53.8 0.32
slight increase over similar results in 2016.
The EU created its Framework Programme for coordinating 112 Bosnia/Herzegovina 44.5 0.04 47.0 0.05
large research programs throughout its member countries. 34 countries $23,945.6 $441.15 $24,410.7 $449.23
Started in 1984 with a budget of approximately $4.5 bil-
Source: R&D Magazine Survey 2017

26 R&DMagazine WINTER 2018 www.rdmag.com


2018
GLOBAL R&D
FUNDING FORECAST

lion and consecutively larger with each cycle, the current 8th Europe, behind Germany, with about 5% of OECD GERD,
Framework Programme (Horizon 2020) is in the middle of patents and publications. Some of France’s pharmaceutical,
its seven-year funding cycle (2014-2020). Horizon 2020 is the aerospace and nuclear industries are among the world’s larg-
largest of all the framework programs with about $ 95 billion est industrial investors in R&D.
available for a wide range of science and technology research France’s R&D as a percent of GDP has recovered following
projects. Framework programs are implemented by the Euro- several years of decline. France also is labored by a broad base
pean Commission (EC), the executive arm of the EU. of SMEs (small-medium enterprises) that play a minor role in
the research system. France’s innovation entrepreneurship is
GERMANY
Germany is the economic, industrial and R&D leader of the
European region. It is the fourth largest R&D investor in the
A strong feature of France’s
world, behind the U.S., China and Japan. With a forecast
R&D investment in 2018 of $116.6 billion, Germany has a
R&D environment is its strong
global R&D share of 5.3%, down slightly from 5.5% in 2016.
The country has an R&D as a percent of GDP of 2.84%,
use of R&D tax incentives.
one of the largest in the global R&D community. About
two-thirds of Germany’s R&D investments are provided by
German industrial firms. These companies work closely with considered fragile. Its patent level is below the OECD median.
universities and research institutes, such as the large network On the plus side, France’s inflow of new doctoral graduates in
of Germany’s Fraunhofer Institutes. science and engineering disciplines is steady.
Germany is also home to the world’s largest industrial A strong feature of France’s R&D environment is its strong
automotive firm, Volkswagen, which is also the world’s fifth use of R&D tax incentives. R&D tax relief in France accounts
largest industrial R&D investor behind Amazon, Alphabet/ for about 70% of the total public support for business R&D,
Google, Intel and Microsoft. Volkswagen is expected to the sixth largest share in the OECD area. This compares to
invest approximately $10.9 billion in R&D in 2018, which has an average share of 39% across OECD-surveyed countries.
declined over the past several years, following the company’s In France, the cost of R&D tax relief rose from 0.09% to
exposure for falsifying, on a global basis, its diesel emission’s 0.26% of GDP from 2006 to 2013. Compared to the OECD
median incentive, the French program has more categories of
expenditures that are eligible for tax relief including expenses
Germany is the economic, related to self-developed patents and depreciation.

industrial and R&D leader of UNITED KINGDOM


The United Kingdom is the ninth largest investor in R&D
the European region. with expected 2018 investments of $49.6 billion, an increase
of 0.9% over the $49.2 billion it spent in 2017. The U.K.’s
R&D is nearly 11% of the total R&D invested in the Euro-
testing results. Germany is also home to Daimler, the 21st pean region and about 2.3% of the global R&D total. The
largest industrial R&D investor in the world with expected country currently invests about 1.7% of its GDP on R&D.
2018 R&D of $5.7 billion. The government recently announced that this ratio will
Germany’s largest industry is automotive, which has led to steadily increase over the next five years due to increased
the siting of R&D centers in the country by other manufac- investments by the government. An extra $3.1 billion of
turers as well. Honda, for example, recently announced its government R&D investments will be added in 2021, raising
investment in advanced bi-directional charging technologies total government support to $17 billion. The government
at its European R&D center in Offenbach, Germany. The new will also work with industries to increase their investments,
technology incorporates renewable energy (photovoltaic) which could see total R&D spending increase by as much as
generation and is a test bed for hardware that be available to $110 billion over the next 10 years.
private households in the future. The U.K. government is focusing on four “grand challenge”
R&D areas: artificial intelligence and the data economy; clean
FRANCE growth; health aging; and the future of mobility. The target for
France is the second largest R&D investor in Europe and the these investments is to increase R&D as a share to GDP to 2.4%
seventh largest R&D investor in the world. With a forecast from its current 1.7% level. The Brexit vote does not appear to
2018 R&D investment of $63.1 billion, France is responsible have affected the UK’s overall R&D investments for 2018. Brexit,
for 14% of Europe’s total R&D and 2.9% of the global R&D however, does not go into effect until 2019 and some in the UK
total. The French innovation system is the second largest in are asking for another two-year extension beyond that.

