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BASF's Small-Tech Big Bet

For years, BASF's (NYSE: BF  ) tagline has been the same: "We don't make a lot of the products you buy; we make a lot of the products you buy better." It's an effective line, and I often paraphrase it when attempting to explain to people how nanotechnology will change many of today's existing products.

What I tell them is not to think of nanotech as a specific "thing," or even a stand-alone technology, but rather as field of science that will make many of the products we use today better. As regular readers of The Motley Fool know, Elan (NYSE: ELN  ) , Nucryst (Nasdaq: NCST  ) , and Headwaters (NYSE: HW  ) are but a few of the companies already employing nanotechnology to improve existing products.

Therefore, I was not surprised when BASF reported this week that nanotechnology will be an integral component of its future. To that end, the company is investing $221 million over the next three years into nanotech research and development.

Company officials also said they expect the market for its nanotechnology-related components to be between $61 billion and $74 billion in four years. That sizeable figure should serve notice to anyone who continues to dismiss nanotech as some far-off, fuzzy, futuristic technology.

Granted, most of BASF's nanotechnology-related revenues will be derived from mundane product lines like coatings and paints. But what investors need to understand is that nanotechnology will imbue these products with some impressive -- and profitable -- characteristics. For instance, automotive coatings will be made scratch-resistant, and household paints will become dirt-repellent.

The figure could easily grow larger if Engelhard (NYSE: EC  ) decides to accept BASF's $4.9 billion buyout offer. As I explained back in January, the deal makes sense from BASF's perspective because Engelhard's nanoparticles and nanomaterials can be used to improve a variety of BASF's existing chemical and catalytic products.

Regardless, however, of whether the Engelhard offer is ultimately accepted, I am confident that BASF will parlay its sizeable nanotechnology research and development into continuing its rich tradition of making the products we use "better."

That's because nanotechnology will not only allow the company to extend its formidable reach into commodity-like products, but it will also let BASF expand into growing and profitable fields like printed electronics, OLED displays, pharmaceuticals, and fuel-cell technology.

And, ultimately, it's these new business lines that will reap BASF the greatest return on its investment in nanotechnology.

Want to read more about nanotechnology? Check out:

OurMotley Fool Rule Breakersteam is always on the prowl for the next big thing, finding opportunities in biotechnology, nanotechnology, and beyond. Sign up for a free, 30-day trial today to learn more.

Fool contributor Jack Uldrich is the author of the new book Investing in Nanotechnology: Think Small, Win Big. He owns shares of Elan but of no other company mentioned in this story. The Motley Fool has a disclosure policy.

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