2013-10_patent_Korea_Japan-Analysis[1]

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Patent Analysis of Electronic/Automotive/Chemical Companies Representing South Korea and Japan

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1. Introduction

Korea has established great economic growth in a short period of time after the Korean War in

1950. This growth, even called to be the miracle of the Han River, has given birth to large

corporations such as Samsung and LG. Korea’s economic growth was based on the export

enterprise. Due to a smaller population compared to Japan and a limited domestic demand

market, exporting goods was the best option for Korea. The strategy was to secure the place in

the world market by focusing on introducing and improving the skills of the world’s leading

companies in highly demanded field of technologies, such as semiconductors, display devices, and

automotives. The plan was to compete along with companies, but with comparably lower prices.

In another words, economic growth was propelled by the ‘First Follower ’ strategy.

On the other hand, Japan did not only possess the best technology in the world, but also a

fairly sizable domestic market. Therefore, it was possible to establish the economic growth on the

foundation of Korea’s domestic demand market. In addition, Japan’s high quality products were

favored by many international consumers throughout the world, earning the power in the world

market with its credibility and product brands. However, Japan gradually weakened as the

globalization of its economic system began to take place in 1990, since they could not respond

quickly to such changes. This is especially apparent in electronics where the most rapid changes

are occurring. Many Japanese electronics companies possessing high-level technology such as

Canon, Panasonic, Hitachi, and Sony are experiencing business depression due to its failure to

correspond to the new market such as mobile devices.

Regardless, Japan is still the world’s third economic power, and is known for the world’s most

advanced technology skills. Patent activities of Japanese companies are remarkably active.

According to the IFI CLAIMS Research1, 19 out of top 50 US patent assignees were Japanese

companies. They were mostly electronics and automotive companies. Five Korean electronics

companies including Samsung were on the list as well.

Korean and Japanese companies are very active in applying for patents because it is one of the

necessary indicators of accomplishing innovation. In other words, patents can be used in figuring

out each company’s technological efforts and strategies in gaining preoccupancy in the future

market. This research aims to compare and analyze the patent strategies of two countries’

representative companies who are the leaders of Asian economy. Since

electronics/automotives/chemicals are the areas that Korea and Japan have intensively and

continuously invested in, the strategies of respective companies for these particular fields will be

examined.

1http://ificlaims.com/index.php?page=misc_top_50_2012

http://ificlaims.com/index.php?page=misc_top_50_2012

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2. Methodology of Patent Comparison Analysis

As the representative companies of both countries in the field of electronics, automotives, and

chemicals, the following companies are selected based on the similarity of business field and their

level of excellence in sales and profits.

- Electronics: Samsung Electronics Company VS Panasonic Company

- Automotives: Hyundai Motor Company VS Toyota Motor Corp.

- Chemicals: LG Chemical Corp. VS Mitsubishi Chemical Corp.

[Target Companies’ Patent Strategy Comparison for each field]

Each company’s recent five-year (Jan. 1, 2006~Dec. 31, 2010) patent applications were extracted

from respective countries to examine the strategic differences of securing patents. In other words,

since general patent system follows the territorial “precedent local filing” system, companies file

for domestic applications for their new invention prior to international applications. Therefore,

identifying domestic patent application activities are most appropriate in understanding the

strategies of comparing companies.

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Main Analysis

- Patent activities for the last ten years?

- Most concentrated technology areas of patent applications?

- Open innovation activities (Joint application, patent acquisition activities, etc.)?

3. Patent strategy comparison analysis for Samsung VS Panasonic

3-1. Current status of Samsung and Panasonic

Samsung and Panasonic are known as Korea and Japan’s representative electronics company.

Both companies had been running businesses in the areas of semiconductors, display devices,

household appliances, digital imaging, and wireless communications. Samsung Electronics

Company had been fostering new business in medical and bio-industries as a future business

concentration. They plan to invest 1.2 trillion won by 2020 to promote 10 trillion won of annual

revenue in medical device business and to meet the sales goal of 2 trillion won in Biosimilars. As

for Panasonic, they had been carrying out additional businesses in automotive system, energy

industry, and eco-solution industry.

Samsung was founded in 1969, and as of 2012, the company has accomplished annual revenue

of 165 trillion won. 138.5 trillion won, about 84% of the sales were from the international market,

shows their high dependency in the international market. Samsung, establishing visible success in

a short period of time, ranked #22 on the 2011 “Fortune 500” by the Fortune US business

magazine. They have a unique position in semiconductor DRAM and mobile AP area, as well as

market competitiveness in TV, monitor, and image display area. Moreover, they arose to be the

strongest in smart phone market with the market share record of 3.7% in 2009 and 19.9% in 2011.

