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IKE_Group I_Tessera Case Analysis_08032015_final


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Tessera Case Analysis

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IKE_Group I_Tessera Case Analysis_08032015_final

  1. 1. List of Presenters: 1. Alexander Christian 2. Dina Sandri Fani 3. Jenna Widyawati 4. Ridwan Martawidjaja Binus Business School MM Executive Batch 20 Innovation & Knowledge Economy Tessera Case Analysis
  2. 2. TesseraataGlance Leaderininnovating&licensingtechnologywithmorethan$2billioninrevenues 3/12/2015IKE-Tessera 2 About Tessera Technologies, Inc.  Got its start as IST Associates in 1990  Founded by 3 IBM veterans, i.e. Igor Khandros, Scott Ehrenberg, and Tom DiStefano  Headquartered in San Jose, California  Leader in innovating & licensing and intellectual property  Patented TCC chip-scale packaging (CSP) in 1990  Got the 1st two clients in 1994, i.e. Hitachi and Shinko Electric Industries, Ltd.  NASDAQ Initial Public Offerings (IPO) in 2003  Acquired Digital Optics Corporation in 2006
  3. 3. TesseraataGlance Leaderininnovating&licensingtechnologywithmorethan$2billioninrevenues 3/12/2015IKE-Tessera 3 About Tessera Technologies, Inc.  Mission: to create, develop, and license innovative semiconductor, interconnect and imaging technologies to deliver value to its customers, partners, employees, and stockholders  Global footprint of approximately 200 employees includes approximately 120 engineers and scientists, of whom approximately 80 hold advanced degrees
  4. 4. 3/12/2015IKE-Tessera 4 TesseraInnovationatEarlierStages Challengedoftheexistingpackagingsiliconchips  Placed in was simply a carrier  Significantly larger than the actual silicon chip  Typically made of ceramic with tiny metal wires bonded to the surface of the IC  Low-performance due to smaller solder ball: could not handle the stress due to the difference in expansion coefficients between the chip and the board Initial packaged chips  Tessera “compliant chip”: chip-scale package technology  Enabled a multichip module to be assembled with only good die  Flexible package design: can absorb the mismatch that allow the movement  Appealed to semiconductor manufacturers and electronic system builders  Assisting its customers in implementing high-volume manufacturing of reliable, miniaturized, high-performance and cost-effective semiconductor packages. Tessera’s Innovation
  5. 5. 3/12/2015IKE-Tessera 5 InnovationatTessera Focusesondevelopingareliable,high-performance,andcost-effectivesemiconductors, semiconductorpackaging,andadvancedimaging  Innovative developer of miniaturization technologies; taking form onto various intellectual properties (IPs)  2 broad inventions categories, i.e. o Advanced chip packaging for microelectronic devices o Image capture & processing technologies  Practicing IPs licensing; focusing on semiconductors, semiconductor packaging, and advanced imaging  Widely used in the production of consumer electronic devices, such as mobile phones & notebook computers
  6. 6. InnovationatTessera InnovationEvolution:FromDRAMs,RDRAMs,toDDR3 3/12/2015IKE-Tessera 6
  7. 7. 3/12/2015IKE-Tessera 7 InnovationatTessera Monetizingitsinnovation:IPcommercializationthroughIPlicensingpractices  Commercialize its intellectual property on technology innovations through licensing model  Licensing included patents, know-how, and trade secrets  Actual selling cycle is quite long, i.e. 6 to 18 months or more  What to sell: IP license adoption (performed by licensing team), running royalties (a.k.a. renewal and maintenance fee), and professional services provision (performed by the implementation team)  Professional services include transfer of the technology, ramp up production, pilot production, or even in-house training
  8. 8. 3/12/2015IKE-Tessera 8 InnovationatTessera Monetizingitsinnovation:choiceofcarrotvs.sticklicensing Carrot licensing  Friendly process  Licensor to convince licensee to take a license  Adoption of the licensor’s technology  Charging costs should be borne by the licensee with the hope of making the licensee’s product better or cheaper  Usually involve an exclusive license to the licensee Stick licensing  Slow, unfriendly, aggressive, time- consuming, uncertain, expensive and litigious process  The prospective licensee have been using the licensor’s IPs, knowingly or unknowingly  Considered as IPs enforcement effort
  9. 9. 3/12/2015IKE-Tessera 9 InnovationatTessera Tessera’schoiceofcarrotlicensingastheirwaytomonetizeitstechnology Hinged on certain criteria, i.e.:  Chip-scale packaging was destined to be so widely used  Derived more income through wider adoption; thus need to allow its technologies to be incorporated into the supply chains of other firms  Self-manufactured is seemed impractical However, stick licensing will be concluded when necessary in enforcement-based licensing in order to ensure the protection of the rights
  10. 10. 3/12/2015IKE-Tessera 10 InnovationatTessera ChallengesonTessera’sInnovation Payback period of investment: long cycle of conversion Substantial investment vs. potential revenues realization High dependency to the other manufacturer firms Changes on patent law enforcement: harder to get the injunction of the infringement The rise of white manufacturers and/or non-practicing entities Direct competition with internal R&D at those firms
