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Drivers of Success in Research, Commercialization, and Diffusion of Smart Lighting Susan Walsh Sanderson and Kenneth L. Simons Lally School of Management.

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Presentation on theme: "Drivers of Success in Research, Commercialization, and Diffusion of Smart Lighting Susan Walsh Sanderson and Kenneth L. Simons Lally School of Management."— Presentation transcript:

1 Drivers of Success in Research, Commercialization, and Diffusion of Smart Lighting Susan Walsh Sanderson and Kenneth L. Simons Lally School of Management and Technology & Department of Economics Light Emitting Diodes and the Lighting Revolution: The Emergence of a Solid-State Lighting Industry Research Policy This work was supported primarily by the Engineering Research Centers Program (ERC) of the National Science Foundation under NSF Cooperative Agreement No. EEC and in part by New York State under NYSTAR contract C

2 Characterizing Industry Emergence Too few studies of industry creation, so… Characterize industry emergence –Fifteen stylized facts –Compare to (scattered) prior literature Case of solid state lighting –Largely matches prior findings Differences pointed out –“excellent… a landmark paper in the area of SSL” - Ed Steinmueller

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4 Unpredictable Paths of Technology Evolution 1.Gradual technological advance Electroluminescence observed by 1907 Light emitting diode (LED) work from 1950s Holonyak red LED success, General Electric 1962 Half-century to develop white light, 1997 Electroluminescent night light (Wikipedia) myledlightingguide.com

5 Top Ten Institutions Most Cited for Inorganic LED Publications, By Time Period Cites: in Science Citation Index & Proceedings Index W-Cites: cites within LED publications only (avoids highly cited applications in 2002+) Credit divided among participating institutions

6 Unpredictable Paths of Technology Evolution 1.Gradual technological advance 2.Many paths, difficult to predict Researchers tried many different materials –Maruska’s red LED, 1962, from gallium arsenide phosphide RCA flat-panel TV needed blue, green LEDs RCA’s Maruska made weak blue LEDs Used gallium nitride (GaN) materials RCA, financially pressured, stopped work in 1974 GaN largely abandoned as unpromising Yet this underdog technology would triumph later…

7 Unpredictable Paths of Technology Evolution 1.Gradual technological advance 2.Many paths, difficult to predict 3.Duplication of invention –But differing specifics, limited success Few researchers still pursued blue GaN LEDs Akasaki: electron microscope beam activated GaN –But this method inappropriate for production Nakamura: pure-nitrogen annealing activated GaN –With refinement, made blue LEDs in reactor –Bright blue LEDs with phosphor yielded white!

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9 Unpredictable Paths of Technology Evolution 1.Gradual technological advance 2.Many paths, difficult to predict 3.Duplication of invention –But differing specifics, limited success 4.Perseverance for success; skill, method, luck Nakamura: unrelenting work for years; developed skills including building reactors; systematically approached the research problem; picked the right bet

10 Unpredictable Paths of Technology Evolution 1.Gradual technological advance 2.Many paths, difficult to predict 3.Duplication of invention –But differing specifics, limited success 4.Perseverance for success; skill, method, luck 5.Multiple players: Firms, universities, public labs RCA, Nichia, Nagoya Univ., many many others

11 Unpredictable Paths of Technology Evolution 1.Gradual technological advance 2.Many paths, difficult to predict 3.Duplication of invention –But differing specifics, limited success 4.Perseverance for success; skill, method, luck 5.Multiple Players: Firms, universities, public labs 6.Corporate persistence for R&D success Nichia persisted & was lucky; RCA stopped

12 Technology Push - Market Pull 7.Scientists, engineers push knowledge spread and new products Nearly 100,000 authors of LED papers –78,242 using last names & first initials –111,226 using full names –papers from Science Citation Index & Proceedings Index –by early March 2012

13 Technology Push - Market Pull 7.Scientists, engineers push knowledge spread and new products 8.Scientists & engineers increase with knowledge & commercial potential Publication & patenting grew exponentially; authors & inventors grew similarly Inorganic LED Publications and Patents

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15 Technology Push - Market Pull 7.Scientists, engineers push knowledge spread and new products 8.Scientists & engineers increase with knowledge & commercial potential 9.Market niches, perhaps many, precede major application