www.rdmag.com WINTER 2018 R&DMagazine 27


2018
GLOBAL R&D Rest of World
FUNDING FORECAST

African R&D Investments


Rest of the World R&D GDP
2017
R&D GDP
2018
R&D
Global
Rank BIL USD BIL USD BIL USD BIL USD
&D spending in the 46 countries comprising the “rest

R of the world” for 2018 accounts for only 8.5% of the


global R&D total—down from 8.6% in 2017. It also
only accounts for about 18% of the global total GDP while
36
44
56
57
South Africa
Nigeria
Tunisia
Morocco
$761.9
1,124.6
133.9
294.2
$6.48
3.37
1.34
1.32
$791.2
1,171.6
138.1
305.7
$6.96
3.51
1.38
1.38
accounting for 40% of the countries. Each of these four
60 Algeria 620.6 1.24 624.3 1.25
ROW regions has its own particular situation for not com-
68 Kenya 164.3 0.90 177.7 0.98
paring favorably to the advanced economies and their large
70 Tanzania 163.5 0.85 178.8 0.93
R&D investments. Africa is comprised of mostly undevel-
72 Ethiopia 195.0 0.78 214.3 0.86
oped countries, which suffer from continuing social unrest.
82 Cote d'Ivoire 95.9 0.48 105.1 0.53
South America is comprised of countries with dramatic and
84 Angola 193.9 0.43 201.3 0.44
disruptive political upheavals. The Middle East has a singular
86 Sudan 182.6 0.42 189.2 0.44
focus—oil—and relatively little technological or academic in-
88 Ghana 131.5 0.39 146.8 0.44
frastructures. And the Russia/CIS is dominated by Russia and
92 Libya 56.5 0.17 58.1 0.17
has little to no technological or academic infrastructure.
94 Uganda 91.2 0.32 98.6 0.35
101 Cameroon 81.5 0.16 86.9 0.17
AFRICA 102 Botswana 39.1 0.16 41.6 0.17
Other than in South Africa, R&D programs in African
111 Congo, Dem. Rep 68.3 0.07 72.3 0.07
countries often focus primarily on products and processes for
114 Zambia 68.6 0.03 73.0 0.04
improving the state of the local community. It is often difficult
18 countries $4,467.1 $18.91 $4,674.6 $20.07
to support R&D in a country beset by famine, drought, scarce
potable water supplies, catastrophic diseases (HIV epidemics), Source: R&D Magazine Survey 2017