In response, Samsung put in 6% of 2011 total revenue amounting to 10.3 trillion won for the

research, and it was the highest since the company was founded. As of 2011, Samsung possesses

total of 196 bases in the world including manufacturing corporations, sales corporations, and

research labs, also securing total of 220,000 workers, including 101,973 national workers and

119,753 international workers.

Meanwhile, Panasonic had a record annual revenue of 117 trillion won as of 2011 after its

foundation in 1918. 53% of the sales amounting to 62 trillion won came from the domestic

market, taking up higher proportion of domestic sales than Samsung. Although there was slight

hesitancy in company growth recently due to long period of stagnation in Japanese economy and

sudden growth of latecomers, the newly appointed CEO Tsuga Kazuhiro introduced innovative

business strategy to regain its reputation in last June. The company lowered the proportion of

products that makes the least profit such as TV and DVD player down to 20% and wrote out

multimillion dollar to carry out the business in mobile phones, solar panels, and lithium-ion

batteries. They are also expanding eco-solution business in the areas that make the most profit

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such as washing machines and refrigerators or other major domestic appliances, light bulbs,

bathroom, ceiling fans, and electrical outlets.2Panasonic has invested 7% of 2011 annual revenue

amounting to 7.76 trillion won in research and development fund, also securing total of 330,000

workers including 133,605 national workers and 197,162 international workers.

[Current status of Samsung Electronics and Panasonic]

3-2. Patent Analysis Result of Samsung and Panasonic

For the last five years, the number of national patent (Korea) applications filed by Samsung was

45,435 and national patent (Japan) applications filed by Panasonic was 58,944. Quantitatively,

Panasonic applied and possesses 1.3 times more than Samsung. The R&D expenditures of

Samsung have consistently increased, but the number of patent applications has decreased

dramatically. R&D expenditures of Panasonic did not increase but the number of patent

applications decreased. For the number of patent application per R&D expenditures in unit of one

billion won were 1.4 for Samsung and 1.8 for Panasonic.

2http://news1.kr/articles/1128857

http://news1.kr/articles/1128857

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[Total Number of patent

application(2006~2010)]

[Samsung’s number of patent application]

[Panasonic’s number of patent application]

Samsung and Panasonic’s power in global market was examined through patent family analysis.

While annual patent application activity was decreasing, the percentage of patent family

applications continued to maintain its status quo or have increased. The rate of Samsung’s patent

family applications increased about 16% per year after 2006, holding up to 88% of total

application by 2010. This reveals Samsung’s strong will in securing the global market. Meanwhile,

judging by the small marginal difference since 2006, Panasonic seems to still consider great deal

of importance in domestic market.

[Samsung’s Annual Patent Family Application Status]

[Panasonic’s Annual Patent Family Application Status]

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The study showed that the common concentrated areas of technology for both companies were

semiconductors, image communications, and electric digital data processing. The different areas of

concentration for Samsung were transmissions, display devices, semiconductor memory devices,

and for Panasonic were batteries for the direct conversion of chemical energy into electrical

energy (fuel batteries), domestic appliances, and recording devices.

[Major Technology Areas of Samsung Electronics and Panasonic (IPC)]

Samsung and Panasonic seem to have common tendencies in open innovation strategies. Both

companies are active in open innovation through patent acquisition rather than joint application.

According to the patent acquisition analysis of transfer and acquisition information based on

United States Patents, Samsung acquired 10,097 and Panasonic acquired 9,620 patents. However,

these two companies show somewhat different patent acquisition strategies. In case of Samsung,

the company usually acquires patents from foreign competitors but Panasonic mostly acquires

patents from domestic competitors. Namely, Samsung had acquired patents from foreign

companies such as the Hewlett-Packard and Seiko Epson, and Panasonic acquired patents from

domestic companies such as Pioneer, Fujitsu, and NEC.