16 Market Niches (past formation)

17 Market Niches (recent penetration)

18 Cost of Light Incorporates: Lifetime Source efficiency Energy cost Replacement cost Labor cost $ / Million Lumen-Hours Source: Color Kinetics Cost of ISSL LED Fluorescent Incandescent Halogen THE COST OF LIGHT

19 Incandescent Fluorescent Source: Lumileds Luminous Efficiency (lumens / watt) Halogen LED White LED Reflector LED EFFICIENCY TRENDS

20 Technology Push - Market Pull 7.Scientists, engineers push knowledge spread and new products 8.Scientists & engineers increase with knowledge & commercial potential 9.Market niches, perhaps many, precede major application 10.Niches support technology development, not necessarily companies

21 Top Ten Institutions with Most Inorganic LED Patents (Multi-Country), By Time Period Patents: from granting authorities worldwide (avoids Western-country bias) M-Patents: granted in multiple countries Credit divided among participating institutions

22 Patents and Appropriation of Returns to Invention and Innovation 11.Thickets of patents, with cross-licensing Major LED producers: 100s-1000s of patents each Key for white light: –Nichia GaN patents –Nichia, Osram blue LED + phosphor patents Many disputes, settlements, licenses (early 2007)

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24 Patents and Appropriation of Returns to Invention and Innovation 11.Thickets of patents, with cross-licensing 12.Patents important early, for negotiation & protection Startup businesses lack most other protections E.g., Color Kinetics bought by Philips, $790M –For strong patent portfolio

25 Invading Mainstream Markets 13.Incumbent firms may aggressively transition to disruptive technology (yet face major competition) Leading western lighting firms – LED joint ventures –Philips + Hewlett-Packard 1999 JV Lumileds - Philips acquired 2005 for $950 million Philips claim: not another cent for incandescent lamp research –OSRAM + Infineon Technologies 1999 JV OSRAM acquired 2001, became OSRAM Opto Semiconductors –GE + Emcore 1999 JV Gelcore – GE acquired 2006 for $100 million Toshiba – internal LED development Despite disruption theory hallmarks –Different science, architecture, niches, & production technologies

26 Top 10HB LED CompanyLED Market ExperienceLighting Products 1NichiaChips: lighting, automotive, displays 2Samsung LEDLCD TV, Mobile & TV backlight Panel lighting, signage & outdoor lighting 3Osram Opto Semiconductor Street lights, grow lights Automotive, micro projectors Architectural, retail, indoor, outdoor 4Philips LumiledsBacklighting, cell phone flash, Architectural Indoor, outdoor, digital imaging, automotive 4Seoul Semiconductor LCD TV, monitor backlightArchitectural, signage, traffic, automotive 6CreeReplacement general Ill.Down lights, lamps architectural 6LG InnotekLCD TV, monitor backlightGrow lights, spot & ceiling, tube lighting 8SharpLCD, solar cellsPAR 30 & 38 lamps, bulb 9EverlightBacklighting mobile phones, computers Lighting, automotive 9Toyoda GoseiComputer backlighting, outdoor displays Down lights, wall lighting systems 26 These firms represent 75% of HB LED market. Source: Market share data, Strategies Unlimited, 2011.

27 Convergence: Displays & Lighting Backlighting driving technology and market development Backlighting entrants may become major lighting competitors Project approach: case studies of major potential competitors starting with Samsung 27 Growth by Application Backlight Market 2010 Samsung LED TV Samsung light panelSharp LED bulb

28 Invading Mainstream Markets 13.Incumbent firms may aggressively transition to disruptive technology 14.Technological race to keep up, & shakeout Managers wary of uncertainties & coming competition Chip production: subsidized Chinese competition Exacerbated by slow SSL adoption Shakeout expected in high-innovation- opportunity sectors

