Steven Reznek

Vice President R&D

Cabot Corporation ®

157 Concord Rd

Billerica Ma, 01821

978-670-8060

The products of the chemical industry are of two types. Formula chemicals are defined by their chemical compositions. Purity defines the grades of these materials. Performance chemicals are defined by what they do. No one particularly cares that a white pigment, for example, is made of titanium oxide. They do care how little they can use to achieve a specified amount of light reflection. Fine powders are a very large portion of the performance chemical products.

What are the opportunities for creating new performance chemical products, based upon ultra-fine or nano-scale particle size? Insight into this question comes from an understanding of three different issues:

What are the costs and what are market values of fine particle materials?

All too frequently in the past, the people in the fine particle field have been technical and focused solely on particle characteristics. And all too frequently the promise of new wonder materials has failed to materialize. This paper is a discussion of all three issues, outlining the important aspects of each that will ultimately determine if new fine particle products will be successful and who will realize that success.

Fine and nano-scale particles are made through chemical reactions that yield individual molecules. Particles are formed through nucleation and growth. The growth can either be molecule by molecule addition from a homogeneous phase onto particles or by the particles coagulating and coalescing. The core of any process is the ability to control the relative rates of one or more chemical reactions in relation to the rate of mass transfer in the system. There are a number of approaches to controlling kinetics, but by far and away the most commonly used is temperature. The most commonly used method for controlling mass transfer is dilution. Typically very fine particles are made with relatively fast kinetics and relatively slow mass transfer. Achieving these conditions determines the fundamentals of the manufacturing costs.

The total manufacturing cost is the sum of the cost of the raw material reactants and the processing costs. The processing costs in turn consist of energy, labor and return on capital investment. Raw material prices are more or less independent of scale of production. Energy costs (per pound) are also independent of scale and are small. They will be a small portion of the total cost unless production volumes are very large. However, the energy costs of plasma processes may well be tens of cents per pound and therefore equivalent to the costs of inexpensive reactants.

Both the per pound costs of labor and capital are very sensitive to scale. The capital costs may depend greatly on the chemical details of the reactions. In many cases, the by-products must be removed from the product and this can entail an added expense. If the by-product creates an environmental problem, costs can increase dramatically. The presence of the dilution material can also imply one or more purification steps with added production costs.

The capital costs for processes that have fast rates, do not require separations, do not involve highly corrosive or flammable materials, and do not have difficult environmental issues may be a factor of between two and five times less than those of processes that do.

The selling price must exceed the production costs, of course. A rule of thumb is that the selling price should be about twice the production costs for materials with relatively inexpensive feed stocks or twice the conversion costs for materials with very expensive feed stocks. The figure below shows the world production volumes and the average price of some of Cabot Corporation’s nano-particulate, performance chemical products. Any nono-scale product will not be very far from this line.

The performance enhancement achieved by reducing the size of the particle will have a certain intrinsic value. There are many examples. Finer particles can have better optical properties, or be used to make better ceramics, or they can give better electrical properties to polymer composites, or better flow properties, or they can be used as frictionizing agents, etc. etc. The ‘zeroith" task is to understand the performance that creates the value. The next task is to understand the actual value that the performance will create. Although the "technologists" tend to ignore this task for a number of reasons, it is both the most important and difficult challenge in launching a new nano-particle product or business. The next challenge is to design a process that will produce the right particle at the requisite cost.

How many nano-particulate programs follow the opposite path? How many start with a process which defines a number of potential product families? Now since there is a patent on a process idea that makes "unique" nano-scale particles, it has to be to be worth a lot, right? The answer is maybe yes and maybe no. The hard part comes after that patent is obtained. The challenge is to understand the manufacturing process; and process understanding takes much more effort and resources than coming up with the idea and getting the patent. The hardest part comes next – finding the value that these nano-particles actually create.

If you have a process that you understand, like Cabot Corporation® or any other established performance chemical company, your processes may not be the correct ones for emerging markets. If you are an inventor, you have three strikes against you. You have a much less sound understanding of the value of a particle than you think you do, you have a far poorer understanding of the cost and capabilities of your process than you think you do and your brand new shiny invention, while it does have advantages, still may not have the correct ones.

