Intellectual Asset Strategy at NEC - OECD.org · Intellectual Asset Strategy at NEC ~Integration of Business Strategy and Open Innovation~ ... NEC LCD Technologies Royalty Capital

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© NEC Corporation 2005 OECD Conference

Intellectual Asset Operations

Intellectual Asset Strategy at NEC~Integration of Business Strategy and Open Innovation~

Botaro Hirosaki, Ph.D.Senior Vice President & Exective General Manager of

Intellectual Asset Operations UnitNEC Corporation


Intellectual Asset Operations Agenda

1.Outline of NEC Corporation

2. Intellectual Assets (IA) as New Management Resources

3. Open Innovation Paradigm

4. IA Strategy at NEC-R&D and Patent Prosecution-Technology Insourcing-Licensing and Spin-offs

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1. Outline of NEC Corporation



Financial Highlights(for the year ended March 31, 2004)

Top Management

Mr. Akinobu KanasugiPresident

Mr. Hajime SasakiChairman

Established July 17,1899

- Net Sales US$47.1Bil- Operating Income US$1.75Bil- Net Income (Loss) US$0.39Bil- Total Assets US$38.8Bil- Employees 143,393

Outline of NEC Corporation

Business Domains:IT and NW Solution BusinessIT and NW Solution Business-System Integration (SI)-Mobile Handsets-Broadband

Through affiliate companies:-Semiconductor Solutions-Displays and Components

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Consolidated Sales of NEC

Net Sales by Market

ＩＴソリューション事業

Net Sales by Segment

Net Sales4,906.8 Bil. Yen

ネットワークソリューション事業

エレクトロンデバイス事業

Japan

海外(For the fiscal year ended March 31, 2004)

Net Sales4,906.8 Bil. Yen

3,898.878%

1,016.922%

JAPAN

OUTSIDE JAPAN

932.219%

1,755.737%

2136.244%

IT Solutions

NW Solutions

Electron Devices



2. Intellectual Assets (IA) as New Management Resources

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Background on ImportantIntellectual Asset Changes

1. Intelligence Becomes very Valuable

2. Intensification of Competition

・Acceleration of Technological Innovations

・Intensifying Market Entry・Global Competition・Difficulty of monopolizing Technology

・The Shift of the Resources for Competence

・Competition for Standardization

Proactive Use of Intellectual Assets as ManagementResources Becoming Important!

・Market Share, Sales Scale・Land Assets・Manufacturing Facility Scale・Management Attaching Importance to Securing Cheap Labor Force

・Management Attaching Importance to Profit Ratio

・Intellectual Assets Becoming Important as Profit Resources

Traditional New Style



Intellectual Asset as Management Resources

Capital Information

Product Human Resource

Know-How

Technology

Brand PowerBrand Power

Tangible Assets Intangible Assets

Goodwill Intellectual Assets

On Balance SheetOn Balance Sheet Off Balance SheetOff Balance Sheet

Plants, Equipment, Credit, etc

When These Management Resources Are Rearranged…

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ASSETSLiabilities

Shareholder’s Equity

Intellectual Assets

（Brand, Patents, Know-How, etc…)

Shareholder’s Equity at

Market Price

Tangible Fixed Asset

Intangible

Asset

Aggregate M

arket Value

Corporate Value

Off-B

alance-Sheet

Book Value

Appraisal Gain Evaluation Gain/Loss

・The time is coming to an end when the profit of an enterprise is decided based on scale of the tangible fixed assets such as equipment.

・The resources that maximize profit are shifting to intellectual assets ( brand, patents, technology, know-how, etc…)

Increasing Interest to Off-Balance -Sheet

Current Asset



Practical Use of Intellectual Asset as Management Resources

DefenseLevel 1

Cost ControlLevel 2

Profit CenterLevel 3

IntegrationLevel 4

VisionLevel 5 Enhancement of Corporate Value

Alliances, ＪＶs

Making Profit Directly from IPR

Cross-Licensing

Built-in Original Products

Countermeasure against M&A

Contract Initiative

Strengthening of Current Net Profit

Insourcing of Promising TechBusiness Domain Protection

・Barriers to Entry・Non-Cost Competitiveness

The Source:Davis,J.,”Using Your IP to Increase Shareholder Value,”Patent Yearbook 1998, Economy Publications PLC, London, 1998

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3. Open Innovation Paradigm



As a High-Tech Company, NEC Can NOT Reduce R&D.→Prompt Measures against the ROI Decline of R&D

Investments Are Needed.