29 LED Bulbs Reach Tipping Point in 2014 Aggressive Market Price Reductions in LED bulbs in the US SoSri Jandhyala, The Lighting Revolution Solid State Lighting – opportunity, challenges & the future, urce: DOE MYPP 2013, Datapoint 2013: CREE 60W $12.97 Feb 2015 $ Retail: $ % LED Bulb Efficacy Improvement Dramatic improvements recently and more projected before reaching theoretical LED limit of 268 lumens/watt Efficiency improvements driving Cost reductions LED Cost ($/Klm) Improvement CREE 60W $16/Klumen $5 for a 60W bulb in 2020 Anticipate “tipping point” when LED bulbs reach <$10 Likely earlier

30 Invading Mainstream Markets 13.Incumbent firms may aggressively transition to disruptive technology 14.Technological race to keep up, & shakeout 15.Differentiation through product characteristics & features Some firms pioneering differentiated products –Programmable color-changing systems –Health, Circadian rhythm, & sleep applications –Communication devices incorporate data with light

31 Market (R)evolution Drive for energy efficiency and tops-down push aiding SSL adoption The volume & opportunity today is in “General Lighting” – Retrofits “Smart” lighting will start to grow significantly in 1-5 years - Driven by the “internet of things” & command/control Color / CCT Control Spectrum Shaping New applications / uses

32 What’s Next? Growth in the replacement bulb market will slow down So far, its been all about energy savings –Driven by governmental regulations and policies In the future, it will be about new and innovative uses –Smart Lighting –Occupancy/Motion sensing

33 “Smart” Lighting – The next catalyst Source: Datapoint & ON Semiconductor analysis and estimates (2012) Today Emerging in volume – on the market today SSL opens up new features –Occupancy, Ambient, Proximity sensors built into bulb –Wireless (Bluetooth, Zigbee, Proprietary) Products are on the market now

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35 A few possibilities for the coming years Occupancy and motion based controls Detection of your presence – and customized lighting No more “fixed” lighting Walls “painted” with different colors Multiple light sources in a room – ala the automobile No more light switches Completely new form factors – paper origami fixtures Individually addressable lamps can become a gateway No longer about illuminating spaces alone – about lifestyles “Adaptive learning” – machine learning similar to annoying internet ads; Naturally setting the personalized light

36 Conclusion: Patterns of Industry Emergence Fifteen stylized facts describe industry emergence –Unpredictable paths of technology evolution –Technology push and market pull Succession of niche markets notable Niches supported technology; companies rarely persisted across niches –Patents and appropriation of returns to invention –Invading mainstream markets New lighting goes beyond light bulbs –Communication, health, smart systems –Extends efficiency trends of prior lighting generations

37 Unpredictable Paths of Technology Evolution 1.Technological advance is gradual. 2.Technological advance takes many paths and is difficult to predict. 3.Duplication of inventive activity is common, but the multiple activities may differ in their specifics and each may have limited chance of success. 4.Key individuals succeed through perseverance, combined with skill, method, and luck. 5.Technologies are often developed by a mix of firms and institutions including universities and public laboratories. 6.Persistence of corporate R&D was necessary to achieve commercially viable invention success.

38 Technology Push - Market Pull 7.Technological knowledge spread, pushed by the efforts of scientists and engineers, facilitates the creation of products. 8.The supply of scientists and engineers working on a topic tends to increase as knowledge spreads and commercial potential becomes apparent. 9.Technologies are usually applied first in market niches, and a succession of niche markets may commonly support any major application. 10.Niches support the development of the technology but not necessarily specific companies, as few companies may participate in many niches.

39 Patents and Appropriation of Returns to Invention and Innovation 11.In typical products with substantial potential for patented technology, firms develop thickets of many patents related to a product, and negotiate cross-licensing agreements. 12.Patents are very important in a high-technology industry’s birth, when lawsuits and cross- licensing arrangements are being negotiated, as a tool to help protect firms’ future profit streams.

40 Invading Mainstream Markets 13.When radical disruptive technologies arise, incumbent firms may anticipate the new technology and act aggressively to transition to it, yet still be faced with stiff competition from new entrants and potentially lose their market leadership. 14.After creation of a new industry that has strong potential for continued technological advance, a race to keep up technologically results in continued exit of less able firms, and eventual near-cessation of entry, yielding after the initial buildup in firms an eventual drop-off, or shakeout, in firm numbers. 15.Firms’ competitive advantage often results from differentiation through novel product characteristics and features.

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