Once you have either done it frontwards by finding the opportunity before you invest in R&D or backwards by investing in R&D and then trying to find out what the invention is good for, you have to select a market entry "strategy". You have to decide at what volume fame and fortune lies. Do you prefer to pursue an opportunity where the nano-particle has an enormous value, but you can make it in your basement? Or do you think that truly great opportunities are not just lying around and that you will consider larger product volumes? If you prefer the former, you should consider bio-technology instead of chemical engineering, before you decide to go too much further.

There is one more aspect of cost that is often ignored. Research and development does cost money. The government often underwrites these costs. If you can get free money, take it! It is much better, or at least it seems to be much better, to use government money than it is to use the money of someone who actually expects to get it back some day. Let us say it costs one million dollars to come up with the idea and the patent, then learning the process will probably cost five million if you already have a pilot plant, and ten million if you don’t. Again it is, or seems to be, really nice if some one will cover these costs without expecting a return.

Where do you look for the opportunities where a smaller particle will create value? BCC, C&E News and others have published the "time magazine" list of great opportunities. The standard list of great applications for nano-scale materials is readily available. How do you select which of these you should look at and how you should prioritize? This is the part where the free government money may have been more of a detriment than help. If you have paid too much attention to the "technical" meetings, you may believe that this is easy; that any nano-scale particle has to be worth a whole lot of money. In fact the opposite is true. Finding an application where the intrinsic value of the small particle size exceeds the cost of obtaining it is a remarkably difficult task.

In general, there are at least three links in the value chain before a fine particle product will reach the ultimate customer. The first step is the manufacture of the particles themselves. Then the particles must be compounded into a material and finally that material will be used in making a device. The table below contains examples of the value chain in various markets involving fine particles.

There are instances where two or more of the steps will be undertaken by a single firm. For example, Cabot Corporation® makes aqueous polishing slurries, aqueous dispersions for jet printer inks and thermo-plastic master batches. Making the material will often require a considerable amount of technical competency. The compound can have many components and the ability to optimize competing properties is often a very sophisticated technical capability. A commercial paint system, for example, is a quite highly developed technology, containing at least a solvent, a binder, a pigment, and a viscosity control agent.

Van der Waals forces become extremely important when particle sizes are reduced to the nano-scale and therefore knowledge of dispersion and colloid stability are essential to the successful use of very fine particles. In many cases, the cost of dispersing fine particle exceeds their purchase price and this cost, along with formulation know how, creates the middle step in the value chain. The performance value of any new nano-particle will be partially off set if there are increased costs of handling or dispersion.

For a fine particle performance chemical to be successful each step of the value chain has to realize an advantage. A better reinforcing grade of carbon black will only be a commercial success if the tire company sees an advantage in using it and the automobile company (or the public) sees an advantage in the tire. This is an iron clad, inescapable rule. Therefore, the value created by the fine particle’s improvement in performance over the ordinary material has to be so large that it can be spread across the value chain. The world does not beat a path to the better fine particle mousetrap. The producer has to buy his way into the world.

The situation is, in fact, more difficult than it appears. Cabot Corporation’s® plastic masterbatch business purchases around one hundred different materials—polymers, pigments, lubricants, antioxidants, etc. Any firm involved in the middle step continually has new and better materials brought to it. Cabot Plastics International® sees fifty new materials a year. Probably a substantial fraction are in fact real improvements. However we devote development resources to at most the ten highest priority projects.

The three laws of market dynamics for a new fine particle material are:

The commercial launch of a new nano-particle as a performance chemical involves a good deal of risk. The risks arise from uncertainties about the manufacturing costs, the performance enhancement that will actually be achieved and the value the market will ascribe to that enhanced performance. These three types of risk will occur at each step in the value chain. The particle manufacturer takes on the investment risk of his own process, but cannot avoid the market risk of all of the subsequent steps. So while the particle manufacturer has to share the value he takes on the entire marketing risk in addition to his own manufacturing risk. There are two ways of dealing with this situation. The first is the "whole hog" option. If you are convinced that the performance of your process is so great that you can not lose and that your process is markedly superior to all others and that your patents are very good, then by all means go for the jackpot and take all the risks. If however, you are concerned about your understanding of the risk, then share it with others who not only understand the risk better than you, but are able to reduce it.

