Nanotech: Dissecting What It Is, and Isn't

3. 'The nanorobots are coming.'

Drexler's early writings on nanotechnology helped to popularize the notion of tiny, self-replicating robots. Drexler came up with a hypothetical end-of-the-world scenario of "gray goo," self-replicating robots run amok and consuming all life on the planet as they build more and more of themselves. The self-replicating robots became a fixture of science fiction, but they are still far from reality in this world.

"Everybody was very excited about these little self-replicating robots, but the reality got really kind of boring when we saw that what we were actually doing was making tools and materials," says Harper. Today, many scientists believe that things on the nanoscale will self-assemble in ways that resemble nature's own nanodevices: DNA, proteins, etc.

"It's actually getting interesting again," says Harper. "There are all kinds of nanoscale machines around, and they're called cells, they're called viruses. The question is, how can we learn from what these things are doing and see if we can apply them out to the processes that are useful on the macro scale?"

4. 'New nanotech applications offer high-margin opportunities.'

Often, emerging technologies offer pioneering companies high margins until the market matures and competition drives down margins for everyone. But Nordan says the nanomaterials, which are delivering some of the earliest nanotechnology-related revenue, are likely to become commodities very quickly. Nanomaterial makers that have strong patents may stave off commoditization, but many materials involve blurry patents, allowing price to quickly become the predominant factor among customers.

Further down the value chain, products are likely to see a similarly cutthroat competition drive down prices as nanotechnology creates improved versions of existing products, whether a stain-resistant toilet or a vastly more powerful memory chip.

"People think that just because it's a new, advanced technology, we're going to rewrite the margin structures of existing products," says Nordan. "That's really unlikely. If Intel(INTC Quote) uses some advances nanolithography process to make the Pentium 6, they are likely to earn the same operating margins that they earn on that chip today."