political corruption and rampant violence. Many programs mainder coming from foreign and other sources. Government’s
introduced focus on areas such as research for cleaner cook- large share of R&D funding and their short-term funding goals
ing stoves, disinfecting water supplies and providing electrical appear to imply that they mean business.
sources for communications and entertainment. In Uganda,
for example, the meager R&D funding provided there supports SOUTH AMERICA
development of banana juices and banana packaging. South America’s expected $49.9 billion in R&D investments
South Africa is expected to increase its 2018 R&D spending by in 2018 represents a 0.7% increase over the R&D the region
7.4% to nearly $7 billion. This is the 36th largest R&D amount invested in 2017 and about 2.3% of the global R&D total—
and represents about 0.3% of the global R&D total. South Africa’s down from a 2.4% share in 2017. Total South American R&D
R&D as a share of its GDP is about 0.9%. Business in South Af- actually declined in 2017 by about 1.2% from the amount in-
rica is recovering from the global recession and the government vested in 2015. Brazil is the largest R&D investor in the South
has expressed that it wants to increase the share it invests in R&D American continent, overpowering the other 9 countries we
to about 1.5% of GDP by 2020. The recent increases of 7.4% in monitor for R&D with a 75% share of the total R&D invested.
2018 and 8.1% in 2015 reveal that they are serious about their Brazil is also the 10th largest global R&D investor with a 1.7%
goal. Their R&D focus over the next several years is on financial share of the total global R&D investment.
and business services which includes software. Over the past several decade, a growing number of mul-
South Africa’s past emphasis on mining quarrying has de- tinational companies established R&D facilities throughout
clined by 20% and they do not expect to see any R&D increases the world, but basically ignored South America. Recently, this
in that area. The government provides about 44% of the funds trend has reversed. Chile, for example, established Inter-
for R&D with industrial sources providing 41% and the re- national Centers of Excellence to attract foreign research
organizations with research and monetary incentives. The
organizations joining this program have included the Univ.
R&D in the Rest of the World of California, Davis, Emerson Electric, Pfizer, Germany’s
Lead Regional Fraunhofer Institute, Australia’s Univ. of Queensland and
2017 2018 Change Country Share
BIL USD BIL USD Australia’s CSIRO research organization and others.
Africa $18.90 $20.10 6.30%
South
35% While Chile is a success story, Venezuela is the opposite.
Africa
Venezuela has serious financial problems and has defaulted
South America $49.60 $49.90 0.60% Brazil 75%
on a number of foreign-owned debts. This debt crisis is a car-
Middle East $52.60 $54.90 4.40% Israel 24%
ryover from the Latin American Debt Crisis of the 1980s with
Russia/CIS $60.40 $61.40 1.70% Russia 96%
the stakes for Venezuela raised. Russia has been propping up
Total $181.5 $186.00 2.50%
Venezuela’s debts, but the results have been seen in short-
Source: R&D Magazine Survey 2017