There are only a limited number of ways of off-loading some of the risk and most of them require you to give up partial control and ownership of the technology. This is often very difficult for the creator of a technology to do. There are only two emotions in the market place – greed and fear. Successful commercialization of a fine particle is probably much more dependent on the greed/fear decision than it is on the intrinsic attributes of the new technology.

The greed/fear decision can lead to two different types of errors: The technology fails, at least financially, because the creator tried to do the whole thing and developing sufficient understanding entailed costs too high to be recovered. Alternatively, the inventor prematurely licenses the technology and thereby loses too much of its value. Large firms apparently are as liable to make the "whole hog" mistake as small inventors. The term ‘chairman’s project" is all too common.

True development partnerships are becoming much more common, both in the literature and in reality. The firms at the end of the value chain are far more likely to seek out partners than they were previously and small firms realize that the complexity of the technology means the expense of doing it all yourself is prohibitive.

One strategy for dealing with the value chain is to try to integrate to become a material producer or even a device manufacturer. The attraction is that it seems possible to capture a greater percentage of the value of the improved particle performance. There are certainly cases where this has occurred, for example Land’s development of polarizers and eventually the instant camera. However, integration is often a very risky strategy. It assumes that the cost of learning the downstream technologies will be small and with very rare exceptions, that is simply not the case. Learning the technology of particle manufacture will be a substantial challenge and, in general, trying to hire (or worse yet develop) the down steam technology at the same time will prove a daunting task.

The chemical production processes required to make very fine particles entail costs. Research and development are additional and substantial costs, and therefore a successful new product will need to command a substantial price. The buyer will expect quite a bit for that price. The primary expectation is, of course, performance. However, performance is usually only the attribute that gets you in the door.

Expensive materials are only used in demanding applications and, without exception, demanding applications are just that. The qualification of an expensive product will always be an arduous process, and it will often be protracted and costly. The liabilities that occur if the product does not perform as it did when it was qualified can be extremely large. If the conducting plastic layer in a high voltage cable laid under city streets fails, the cost of replacing the cable dwarfs the sales of a materials supplier. The cable manufacturer is going to be more interested in the quality practices that assure consistency in the manufacture of the carbon black filler than he will be in an improved level of conductivity. The maker of printed circuits will not buy polishing slurry that inconsistently scratches the chips, no matter how much the polishing rate is increased in the on-quality material.

The makers and users of sophisticated materials have two inescapable demands of a performance chemical supplier. The entire system involved in manufacturing from raw materials supply, through the production process, to distribution and logistics must be managed and continuously improved. Second the production process must be understood and controlled. These are not simple tasks and to an inventor they may often seem pedestrian. However, it is far more common that these two demands determine the qualification or selection of a supplier than any special attribute of the material. In the minority of cases where the fine particle has some unique attribute, the purchaser will be even more concerned since he will be dependent upon a single supplier.

The inescapable requirements of an advanced performance material are:

Three issues will determine the commercial success of a new nano-scale material or process. The first is the obvious one; the material must bring value to the market place that exceeds the added cost of production. It is all too easy to imagine that the increased performance is unique and has to be worth the added manufacturing costs. However, with exceptions so rare as to be almost non-existent, there are always competing materials that set a cap on price. Second, a nano-material is only the start of a manufacturing chain that eventually leads to a new device. Since the properties of the performance material often determine the ultimate performance of the device, it is tempting to assume that the material can capture much of the ultimate market value in its high price. In fact, the market is very resistant to allowing this to happen and the value of the new material must be shared among all the steps between performance chemical and consumer device. Finally, consistency and quality requirements have grown in importance over the last few years. Manufacturing excellence now has the same importance as product performance in getting a material accepted in the market and manufacturing excellence implies a large expense that must be met.