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[USPTO Patent Acquisitions Cases]

[Samsung’s Top 5 Patent Acquisition Applicant]

- Hewlett Packard Development Company: 652 cases

- Hewlett Packard Company: 267 cases

- Seiko Epson Corporation: 171 cases

- AST Research: 170 cases

- Samsung Techwin: 146 cases

[Panasonic’s Top 5 Patent Acquisition Applicant

- PIONEER CORP: 210 cases

- FUJITSU LTD: 200 cases

- SEMICONDUCTOR COMPONENTS IND: 109 cases

- NEC CORP: 84 cases

- PANASONIC TECHNOLOGIES INC: 79 cases

Samsung mostly acquired technologies in the areas related with semiconductors and electric digital data

processing which occupied 47% of total acquisition. Panasonic acquired technologies such as

communication through images/pictures/figures and electric digital data processing which occupied 32%

of total acquisition. Technology regarding batteries for the direct conversion of chemical energy

into electrical energy is also the area that Panasonic is concentrated on applying lately.

[Major Technology Areas of USPTO Patent Acquisition]

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4. Patent strategy comparison analysis for Hyundai and Toyota

4-1. Current status of Hyundai and Toyota

Hyundai Motors and Toyota Company are Korea and Japan’s leading automobile manufacturer.

After its foundation in 1967, Hyundai Motors has sold 4,060,000 cars, accomplishing the total

revenue of 42 trillion won and ranking the 5th automotive company in the world. The company

succeeded in expanding its influence in the world market amidst world’s economic insecurity,

establishing its firm enterprise competitive power with an increased value of 12.3% (sales basis)

from last year. The domestic sales only took 16.8% of total revenue, showing company’s higher

dependency on the international market. The major field of international market (sales basis)

includes countries such as North America (19%), China (18.6%), and Europe (15.7%).

Meanwhile, after its foundation in 1937, Toyota Company has sold 7,090,000 cars, accomplishing

the total revenue of 18.5 trillion yen (about 277 trillion won). Toyota is the fourth ranking

automobile company in the world, being a true leader of the global market. Although company

revenue ranking shows only a single level difference with Hyundai, Toyota’s revenue actually

amounts to 6.6 times more than Hyundai. Toyota’s major field of international market (sales basis)

includes countries such as North America (25.4%), Asia (18%), and the domestic market sales of

about 28%.

These two companies have concentrated their efforts in developing eco-friendly cars such as

hybrid cars, electric cars, and fuel cell electric vehicles, which can be the solution to the problem

of global warming, fossil fuel depletion, and various environmental pollutions. Hyundai invested 3%

of 2011 total revenue amounting to 1.3 trillion won into research and development areas, and

Toyota invested 4% of total revenue amounting to 780 billion yen (about 11.6 trillion won). It is 10

times more than Hyundai’s investment.

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[Current status of Hyundai and Toyota]

4-2. Patent Portfolio Analysis Result of Hyundai and Toyota

For the last five years, Hyundai Motors filed 14,964 national patent applications and Toyota filed

42,657 national patent applications. Toyota holds 2.8 times more patents in quantity than Hyundai.

The comparison of R&D and patent activities showed that although Hyundai’s R&D expenditures

have increased, patent activities have somewhat decreased for the last five years. For Toyota, R&D

expenditures and patent activities have both decreased after 2007. The number of application per

R&D expenditures in unit of one billion won for both companies showed Hyundai with higher

number of 2.6, and Toyota with 0.8.

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[Patent Application Cases (2006~2010)]

[Hyundai’s patent application cases]

[Toyota’s patent application cases]

The patent family analysis was performed to figure out Hyundai and Toyota’s power in global

market, and the result showed that Toyota was more dominant in the number of family

application and the applied countries, but Hyundai was more dominant in family patent ratio.

Hyundai holds average of 1.4 families with 1.3 countries per patent. Toyota holds average of 1.6

families with 1.5 countries per patent. Regarding the percentage of family application, Hyundai’s

patent applications have continuously decreased until 2009 but patent family applications have

increased about 20% every year, showing dramatic growth. In other words, the percentage of

patent family application has increased from 7% in 2006 to 27% in 2010. This growth rate of 40%

shows that Hyundai has been putting efforts in patent families for the expansion of share in

global market. On the other hand, Toyota has shown a decrease in the total number of patent

applications and family applications. Family application was up to 20% in 2006 but it has

decreased to 15% in 2010.

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[Hyundai’s Annual Patent Family Application Status]

[Toyota’s Annual Patent Family Application Status]

The research showed that Hyundai concentrated on patents for technologies in motor

vehicles/trailers, vehicle fittings/parts, and vehicle propulsion systems and Toyota concentrated on

batteries for the direct conversion of chemical energy into electrical energy (fuel cell), combustion

engine controls, and controlling systems (hybrid). Distinctively, the technology in batteries for the

direct conversion of chemical energy into electrical energy takes up the highest percentage of

patent applications for Toyota (12%), whereas it takes up smaller proportion for Hyundai with 4%.