28 R&DMagazine WINTER 2018 www.rdmag.com


2018
GLOBAL R&D
FUNDING FORECAST

South American R&D Investments


Israel and South Korea often work together. Their governments
2017 2018
established the Korea-Israel Industrial R&D Foundation in
GDP R&D GDP R&D
Global 2001. And the first R&D centers outside of Korea established
Rank BIL USD BIL USD BIL USD BIL USD
by Samsung were set up in Israel working on camera technol-
10 Brazil $3,147.3 $37.14 $3,200.8 $37.45
ogy and semiconductor devices.
38 Argentina 893.2 5.00 913.7 5.02
While Israel outspends Iran in R&D, Iran has made substantial
50 Chile 446.3 2.01 456.6 2.05
gains in aerospace, nuclear science, medical development and
52 Venezuela 395.4 1.58 379.2 1.44
stem cell and cloning research. Their work in aerospace and
54 Columbia 704.6 1.55 725.7 1.60
nuclear science have been controversial in that this research
66 Peru 420.4 0.92 436.0 0.96
enabled them to create nuclear weaponry and nuclear missile
76 Ecuador 180.7 0.63 180.2 0.63
delivery systems to the consternation of the United Nations.
89 Uruguay 76.1 0.38 78.1 0.39
97 Bolivia 81.8 0.27 84.8 0.28
RUSSIA/CIS (Commonwealth
110 Paraguay 66.5 0.07 69.0 0.07
of Independent States)
10 countries $6,412.3 $49.55 $6,524.1 $49.89
Russia is the 8th largest R&D investor with $58.6 billion in
Source: R&D Magazine Survey 2017
expected R&D spending in 2018, a 1.4% increase over the $57.8
ages of food and medicine and the world’s highest inflation billion it spent in 2017. Russia’s R&D spending is a 2.7% share of
rate—653% this year so far. the global total R&D spending. Russia has a strong international
reputation in aerospace, nuclear science and engineering, and
MIDDLE EAST advanced software. The bulk of Russian R&D is still performed
Middle Eastern countries are expected to see a significant up- in state-owned research institutes, which are mostly separate
tick in their cumulative R&D investments, increasing by 4.3% from industrial firms. The share of public research funded by
in 2018 to $54.9 billion. This investment is about 2.5% of the industry is slightly above the OECD median (60%), but the rela-
total global R&D—the same as it was in 2017. Middle Eastern tive number of patents filed by universities and public labs is on
leaders in R&D investments include Israel and Iran, ranked a par with the bottom OECD countries (less than 90 patents).
globally # 2 and #25, respectively, with expected R&D invest- Russia’s international collaboration is mixed: 31% of scientific
ments in 2018 of $12.9 and $12.2 billion. articles are produced with international co-authorship. In spite
Iran and Israel are obviously two different countries with of recent policy initiatives, restrictive regulations, exceptions to
different cultures, religions and economics. Iran’s GDP is five the rule of law, and a lack of competition are still major disin-
times that of Israel, yet Israel invests about $700 million more centives to entrepreneurship in Russia. PISA scores in science
in R&D than Iran. Iran also has nearly ten times the population for 15-year-olds are low and the aging of researchers and engi-
as Israel and Iran is about 75 times larger in size than Israel. neers raises concerns for future R&D capabilities for Russia.
Israel actually spends more on R&D as a share of its GDP Russia has a 96% share of the R&D produced in the Russia/
than any other country, narrowly beating out South Korea. CIS region. While its overall dominance in economic output
(GDP) has fallen behind the top countries (U.S., China, India,
Japan, Germany and South Korea), its natural resources, self-
Middle Eastern R&D Investments sustainability, military and still strong R&D infrastructure,
2017 2018 aerospace/space capabilities and nuclear expertise are areas
GDP R&D GDP R&D
that cannot be ignored. Russia’s new state armament plan,
Global which runs from 2018 to 2027, is refocusing defense spending
Rank BIL USD BIL USD BIL USD BIL USD
22 Israel $309.3 $12.53 318.6 $12.90 and defense R&D on its ground forces to protect the country’s
25 Iran 1,503.0 11.57 1,567.6 12.23 overall vast size.
29 Qatar 340.4 8.51 349.9 8.82
32
33
Saudi Arabia
Egypt
1,758.0
1,198.0
8.09
7.19
1,780.9
1,279.5
8.37
7.68
Russia/CIS R&D Investments
55 UAE 678.9 1.36 708.8 1.42 2017 2018
62 Iraq 627.1 1.25 643.4 1.29 GDP R&D GDP R&D
Global
74 Oman 188.3 0.66 193.8 0.68 Rank BIL USD BIL USD BIL USD BIL USD
77 Kuwait 303.1 0.61 313.7 0.63 8 Russia $3,803.5 $57.81 $3,856.7 $58.62
90 Jordan 87.6 0.35 89.8 0.36 63 Kazakhstan 462.6 1.30 478.3 1.34
96 Lebanon 86.9 0.26 89.1 0.27 79 Uzbekistan 218.0 0.59 231.1 0.62
105 Bahrain 68.2 0.14 70.2 0.14 81 Azerbaijan 163.8 0.49 167.1 0.50
107 Yemen 70.5 0.07 72.5 0.07 98 Turkmenistan 101.7 0.25 108.1 0.27
13 countries $7,219.3 $52.59 $7,477.8 $54.86 5 countries $4,749.6 $60.44 $4,841.3 $61.35
Source: R&D Magazine Survey 2017 Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 29


2018
GLOBAL R&D The Future of R&D
FUNDING FORECAST

Perspectives on the Future of R&D


he 59th edition of R&D Magazine’s Global R&D Fund-

T ing Forecast was created as a service by the editors of R&D


Magazine to assist researchers and research managers in
evaluating their R&D spending plans for the upcoming 2018
Has Your R&D Performance
Changed Since 2015?
calendar year. The previous sections of this report document the 50
current and expected R&D funding by the global R&D commu- 46%
nity. We’ve attempted to cover all aspects of R&D both in the U.S.
and in foreign countries alike. The data collected and presented 40
in this report is based on a number of reliable sources from
established and respected R&D organizations. Data from surveys
30 29%
of the readers of R&D Magazine have also been collected and is
presented in this closing section of this report.
These surveys query our readers on their current R&D 20
16%
perspectives and what they expect to see and experience in
the relatively short-term future in five years—or by 2022. The
10 7%
3%
Many respondents indicated that 0
Strong Slight No Change Slight Strong
R&D was now more important. Improvement Improvement Decline Decline

