LED industry policies in USA and Japan, an empirical case study
Semiconductor solid-state lighting (Solid State Lighting) is one of the most promising uprising technologies of 21th century. As a new and efficient solid light source, which has a long life, energy saving, environmental protection, and other significant advantages of rich colors, the light emitting diode (LED) takes place of the ever dominant light source, incandescent and fluorescent. LED has a property of relatively high photoelectric conversion efficiency and the advantage of energy saving, environmental protection, long life, maintenance-free, easy to control and so on. American and Japan are two leading countries with the most LED intellectual properties and the most prosperous LED industries. However, there are some differences in each strategy for promoting LED industries which is worth of a comparison. The following text present relative policy and an outline of industry development in each industry, and in the end, an empirical case study of a intellectual property cross licensing is presented which is correspondent with the two countries’ LED industry policy.
- USA: slogan rather than machines
Since 2000, U.S. $ 500,000,000 investment has been put in the implementation of the “National Semiconductor Lighting Plan” with strong support for the U.S. Department of Energy Solid State Lighting. (Jeffrey, 2009) During the tenure of President Obama, he calls for energy policy in the National Development and put forward the “cheap, clean, efficient energy” slogan, in which the development of zero-energy building to improve the energy efficiency is an important part.(Kevin,2010) LED lighting in the performance of the U.S. has started the competition with traditional lighting standards. (Anne, 2009) Base on the U.S. Department of Energy workshop in February 2005 in San Diego, a goal is set that in 2020 the price of the solid-state lighting will be reduced to half in order to improve its market performance. (Joey, 2008) It’s predicted that cold white LED lighting in 2020 the average luminous efficiency target of 219 lm / W, OEM price target of $ 1 per thousand lumens; OLED luminaire efficiency goals for the 127 lm / W, per thousand, compared with OEM price target lumen 6 dollars or 80 dollars per square meter.
However, as the financial crisis comes into being, Americans are beginning to pick up the calculator caring about their expenses. LED lighting products for the price is higher than traditional lighting of the reality, the United States has always been very generous and see some hesitation, so in the major markets and supermarkets yet do not see the LED lighting applications and large-scale promotion of shelves, but merely occasionally sporadic some low voltage torch and night light type of product. Americans are very strict in terms of market access. In addition to that, other than the Energy Star standards, UL standards for solid-state light sources are developed and gradually introduced the draft, and also associated with other access standards are also being developed and consultation. Although world LED application products, chips are massively fabricated by intrigue from Europe and America mainstream companies, and it’s coming to an even fiercer competitive trend, but LED solid-state lighting market in North America won’t truly commence until 2012 because of the high cost and cumbersomeness of UL certification.
Take a microscope look into the enterprises, the United States leading corporations CREE, lumileds led a group of companies such as LED chip manufacturers in the world to grasp the core technology of LED chips and produce mass LED chips unceasingly. On one hand, USA’s corporations hand over up to 70% of the middle and lower profit margins applied traction large number of enterprises purchasing their products; on the other hand they lead organizations or associations Union to work out technical standards that even they themselves cannot reach, and they treat the Chinese mainland and Malaysia enterprises as their testing ground for immature technology. (David,2010)
However, it’s to be acknowledged that Americans holds the most LED technology intellectual property, and the means to promote American business is also to be approved. (Richard, 1999) From the example Cree introduces Shuji Nakamura from Japan, it can be found that the Americans LED industry is always sticking to the high-end chain link of the so-called 500 billion dollars for the capture market(Dirk,2003).
- Japan: anxious manufacturers
Japan’s point system to promote environmental protection through reform universal LED light bulb METI 2009, including 268.3 billion budget was passed on January 28, 2010 including information policy related to the 2nd supplementary budget. Among them is some of the relevant supporting budget of the LED lighting industry. The development of LED lighting industry is expected to play a catalytic role. In addition, the policy ‘’to promote employment opportunities for low-carbon-based industries” in Japan, is equipped with the most cutting-edge technology and the development potential of the lithium-ion rechargeable battery and LED lighting based on environment protection and energy industry in Japan should be supported to create a green employment opportunities. (Lye, 2010) It’s estimated that these policies will be to promote the popularity of LED lighting products such as the driving force.
Blu-ray high brightness LED technology was brought out in 1980s by Japanese, and since then Japan has showed the world’s highest enthusiasm the LED lighting applications. Support to the Japanese market for LED applications is much stronger compared with the case in USA. In recent years the government introduced a strong integration plan to redeem LED products. Sales growth of LED products in Japan has been far ahead of other countries.
In terms of technology, Japan so far still holds the highest brightness LED manufacturing technology, and high phosphor used in packaging technology. However, Japan always blocks the technology from developing countries and districts. For instance, Chinese manufactures always obtain outdated technology from Japan; what’s worse, application from these technologies have always faced with the risk of patent infringement.
Japanese companies in LED industry cover a wide from the upstream to the package. To be more specific, only the Japan’s Nichia, Toyoda Gosei, Mitsubishi Chemical Company dominate the master-class chip technology, phosphors and optical materials technology, while the high-end market of packaging products technology are hold by Japanese Citizen and Sharp.