Also, Hyundai’s most concentrated area of technology in motor vehicles/trailers (10%) only takes

up 4% of total patent applications for Toyota.

[Hyundai and Toyota’s major area of technology (IPC)]

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Hyundai and Toyota seem to be sharing common open innovation strategies. Both companies

are more active in open innovation through joint applications rather than patent acquisitions. The

current joint application status shows that Hyundai filed 3,407 joint applications equivalent to 23%

of total patents. The joint applications proportion was only 3% in 2006, but it increased

dramatically in a short period of time to 47% in 2009. A major partner of the joint applications

was the subsidiary company, Kia Motors, which corresponds to 86% of total joint patent

applications. On the other hand, Toyota filed 8,584 joint applications equivalent to 20% of total

patents. Every year except 2007, the company has been filing about 20% of patents jointly. Most

of the joint applications were carried out with subsidiary companies, Toyota Central R&D Labs

(19%) and DENSO automobile parts corporation (17%).

[Number of Joint Patent Applications]

[Annual Status of Joint Patent Application]

5. Patent Strategy Comparison Analysis for LG Chemicals and Mitsubishi Chemicals.

5-1. Current Status of LG Chemicals and Mitsubishi Chemicals

LG Chemicals, founded in 1947, is the number one chemical substance manufacturer in South

Korea and ranks 15th in the world based on sales according to the “ICIS top 100 Chemical

Companies 2012” 3 . The company is strengthening its growth power with its foundation on

traditional petrochemical industry along with business portfolios such as IT & electronic materials

and secondary batteries.

Mitsubishi is the leading general chemical company of Japan founded in 1934. It is 8th ranking

chemical industry in the world based on sales according to ICIS. Mitsubishi’s 2011 total revenue

was 3.208 trillion yen (22.7 trillion won), about twice the sales of LG Chem.

3http://www.icis.com/pages/top-100-2012/

3,40723%

8,584 20%

HYUNDAI TOYOTA

http://www.icis.com/pages/top-100-2012/

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While both companies manage industries in petrochemicals, IT & electronic materials, and

batteries, petrochemicals hold 75% of LG’s total revenue and 53% of Mitsubishi’s total revenue.

Distinctive to LG Chemicals, Mitsubishi is advancing into other businesses than the ones

mentioned above, such as pharmaceutical intermediates, clinical and diagnostic experiments, and

development of new pharmaceuticals.

LG Chemicals have invested 2% of 2011 revenue amounting to 348.1 billion won into R&D

expenditures whereas Mitsubishi invested 4% of their revenue amounting to 139 billion yen (2.678

trillion won), which is 7.8 times more than LG.

[Current Status of LG Chemicals and Mitsubishi Chemicals]

5-2. Patent Portfolio Analysis Result of LG Chemicals and Mitsubishi Chemicals

For the last five years, LG Chemicals filed 4,215 patent applications and Mitsubishi Chemicals

filed 2,771 patent applications in their national patent offices. Quantitatively, LG holds 1.5 more

patents than Mitsubishi. For both companies, number of patent applications has decreased

whereas R&D expenditures have increased. Also, LG showed higher ratio of the number of patent

applications per million. The number of patent applications per million was 3.7 for LG and 0.4 for

Mitsubishi.

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[Number of Patent Applications

(2006~2010)]

[Number of Patent Applications for LG Chemicals]

[Number of Patent Applications for Mitsubishi Chemicals]

The patent family analysis was performed to compare LG and Mitsubishi’s power in global

markets, and the results showed that the number of family applications was higher for Mitsubishi

Chemicals but the ratio of patent family countries per number of application is higher for LG

Chemicals. LG possesses a number of family patents mainly from Japan, United States, and China,

averaging 3.2 families and 2.5 countries per patent. Mitsubishi possesses a number of family

patents mainly from United States, China, and Europe, averaging 3.4 families and 2.1 countries per

patent. Out of total patent applications, LG holds 35% patent families and Mitsubishi holds 26%

patent families. LG declined in number of patent families for the last five years then showed

recent expansion but Mitsubishi has been showing continuous decline since 2007.