Source: R&D Magazine Survey 2017

R&D Trends
results of these surveys, which have now been performed The Charts shown here reflect on the opinions and experiences
annually fo than 10 years, have been proven to be statisti- of R&D Magazine’s readers, consisting of scientists, engineers
cally and reliably relevant with more than 1,000 responses and research managers, on how their R&D environment has
received over the past several months of 2017. The forecast changed over the past three years since 2015. As shown in the
data presented in the previous sections on the expected R&D chart on R&D Performance, only 10% of the readers indicated
spending has similarly been tracked and compared over the that their organization’s R&D performance had declined over
past several years with actual data and found to compare with the past three years. More than 60% of the readers stated that
the actual results to within less than 1%. their organization’s performance had shown improvement over
those three years.
In the Chart reflecting how R&D, in gen-
How Has R&D Changed Since 2015? eral, had changed over the past three years,
six times as many respondents indicated
that R&D was now more important. Twice
Less Successful than in 2015 3% as many respondents stated that they had
less administrative support for their R&D
More Successful than in 2015 8% now than in 2015. And nearly three times as
many respondents indicated that they were
Less Admin Support than in 2015 7% now more successful in their R&D than
they were three years ago. All of these—
More Admin Support than in 2015 3% highlighted in both Charts—are positive
reflections revealing a substantially improv-
Less Important than in 2015 6% ing R&D environment.
The fact that the global economies have
More Important than in 2015 37% been improving over the past three years in
the recovery from the deep recession of 2008-
No Change in Status 35% 2010, also implies that the overall R&D envi-
ronment is improving, maybe too slowly for
0 10 20 30 40 some, but it is improving, not counting the
declining federal funding support of R&D.
Source: R&D Magazine Survey 2017

30 R&DMagazine WINTER 2018 www.rdmag.com


2018
GLOBAL R&D
FUNDING FORECAST

The Global Researcher in 2018


s noted in the section of this report on

A the status of international R&D (pages


21 to 29), the large R&D players in
North America, Europe and Asia all have posi-
Flexibility of 2018 Industrial R&D Budgets
R&D budget is
35%%
tive growth factors for now—and for at least the fixed for the year
short-term future or three to five years. The global R&D budget can increase
39%
modestly (0% - 10%)
economy is expected to see strong growth in 2018,
R&D budget can change
with possibly a slight scale back in 2019 but still substantially >10% monthly 12%
growth similar to that of 2017. R&D budget can change
As long as these economic forecasts hold true, it substantially >10% twice yearly 12%
appears that R&D organizations should fare well Unused R&D is returned
12%
to the organization
in 2018 and possibly even into 2019. R&D funding
Unused R&D is carried
sources should be able to support increased R&D over to next fiscal year 6%
investments as long as their individual product
revenue streams continue to improve. Even with a 0 10 20 30 40
slight scale back in 2019, the funding organizations Source: R&D Magazine Survey 2017
appear to be flexible enough to continue their cur-
rent levels of R&D investments. tive complexities. It is easy to say “yes,” while not jeopardizing
any overriding budgetary constraints.
In the Chart revealing the items that can affect an R&D
Most technologies across the budget, it’s obvious that a limited R&D budget can be con-
straining, thereby justifying the flexibility offered to R&D
wide range of industries are managers in the previous Chart. The fact that nearly half of the
survey respondents chose this item surely reveals its overriding
likely to continue to see con- importance. Limited organizational revenue growth follows a
similar track by revealing the threat potential in future product
tinued improvement over the development efforts from current weak economic situations.
Limited revenue growth and limited R&D budgets are synony-
next several years. mous with each other. Economics always overrides all other
aspects of running a productive R&D operation.

Most technologies across the wide range of


industries are likely to continue to see contin- Items Affecting 2017 R&D
ued improvement over the next several years.
The ICT industry, with its artificial intelligence,
50 47%
cloud computing and autonomous systems,
is likely to drive technology development in
aerospace/defense, automotive, energy and even 40
advanced materials. The life science industry 32%
will utilize advanced computer systems to work 28%
30 27%
its way through the complexities of the human
genome. 22%
20 17% 16%
Budgetary Flexibility
and Constraints 10
In the Chart revealing survey results on the flex- 4%
ibility of R&D budgets, it is noted that the largest
chosen selection is that R&D budgets can be 0
Changing Limited Limited Limited Outdated Priorities Technologi- Other
modestly increased from 0% to 10%. This level Regs. Skilled Org. R&D Infrastruc- cal Com-
Staff Revenue Budget ture plexities
of flexibility can be accommodated in a period of Growth
economic growth without any undue administra-
Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 31