  11. 11. 3/12/2015IKE-Tessera 11 InnovationatTessera Possibilitiesotherthanlicensing? Monetization through IP Exchange  Trading the intellectual property through new financial exchange  Sell its patent or group of patents as “unit license rights” (ULR): grants a one-time right to use a particular technology in a single product  Can be bought and sold like shares Benefits Lower transaction costs to market Unlock value in inactive IP holdings Maximize revenue generation in all IP holdings Speed and streamline process of getting IP to market Secure early adopter advantage and thought leadership in fast- moving IP world Add efficiency throughout IP management
  12. 12. 3/12/2015IKE-Tessera 12 InnovationatTessera TheroleofpatentinTessera Patent’s role Financi al Bargain ing Reputat ion Primary role of patents is to optimize income through license To improve the position of a company & to enhance market position as the innovative developer of miniaturization technologies Patents designed to promote strategic alliances with licensee
  13. 13. 3/12/2015IKE-Tessera 13 InnovationatTessera Thewarwithwhitemanufacturers:thebestwaytomonetizesilentaircoolingtechnology Monetizing silent air cooling technology Licensing Manufacturing Sell to Highest Bidder
  14. 14. Licensing–samelikeTesseracurrentpractice,registerpatent,selllicenseand workingtoimplement ideasintoproduction 3/12/2015IKE-Tessera 14 Pros: Familiar business model Mature business model for Tessera Cons: Long selling cycle Higher threat/risk from white manufacturer High investment to prove high-volume scalability
  15. 15. Manufacturing–manufacturingtheproductinTessera’smanufacturingfacility inaccordancetocustomer’stechnicalspecification 3/12/2015IKE-Tessera 15 Pros: Higher control, smaller risk from white manufacture Only need to enlarge capacity of initial prototyping production line Cons: High investment for manufacturing facility Might require high product variability to achieve cost effiency
  16. 16. SelltoHighestBidder–UnprecedentedstrategyforTesserawherethelicense andknow-howsoldtosinglehighestbidder 3/12/2015IKE-Tessera 16 Pros: Low investment, only R&D Shorter selling circle Transfer the risk to buyer Cons: New business model No control over further technology development Considered as the best solution and can be new business model option
  17. 17. FurtherAnalysis CanIndonesiancompaniesachievethelevelofbreakthroughofinnovationlikeTesseraorApple? 3/12/2015IKE-Tessera 17 Generally, hardly to achieve the level of breakthrough of innovation… Education system Government role Socio-cultural system  Key vehicles for the intellectual and professional development  Problems related to quality and access as well as the even distribution of well- trained teachers  High number of dropped out student  Low Human Development Index (.629; ranked 121 out of 185 countries)  IP law enforcement does not run as expected by the IP owner  The Judiciary usually imposes the minimum punishment in the case of IPR infringement  The nature of IPR crimes is by complaint (warrants complaint)  Complexity on IP registration process  Lack of incentive program for the Innovators  Openness towards new ideas or constructive feedback  Multicultural, rooted in older societies  Rooted in imperialism mentality  Deference to authority, paternalism, and social stratification hinder innovation process run smoothly
  18. 18. FurtherAnalysis CanIndonesiancompaniesachievethelevelofbreakthroughofinnovationlikeTesseraorApple? 3/12/2015IKE-Tessera 18 … however, there is a little example of Indonesian company who already could and has a similar approach of monetizing its innovation like Tessera  Began in 1992 as a software development company  Having started in telecommunication industry; but then further spread its solutions to the public sector, utilities, and other industry  Delivers total IT solutions, including Supply Chain Management, e-Government, and Managed Services “A complete web-based application for automating the entire procurement process, from purchase order creation on the front end to decision making and reporting tool that provide greater management control” The Product  Carrot licensing (module licenses, i.e. Vendor Management, Core Modules, and Contract Management)  Includes transfer of know-how in implementation stages  Professional fee charges to its client What to Sell
  19. 19. FurtherAnalysis CanIndonesiancompaniesachievethelevelofbreakthroughofinnovationlikeTesseraorApple? 3/12/2015IKE-Tessera 19 … however, there is a little example of Indonesian company who already could and has a similar approach of monetizing its innovation like Tessera  Established in 1996  Founded on the passion to combine management & IT  A leading provider of business application solutions and software- related services  Focus on developing innovations & providing customer-oriented solutions to help companies of all sizes and industries achieve their business goals
  20. 20. FurtherAnalysis TheMainObstaclesinMonetizingInnovationinIndonesia 3/12/2015IKE-Tessera 20 1 Lack of Awareness Little has been aware of the need to grasp the value of IP in terms of its commercial relevance 3 Total economic value of royalties received & paid Significant differences. Perform extremely poorly in comparison (a difference of USD 1.5 billion)1 1. Ghafele, Roya and Gibert, Benjamin. “Promoting intellectual property monetization in developing countries : a review of issues and strategies to support knowledge-driven growth”. July 2012 2 Lack of ‘ecosystem of incentives’ Has not promoted and ecosystem of incentives for individuals and/or companies to file IPs in order to stimulate domestic innovation 4 Weak law enforcement Lead to the rise of Non-Practicing Entities (NPE). More active support from government departments or other public agencies needed to suppress no. of NPE. 5 Heavy requirements in Injunction Proceedings Proof of IP ownership; sufficient evidence to prove the existence of IP infringement, huge amount of payment of warranty
  21. 21. 21 IKE-Tessera3/12/2015