Potential for chemicals start-ups
Interestingly, most of the innovation takes place within Germany’s Mittelstand – its often family-owned small and medium-sized enterprises, which account for 90 percent of Germany’s 2,200 chemicals companies. There’s also a new emphasis on chemicals start-ups which offer less conventional products and services. In Berlin, for instance, local authorities and the city’s technical university are putting EUR 11 million into an incubator for fledgling chemicals companies.
The most promising areas for future innovation in this field are digital development and sustainability. The German government is legislating emissions reductions, and the chemicals sector’s most important customers, including the auto industry, are desperately seeking solutions to deal with the new rules. This generates opportunities. For example, in October 2019, Japanese-founded company Sunstar opened a new 20-million-euro headquarters in Bavaria for its engineering wing. The company, which already supplies Nissan and Toyota in Asia, will work on exciting new projects such as novel structural adhesives that respond to the changing needs of European carmakers. As the company explains in a statement: “The Bavaria region is particularly attractive due to the strong presence of premium car manufacturers such as BMW and Audi.”
Valuable industry secrets
One of the most intriguing aspects of Germany’s chemical sector is that increasingly innovation is hidden. While the industry still relies on know-how in basic chemicals, it also harbors scores of potentially lucrative secrets – exciting interest from investors. Globally, the number of chemicals patents coming out of industrialized nations has been falling since 2010, explains Martin Erharter, partner and chemicals specialist at consultancy Roland Berger, but that’s not due to a lack of innovation. Instead, some firms, particularly those in specialty chemicals, are not necessarily patenting the new processes they develop but rather keeping them in-house to maintain a competitive edge.
Smaller companies are “more likely to use their specialist know-how about certain materials for very specific applications,” Erharter explains. “They’re shifting into more differentiated products, and they make very good money by adding value. It’s an extremely risk-resilient area. It’s also relatively easy to defend your niche.” He concludes: “What is also really interesting is that a lot of these companies are privately held and therefore have high investment potential.”