％

Limitation of Closed R&D-Why “Open Innovation Paradigm” Is Needed-

Edited by NEC based on Michikazu Murakami’s “Innovation Management Invoked by the Sense of Crisis” WORKS (Recruit, No. 37, 1999/12-2000/1)

0

50

1 00

1 50

2 00

2 50

3 00

3 50

1988-92

1989-93

1990-94

1991-95

1992-96

1993-97

1994-98

1999-2003

2000-2004

M A T S U S H IT A /P anason ic

T O S H IB A

N E C

S H A R P

T O Y O T A

B R ID G E S T O N E

R&D Efficiency％

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Open Innovation Paradigm

・Proposed by H. Chesbrough (Prof. of UC Berkeley)”An Innovation model, in which each pipeline is NOT CLOSED in the same company”.

Most suitable for IT and Network industries

• Very rapid innovation required• Fierce, global competition• Difficult to monopolize all intellectual assets and

smart people• Better business model beating better technology• Technology standardization important

Suitable for the following situations:



2. Tech Insourcing

Business DevelopmentDevelopmentResearch

IA Strategy for Open Innovation

1. R&D and Patent Prosecution

4. AllliancesUsing

Licensing3. Licensing and

Tech Spin-Offs

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4. IA Strategy at NEC



1. Integration with Business Strategy- Registration Focusing on Core Technologies

- Standardization- Patent Portfolio Management

2. Maximizing Technological Competitiveness- Continuous Investments in R&D- Cross- Licensing and Insourcing of promising New Tech

3. Enhancing Profit Opportunities- Friendly Licensing and Technology Transfer - New Licensing Schemes

IA Strategy at NEC

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Integration of Business and Intellectual Asset Strategy

Covered with NEC’s Technical

Strength (Dominance)

Small

Big

Small Importance of the Business (Promising Profit) Big

Strategic Alliance Business Fields

Profitable SpectrumTransfer, Abolish, Use in

Other industries

NEC’s Original Business Fields

Tech Enclosure

Know-How Enclosure

Business Enhancement with Alliances

Complementary Tech Insourcing

Standardization

Cross-Licensing

Licensing Out（Patents + Know-How）

Business Risk for NEC



2. Tech Insourcing

IA Strategy [1] NEC’s Original Business Fields

Research


3. Licensing and Tech Spin-Offs

4. Alliances Using

Licensing

DevelopmentResearch

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Continuous Investments in R&D Create New Business

Enforcement of Technological Competence Using R&D

World’s First Quantum Logic Gate (Two Qubit Solid-State Device)For future Super-computers

1 µm

Probe 2

Pulse 2 Pulse 1

Control Bit DC 1

1 um

Ground 2

DC2 Target Bit

Ground 1

Probe 1

NEC’s R&D Is Focusing on:- Information Systems - Networking - Electronic Devices- Fundamental Technology- Environmental Technology- Production Technology

0100200300400500

-400-300-200-100

’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04

Net Income

R&D Investment

FY

Bil. yen



Technology Insourcing and Investments

◆ To Maximize NEC’s Competitiveness, NEC has Obtained Licenses for:

-Secure Connection Technology（From Permio Technologies, Inc.）

- Low Power (Leakage) Transistor Design（From Transmeta Corp.）

◆NEC Invests in Promising Technologies through Universities and Venture Capital Firms

-Determining Newest Technology Trends

-Node Function for Technology Insourcing

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DevelopmentResearch

IA Strategy [2] Strategic Alliance Business Fields

2. Tech Insourcing


Business Development

4. Alliances Using

Licensing3. Licensing and Tech Spin-Offs



Alliances, Licensing and Spin-Offs◆ Business Alliance

- 3G Mobile System Infrastructure Alliance with Siemens- LCD Panel Alliance with Chinese Partner

◆ Licensing of Essential Patents-Carbon Nanotubes to Sumitomo Corp.