- Cree signs cross licensing on GaN substrates to Mitsubishi Chemical Corporation, an empirical case study
In 2009, US`s leading LED manufacture Cree signed cross-licensing agreement on GaN substrate with Mitsubishi Chemical Corporation (MCC), which belongs to Mitsubishi Chemical Holdings Group and is a Japan`s top chemical corporation. According to the agreement Cree obtains the guaranteed payment and royalties from MCC for IP license..
MCC and Cree vary a lot in their Research & Development (R&D) focus. A landscape study in US patent and US patent application reveals that MCC is a pioneer in LED with its first patent dating back to 1977 (filing year, the same as below). (Jack, 2005)Not until 2002 did MCC turned to GaN LED on sapphire substrate, which is still a mainstream method in recent days. In 2006 MCC filed its first patent on GaN substrate, and relevant patents remain very limited during these years.
While MCC is essentially a chemical corporation and have wide production range, Cree has been focused on LED since its early stage. Cree`s all early patents in the 1990s were in sphere of SiC substrates. In LED industry, Cree dominates both technique and manufacture of SiC-substrated LED. At the same time, Cree has large investigation on GaN substrate research. Its first GaN substrate patent came in year 2003, which is after when Japanese LED gaint Nichia signed GaN substrate cross-licensing with a series of companies including Cree.
GaN substrate technology is developing fast in recent years. Compared with its replacers, such as traditional sapphire, SiC and the recent silicon substrate, GaN substrate overcomes the problem of lattice mismatch between GaN devices and the foreign (heteroepitaxy) substrate. Free-standing GaN substrate was initially developed by Nichia and Sumitomu Electrical Incorporation (SEI), both of which are Japanese major LED manufactures. As GaN substrate is demanded in the up growing industry of blu-ray and optical disc equipment, a more intensified interest on research and development (R&D) on GaN substrate is aroused in near future.
4.2 A view for the trade: Benefit and limitation
Cree: strengths in intellectual property
Cree is recently frequently signing cross licensing agreement with other LED giants such as Philips Lumiled and Osram. In 2002 Cree ever licensed IP on GaN substrate with Nichia
Cree takes full advantage of research ability and cooperation with a range of universities and institutes such California Unversity of Santa Babara and University of North Carolina. Research atmosphere in America contributes a lot to its large IP pool. In this case of selling GaN substrate patent to MCC, Cree has a strong group of inventors, among whom is Xueping Xu who got PhD degree on chemical from Harvard University and is actively engaged in producing patents on GaN substrate.
MCC: eager to enter GaN industry
MCC made its ambition into GaN industry conspicuous through several recent events. Financially, it has just now invested as much as $175 million on new MOCVD systems. Technologically, not only licensing GaN patents from Cree, it also intends to sign more cross licensing agreements with other vendors.
The efforts MCC is making are in consistent with its decades-long strategy, which aims to transfer from traditional chemical to electronic sphere and enhance competitiveness in high-tech products.(Lihoh, 1999) For example, MCC sold the non-profitable and low-technology-leveled agriculture group in 2002. Now MCC is working towards a consolidated position in the upstream of Japan`s laser and LED industry.
GaN industry, part of semiconductor industry, is a typical oligopoly in market form. The industry in Japan is almost dominated by SEI, Sony, Nichia, e.t.c. Barrier of entry for oligopoly is quite high (Think of how much MCC has spent for the entry). After entry to the market, MCC has also to be involved into complex game with other oligopolists in order to make profit.
Cree: why not spinning out
This trade involves several patents from the patent portfolio on GaN substrate. Although its IP on GaN substrate is fairly enough to spin out a company or subsidiary, there is no indication that Cree takes the step.This means Cree is willing to give up the possibly big profit from GaN substrate manufacture in coming years.IP, Funding and existed infrastructure are advantageous for Cree to spin out company. However license is still more appropriate for Cree, as the barriers to the GaN industry is high and there are already several big players in the industry. GaN substrate is more applicable in laser and optic disc industry than LED, which is also a reason that many lighting corporation in USA including Cree would not take up GaN substrate industry.
MCC: still falls behind
Even though MCC possesses the leading technology and perfect equipment, it`s still confronted with several concerns. Comparing with its domestic competitors, Sumitomu Electric Incorporation and Nichia which have already years` experience in the manufacture of GaN substrate, MCC is not mature in this area. The first-strike advantage such as customer loyalty is not easy to surpass.
Another concern originates from its R&D capability. In the first manufacturing stage, MCC might start with 2-inch GaN substrate production, which is already commercially available for Sumitomu. Sumitomu is now cooperating with Suitec, another Japanese company, to invest on R&D of 6-inch GaN substrate. Licensing IP is not always the most updated, as publication data is always more than 18 months after filing date. Not only possessing self-intellectual property rights, but also, for MCC, improving independent R&D capability count in its future success.
Both USA and Japan are two giants in solid state lighting industry, with positive supporting policies and considerable investment. However, massive production of LED is not presently realised in USA and USA LED companies tend to stick to the high profit end of LED intellectual property. On the other hand, Japan is not only advantageous in research and development capabilities, but also anxious into LED application market. The example that USA’s company Cree signs cross licensing with Japanese Mitsubishi Chemical Corporation, well reflects each country’s attitude to the LED industry.
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