2018
GLOBAL R&D
FUNDING FORECAST

Creating an R&D Budget


his report provides information about the overall R&D Capital requirements (another economic factor), adminis-

T environment, economic drivers, the value of product


technologies, a short-term economic and technological
outlook and the global R&D environment and its inter-relation-
tration approval and staffing considerations (with their own
quasi-economic issues) were the next most selected factors
in the reader survey. Some items considered important
ships. So with that knowledge, how do you go about creating an for the operation of an R&D facility, such as sustainability,
R&D budget, what’s important for it and how reliable is it likely energy usage (itself a sustainability factor), technology li-
to be? The Chart provides reader survey results on the ranked
generic factors for establishing an R&D budget for 2018.
Time-to-market demands
Economic Factors
As shown and discussed in this report, economic factors are
can also affect the
the most chosen items for R&D operations. As such, R&D
operating costs were selected by more than half of the survey
demands made on an
respondents. The biggest concerns that researchers have with
their existing budgets is that the costs of operating the R&D
R&D budgeting process.
facility are continually increasing and they often don’t have the
budget to meet those rising costs. They also are concerned that
they have insufficient R&D funds for completing their goals. censing and outsourcing, were not considered comparatively
With inflexible budgets to satisfy cost overruns, their research important by the survey respondents for creating an R&D
projects cannot be completed. Both of these issues with current budget. Each of these “minor” factors were chosen by less
operations can be moderated by ensuring that changing operat- than 10% of the survey respondents.
ing costs are satisfied within the initial operating budget. Competition, the general economy, patent protection, regu-
lations, revenue growth, safety/security, technolo-
gy advances and technology costs were considered
Factors for Establishing a 2018 R&D Budget to be of intermediate importance by the survey
respondent and only have relative importance to
the individual research organization and their
Administration Approval 45% specific concerns.
Capital Requirements 45%
Non-economic Features
Competition 26% Important, non-economic features considered
Energy Considerations 8% important for operating an R&D facility were also
General Economy 29% chosen and ranked in our reader survey. Unsurpris-
Globalization 15%
ingly, attracting, developing and retaining R&D tal-
ent or staff was considered the most important fea-
Inflation 16%
ture by the survey respondents, who are researchers
Operating Costs 55% and research managers. This high ranking matches
Outsourcing 15% the results of previous similar reader surveys on
Patent Protection 26% maintaining a research lab or facility.
Regulations 35%
Some of the other features that may be im-
portant in considering when creating a new
Revenue Growth 35%
R&D budget include recent changes in the R&D
Safety/Security 26% environment. About 20% more research organiza-
Staffing Considerations 41% tions are now becoming involved in collaborations
Sustainability Requirements 13% and alliances with domestic and foreign research
Technology Advances 29%
organizations than they were involved with in the
past, according to R&D Magazine surveys. The
Technology Costs 36%
fact that your organization is involved in collabo-
Technology Licensing 14% rations or alliances may affect the amount of R&D
0 10 20 30 40 50 60 budgeting you require. A strong collaboration may
actually decrease your budget requirements since
Source: R&D Magazine Survey 2017

