Investors trying to get a better handle on nanotechnology may find themselves confused about what it is and isn't. As with any technology that is complex and evolving quickly, there are a number of common myths surrounding nanotechnology. Here are five of them, along with the reasons why many people familiar with the science say they're false.

1. 'Nanotechnology is an emerging industry.'

The more we see of nanotechnology, the clearer it is that it will not be an industry unto itself. "Nobody makes nanotechnology," says Tim Harper, president of the U.K.-based nanotech-research firm Cientifica. "People make cell phones, they make computer chips, they make textiles, but people don't make nanotechnology."

In the era of computers and the Internet, technology has come to mean the PCs, the servers, the software applications and Web-based services that enable companies in every other industry to increase their efficiency. With nanotechnology, there are tools and nanomaterials made by companies such as FEI Co. ( FEIC) and Veeco Instruments ( VECO) as well as modeling software from companies such as Accelrys ( ACCL), but they only are the means of tapping into the science behind nanotechnology, not the industry itself.

The companies controlling access to different aspects of nanoscience will do so in part through patents. The patent holders won't be limited to any single nanotechnology industry -- they will be scattered throughout all industries. And the fruits of those patents will be everywhere, from General Motors ( GM) to DuPont ( DD) to Wal-Mart ( WMT).

"You've got all of these companies in wildly differing markets, all being lumped under this one umbrella of nanotechnology," says Harper. "Don't get hung up on the word nano. Nanotechnology doesn't exist in a vacuum. It has to be related to all of the other technology trends that are going on."

As an example, Matthew Nordan, vice president at the nanotech-research firm Lux Research, points to fullerenes, which are highly stable carbon molecules with a variety of potential applications.

"You can buy a golf driver from a Japanese company called Maruman that uses fullerenes as part of a composite that forms the head of the golf club," he says. "There's also a company called C60 that has an agreement with Merck ( MRK) to develop drugs that would offset or reverse the damage from Alzheimer's. They are also based on fullerenes. You couldn't imagine two applications that are further away from one another, but they're using exactly the same new material."

Nordan says it's more helpful to think of three types of nanotech-related areas: the nanomaterial makers, the intermediaries manufacturing composite materials using nanoparticles and the end-user companies creating and selling nano-enabled products. Nanomaterial maker Southern Clay, for example, ships its nanosized clay particles to intermediary, plastics manufacturer Basell, which makes a composite used by General Motors in the doors of its Impala models.

2. 'Nanotechnology is new.'

"Things with a dimension of under 100 nanometers with size-dependant properties have been around for hundreds of years," Nordan says. "Egyptians made colloidal gold nanoparticles and used them to make red dye that went into pottery. Cat litter is able to absorb these odoriferous particles that it traps in nano-sized holes; People have been synthesizing cat litter the same way since the 1930s."

Even the idea of nanoscience has been around longer than many of the scientists who are now devoting their careers to it. In 1959 Richard Feynman, who won a Nobel Prize for his work on quantum electrodynamics, delivered a now legendary talk called "There's Plenty of Room at the Bottom," suggesting the ability to manipulate atoms and molecules through a series of progressively smaller tool-making machines.

The term "nanotechnology" came a few decades later. It was first used in 1974 by Norio Taniguchi, a professor at Tokyo Science University, and popularized by Eric Drexler, who now heads up the Foresight Institute and who in 1986 published Engines of Creation , which outlined the possibilities of molecular nanotechnology. The emergence of high-powered, scanning-powered microscopes gave scientists the means to observe and manipulate objects on the nanoscale, although at costs that are still too high to allow for mass production.

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) 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."

5. 'Nanotechnology will bring revolutionary change.'

For all of the life-transforming potential often attributed to nanotechnology, the products that have reached the commercial market so far are less than thrilling: car doors that are sturdier, golf balls that can fly a little farther, pants that resist wine stains. Anyone waiting for a big breakthrough that will announce the nanotech age will probably be waiting a long, long time.

"People think a bell is going to ring and suddenly we'll be in age of nanotechnology," says Charles Harris, CEO of Harris & Harris Group ( TINY), a venture capital shop investing primarily in nanotech start-ups. "It's more likely to be evolutionary before it's revolutionary."

Because the effects of nanotechnology are likely to be far-flung across a wide spectrum of industries, its progress will come in fits and starts -- first in materials, then in an unrelated area such as semiconductors, then somewhere else such as drug development. "Let's say you have important breakthroughs enabled by nanotech in drug delivery," says Harris. "Is that going to kick off a lot of interest on the part of investors the semiconductor industry? Probably not. You might see commercialization taking hold in a particular area and a cluster of companies emerging from that area then being acquired or going public."

"There are very few quantum leaps in technology, where something happens and is totally changes the game," says Warren Packard, a venture capitalist at Draper Fisher Jurvetson. "More often, things are evolutionary but they're exponentially evolutionary. Everything we build today is built on what we built yesterday. But because of that, it grows by an exponential factor."

Packard believes that the changes that nanotechnology will bring won't be noticed on a daily basis. "Nanopants aren't going to change your life," he says. "But after nanopants, there will be something like nanomemory and a TiVo with infinite memory, then maybe quantum computers -- then, who knows -- devices with computing power that makes them as smart as you? If you were to fall asleep today and wake up in 20 years, you'd be shocked at the difference."
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