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Opportunity abounds in MEMS/nanotech

Posted: 01 Nov 2007 ?? ?Print Version ?Bookmark and Share

Keywords:MEMS? nanotech investment? nanomaterials?

It's not too much of a stretch to say that there are some 2,000 companies worldwide that are involved in the commercialization of MEMS devices or nanomaterials.

The vast majority tend to be small, private startups that hope to become the next $100 million dollar company!which will, however, take a while, since most are still in the early stages of product development. Investment in these companies is typically only open to venture capital firms and institutional investors via private equity placements.

Despite the fickleness of the investment community!a tendency to jump on the "bandwagon of the moment" investment in both nanotech and MEMS startups has remained relatively strong for the past three years, and almost evenly split between the two (Click to view graph).

Sales of MEMS devices hit nearly $8 billion in 2006.
Click to view image.

That still leaves us with a couple hundred companies that are actually public. Of those, more than 125 public firms are indeed selling MEMS or nanomaterials today, or are very close to having real products on the market (i.e. they're in clinical trials or are doing final product testing with customers). It's important to point out that this number does not include the customers of these companies. Rather, the focus here is on the companies that are actually manufacturing the nanomaterials or MEMS devices themselves (or outsource production). In some instances, these companies sell their products directly to the consumer (e.g. window films for residential homes), but in many instances, they don't (e.g. selling a sensor to a medical firm, which in turn markets a product with that sensor).

The stock exchanges on which these companies are listed are varied!and telling. About three dozen firms can be found on the New York Stock Exchange. Here's where you'll find multibillion-dollar, multinational corporations. For a few, however, MEMS and/or nanomaterials already account for a significant portion of their revenues. The six or so companies listed in the American Stock Exchange are all focused on medical applications. About four dozen firms are listed on NASDAQ. There's a strong focus on medicine here as well, but the common thread to all of these firms is that MEMS and/or nanomaterials form the basis of all the products these companies sell. Over-the-counter stocks are often dismissed, but the three dozen or so companies currently listed here actually offer some of the most innovative, and most exciting, MEMS and nanotech-based products!the ones that will truly disrupt the markets they're targeting. The foreign exchanges offer a mix of startups and large multinationals.

While sales of nanomaterials seem to pale in comparison with MEMS for now, their use is far more diverse and innovative than many realize.
Click to view image.

In terms of initial public offerings (IPO), or small startups going public, IPO activity remains negligent!but this is not surprising. Few MEMS startups have ever gone public, and it has been long suspected that the same will hold true for those involved with nanotechnology. The technological approaches and resulting products are simply more conducive to acquisition!i.e. it makes more sense to add this value to the portfolio of an existing company so that they can leverage it as a competitive advantage. This doesn't mean that there won't be any IPOs, just that we won't see a lot.

There's far more to these markets than one might think. However, don't be fooled by the trillion-dollar market number floating about!that's for the total value of products integrating MEMS and nanomaterials, not the value of actual MEMS devices or nanomaterials sold. While such big numbers are pretty exciting, it skews the reality of production today and thus creates unrealistic expectations from an investment standpoint. That being said, both industries are at the point where they can stand on their own. They may be small in the overall scheme of things, but their reach is already huge. (Click to view graph).

- Marlene Bourne
President and Principal Analyst
Bourne Research

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