32 R&DMagazine WINTER 2018 www.rdmag.com


2018
GLOBAL R&D
FUNDING FORECAST

you and your collaborator are sharing technologi-


cal developments. Important Features of R&D Operations
Impacts on the Process
Time-to-market demands can also affect the Attracting, Developing R&D Talent 58%
demands made on an R&D budgeting process. If
Balancing Long- and Short-Term R&D 48%
the corporate administration demands that new
products get to the marketplace faster than in the Building an Innovation Culture 56%
past that surely will increase the R&D budget due to
overtime, outsourcing, faster equipment and other Complying With Regulatory Changes 53%
factors needed to accelerate the product develop-
ment timeline. Similarly, if that time-to-market is Gaining Management Support for R&D 35%
relaxed from previous years, then some product Indentifying Disruptive Technologies 38%
development costs as well could possibly be relaxed.
If a new competitor appears in your market that Improving Efficiency 56%
you did not have in the past, then costs again may
need to be reconsidered to accelerate product devel- Improving Knowledge Management 48%
opment schedules, include new performance char- Improving Sustainability 45%
acteristics to your products or in some other way
improve the competitiveness of your products—all Integrating Technology and Strategies 35%
of which could affect the development costs.
The addition of new patents by your organization, Developing Leadership 38%
the expiration of existing patents or the granting of
Managing Global Innovation 28%
important new patents by your competition could all
change your R&D budgeting process and costs. Tech- Measuring R&D Values 38%
nical staffing issues can also affect your R&D bud-
geting process and costs. Losing a valued researcher 0 10 20 30 40 50 60
to the competition or death or illness may require the
Source: R&D Magazine Survey 2017
recruiting, hiring and training of new researchers.
Changing a process or technology in your R&D op-
Is Creating a 2018 R&D Budget
The biggest concerns that More Difficult Now?
researchers have with their
Less
existing budgets is that difficult
than
More
the costs of operating Slightly
less difficult
in
2015 difficult
now than
than in 2015
5%
the R&D facility are 12%
in 2015
20%
continually increasing.
No difference
erations can have the same effects on the staff requirements. Each Slightly
staffing situation may be unique to your specific operations. 29% more
When R&D Magazine’s readers were queried via survey difficult than
in 2015
on the comparing the creation of a 2018 R&D budget and
those prepared three years ago in 2015, more than half of 34%
the survey respondents indicated that creating a budget now
is more difficult. Only 17% of the respondents stated that it
was easier now. About a third of the respondents stated that
there was no change.
Source: R&D Magazine Survey 2017

www.rdmag.com WINTER 2018 R&DMagazine 33


2018
GLOBAL R&D
FUNDING FORECAST

The Future of U.S. R&D is Ours to Lose


ost researchers and research managers expect to

M increase their R&D budgets over the next five years-


-by 2022 according to the respondents of an R&D
Magazine reader survey. Only 15% of those respondents
Outlook for R&D Budgets
Over Next Five Years
expect to see smaller R&D budgets over that time period. You
40
only need to look at the headlines, the stock market or our 36%
35%
Industrial section (page 17) to see which technologies will be
the most important over the next three years (2021). Accord-
ing to our reader survey, information technologies (IT) will 30
have the most importance by 2021, which is the same result

20
Significant new innovations
13%
in advanced materials and 10
11%

energy will also be made 4%

over the next five years… 0


Significant
Increase
Slight
Increase
No Change Slight
Decrease
Significant
Decrease

Source: R&D Magazine Survey 2017

discussed in the Information and Communication Technolo- share of survey respondents chose IT as the most important
gies (ICT) section of this report. technology by 2021 with software being chosen second most
As noted in the Chart on the opposite page, the largest often. Quantum computing and space technologies were
chosen as the least important by 2021. Quantum
computing is important in the future but likely
Industries with Greatest Innovations by 2022 beyond 2021. Space technologies are also impor-
tant in the future, but also beyond 2021 and only
by a comparatively small group of researchers.
Advanced Materials 42% The industries expected to have the great-
est number of innovations over the next five
Agriculture/Food 19% years (2022) are in life science and healthcare
Automotive 25% applications, according to the respondents of
R&D Magazine’s reader survey. These innova-
Commercial Aerospace 21% tions will be driven by continuing advances in
traditional and gene therapy-based discoveries.
Computing IT 36% The developments in ICT technologies, cloud
computing, artificial intelligence, biotechnol-
Energy 44%
ogy, nanotechnology, robotics and automa-
Sustainability 35% tion and genomics/proteomics will all come to
bear in this area. Significant new innovations
Information Technologies 34% in advanced materials and energy will also be
made over the next five years, according to our
Instrumentation 21%
readers. These innovations are likely to overlap
Life Science/Healthcare 49% into other technologies as well. New materials,
for example, are being developed to enhanced
Military/Space/Defense 32% lithium-ion batteries for applications in auto-
motive and military/space/defense applications.
Pharmaceutical/Biotech 32% IT and computing IT will also find applications
0 10 20 30 40 50 60
across almost all other technologies.