◆ Business Transfer of Non-Cores- Plasma Displays to Pioneer- Organic EL to Samsung

◆ Spin-Offs through Entrepreneurs in Residence-Vidient Systems Inc（USA）Video Surveillance IP Incubated Internally, Venture-Backed, and Spun-out

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３G Mobile System Infrastructure Alliance with Siemens

Development, Manufacture, and Sales of 3G Mobile System

Infrastructure

Siemens NECMobisphere

Capital Capital1999 Oct.

Siemens-NEC JV(Strong in Switching Technology)

(Strong in Radio Technology)

-Technical Compensation, Synergy Effects-Accelerated Innovation-Avoidance of Redundancy during Development

Win – Win Scheme

Royalty

Technology Transfer & Licensing


Royalty



LCD Panel Alliance with Chinese Partner

SVA Group NEC

SVA-NEC LCD

Capital Subsidiary


China Japan

TV/Monitor use High Value-added Products

NEC LCD Technologies

Royalty

Capital

- New Technology Development

- Re-investmentG5 Size G2~G3 Size

JV(Shanghai)

Making a Profit by MaximizingNEC’s LCD Technology with Leveraging Chinese

Capital and Market

Business Launching intoHi-Tech Market by Introducing

NEC’s LCD TechnologyWin - WinScheme

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NEC Open Innovation Workshop-New Licensing Scheme ( in Japan)-

New Business,

License, New Companies,

New Divisions

NEC

Business Creation Forum and WorkshopBusiness Creation Forum and WorkshopHeld in February 2004, November 2004, and May 2005Held in February 2004, November 2004, and May 2005

Purposes :-Activation of Potential Technology-Creation of New Business ModelsFunctions :-Matching Place-Incubation (Technology and Business)-Verification of Trial Cases

Purposes :-Activation of Potential Technology-Creation of New Business ModelsFunctions :-Matching Place-Incubation (Technology and Business)-Verification of Trial Cases

Collab

oratio

n

Collab

oratio

n

Investment

Business Creation Initiative

Complementary

Technology

EntrepreneurVCTLO

VB

Major Company

Angel

Leading Company

http://www.ipr-nec.com/koubou/

Technical SeedsKnow-How

Technical SeedsKnow-How



Win-Win Relationships through Collaboration with Other Companies

Alliances with partners through the “NEC Open Innovation Workshop” Results in Complementary Technology, Investments and Human Resources to Create New Business

Alliance Partners

Business

NEC

+Win–Win Relationships

Complementary Technology

Investments

Human Resources

Larger

EffectsTechnology Seeds

Business

Small

Effects

Market…

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Supply Chain made by “NEC Open Innovation Workshop “

NECDeodorizing Catalyst Technology

Material Manufacturer

Equipment Manufacturer

Facility Manufacturer

Engineering Company

Trading Company

End User

Driving Force of Companies to Create New Business

Licensing

Promote Business Alliance

-Catalyst for Deodorizing Case-



ConclusionConclusion

・Amidst the Progress of IT, Intellectual Assets Become the Resource of Competence.

・ Adaptability Is Particularly Necessary for Management, Where Business Models Change Rapidly in Proportion to Moore’s Law and Other Factors.

・NEC’s Basic Intellectual Asset Strategy Is to Maximize the Power of Intellectual Creation as Business Value.

・Based on the “Open Innovation Paradigm”, NEC Has Put into Action Three Sets of Concrete Intellectual Asset Strategies:1. Integration of Own Business and Intellectual Asset

Strategies2. Enhancement of Technological Competitiveness3. Expansion of Income-Generating Opportunities

Documents

Intellectual Asset Strategy at NEC - OECD.org · Intellectual Asset Strategy at NEC ~Integration of Business Strategy and Open Innovation~ ... NEC LCD Technologies Royalty Capital