Source: R&D Magazine Survey 2017


34 R&DMagazine WINTER 2018 www.rdmag.com
2018
GLOBAL R&D
FUNDING FORECAST

Nearly two-thirds of all these


new technologies developed over Most Important Technologies by 2021
the next five years will be devel-
oped with in-house R&D capabili-
ties. Academic collaborations and Additive Manufacturing 27%
the hiring of new expert staff will
also need to be utilized and imple- Artificial Intelligence 21%
mented in these developments.
Big Data 27%
R&D Encroachment Bioengineering 21%
Globalization and particularly Asia
R&D collaborations with European Bionanotechnology 15%
and U.S. R&D groups and orga-
nizations are also likely to have Cloud Computing 19%
significant roles in future R&D
Embedded Processing 12%
developments. It will be interest-
ing to watch how the distribution Information Technologies 37%
of R&D shakes out following the
expected reductions in federal Genomics/Proteomics 13%
support. Several scenarios can be
Medical Diagnostics 22%
envisioned. One of these involves
congressional funding support over Nanotechnology 20%
and above the Trump Administra-
tion’s proposals. This has happened Quantum Computing 7%
before when life science research
funds were added to support local Renewable Energy 20%
representatives’ home districts. Robotics/Automation 26%
Another scenario could include
the addition of industrial funding, Software 32%
philanthropic funds or crowd-
funding to balance or offset the Space Technologies 7%
federal reductions. This has hap- Sustainability 24%
pened before over the long term
but not in sufficient volumes over
0 10 20 30 40
the short term to increase or create
Source: R&D Magazine Survey 2017
a balanced funding portfolio. Still
another scenario could include the merger and acquisition in a number of areas and will likely continue, but be limited
of foreign and U.S. R&D organizations and the resulting by government regulatory limitations and not really offset
inclusion of offshore R&D funds. This has been happening government funding reductions.

R&D Warnings
Nearly two-thirds of Trends that may occur with the reduction of federal R&D
funding in the U.S. include the continuing erosion of
all the new technologies basic research support and creation of new technologies
and products. As noted in this report, foreign academia
developed over the next continues to gain on the quality and performance of U.S.
academia.
five years will be developed The reduction of federal R&D funding support is likely to
accelerate that trend and allow foreign countries to increase
with in-house R&D their competitive posture against U.S. basic research devel-
opments and capabilities. Immigration restrictions being
capabilities. implemented are also likely to dampen U.S. R&D capabili-
ties as R&D openings go unfilled in an already tight labor
market.

www.rdmag.com WINTER 2018 R&DMagazine 35


2018
GLOBAL R&D
FUNDING FORECAST

2018 R&D Global Funding


Forecast Resources
The following websites are good sources of information related to the global
R&D enterprise. Information contained in this report was derived from these
sources to forecast R&D along with R&D Magazine custom surveys.

American Association for the European Industrial Research McKinsey & Company
Advancement of Science (AAAS) Management Association (EIRMA) www.mckinsey.com
www.aaas.org www.eirma.org
Organization for Economic
Booz Allen Hamilton European Union Community R&D Cooperation & Development (OECD)
www.boozallen.com Information Service (CORDIS) www.oecd.org
cordis.europa/eu/en.home.html
China Ministry of Science R&D Magazine, Advantage
and Technology (MoST) Industrial Research Institute (IRI) Business Media
www.most.gov.cn/eng/ www.iriweb.org www.rdmag.com

Chinese Academy of International Monetary Fund (IMF) Schonfeld & Associates


Sciences (CAS) www.img.org www.saibooks.com
http://english/cas.on/
Japan Research Industries and Strategy & (Global Innovation 1000)
Clarivate Analytics Industrial Technology Association www.strategyand.pwc.org
clarivate.com www.jria.or.jp/HP/EN
The World Bank
EU Industrial R&D Scoreboard Korean Industrial Technology www.worldbank.org
iri.jrc.ec.europa.eu Association (KOITA)
www.koita.or.kr U.S. National Science
European Commission Research Foundation (NSF)
ec.europa.eu/research/index_en.cfm www.nsf.gov

36 R&DMagazine WINTER 2018 www.rdmag.com