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[Average Number of Families and Family Countries]

[Status of Annual Patent Family Application for LG

Chemicals]

[Status of Annual Patent Family Application for

Mitsubishi Chemicals]

Commonly concentrated areas of technology for patents that both companies share were fuel

cells, highly polymerized compounds, carbocyclic compounds, optical elements, and

semiconductors. Especially, 41% of LG’s entire patents were related to fuel cells, indicating the

company’s great interest in particular technological area. Other than that, LG is also processing

patent applications regarding adhesives and macromolecular compound mixtures, whereas

Mitsubishi is working on developing technological areas of electrography and catalysis, colloid

chemistry.

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[Major Technological Areas of LG Chemistry and Mitsubishi Chemistry (IPC)]

Open innovation strategy of LG and Mitsubishi is contrary to each other. LG is pursuing open

innovation through patent acquisitions, and Mitsubishi is pursuing through joint application

strategy.

Result of joint application analysis showed that 3% (114 cases) of LG’s patent applications were

joint patents, and 17% (469 cases) of Mitsubishi’s patent applications were joint patents.

Mitsubishi’s joint application ratio was 6 times more than LG. LG’s major joint companies were

KAIST, LG Electronics, Seoul University, and Hyundai Motors; Mitsubishi’s major joint companies

were Pioneer, ROM, Kyoto University, Nippon Telegraph and Telephone Corporation, and Hitachi.

[Number of Joint Applications]

[Annual Joint Application Status]

1143%

46917%

LG Chemical Mitsubishi Chemical

5.0% 2.1% 1.2% 2.9% 1.9%

19% 17% 18% 18%12%

-80%

-55%

-30%

-5%

20%

0

40

80

120

160

2006 2007 2008 2009 2010

LG Chemical Mitsubishi Chemical

Num

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of

Join

t Applica

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Join

t Applica

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atio

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According to USPTO Assignment (ownership transfer) Recordation, LG acquired 521 assigned

patents and Mitsubishi acquired 277 assigned patents. The records show that both companies

acquired a number of technologies related with fuel cells and semiconductors. Other than the

major areas of technology, LG acquired technologies in LCD, layered products, and inorganic or

non-macromolecular organic substances as compounding ingredients; and Mitsubishi acquired

technologies in macromolecular compounds, preparations for medical, dental, or toilet purposes,

information storage, and layered products.

[Major Technology Areas of USPTO Patent Acquisition]

6. Conclusion

The analysis of representative companies from Korea and Japan’s

electronic/automotive/chemical area showed that Korean companies concentrate on patent

applications more than Japanese companies, considering the global market. With the case of

Samsung and Panasonic, Panasonic possessed 30% of patents as family patents whereas Samsung

showed an increase in the proportion of family patents for the last five years, taking up to 88% of

total patents by 2010. Although Toyota exceeds Hyundai in patent family proportion in the

automotive, recently Toyota has been showing reductions; Hyundai, with the 4% in 2006, showed

increase in its proportion to 27% in 2010. Also in the chemical area, LG Chemicals had a higher

percentage of patent families with 35.4% and Mitsubishi with 25.8%.

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Korea and Japan’s representative companies’ annual revenue for the last 3 years indicate that

Korean companies are mainly targeting the global market. 83% of Samsung’s total revenue is from

the global market, but 53% of Panasonic’s total revenue is from the domestic market, higher than

their proportion of the international market.

[Samsung’s Recent 3 year Revenue]

[Panasonic’s Recent 3 year Revenue]

In the automotives area, Toyota’s revenue scale is too large to compare with Hyundai Motors,

but Toyota’s proportion of revenue from the international market is similar to Hyundai Motors.

However, for the last 3 years, the percentage of Hyundai’s revenue from the international market

has increased from 66% in 2009 to 73%, but the percentage of Toyota’s revenue decreased from

71% in 2009 to 65% in 2011.

[Hyundai’s Recent 3 year Revenue]

[Toyota’s Recent 3 year Revenue]

The chemical area is the same. 57% of LG’s total revenue was from the international market

whereas only about 30% of Mitsubishi’s total revenue is from the international market.

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[LG’s Recent 3 year Revenue]

[Mitsubishi’s Recent 3 year Revenue]

This might be related to the economical background of Japan and Korea as mentioned in the

introduction. Unlike Korea, Japan has developed a considerable size of domestic market but Korea

could not expect growth in a company or country only depending on such a small domestic

market. The government of South Korea executed an export drive policy in 1970 in hopes to

become a rising nation with rapid growth. This policy led Korean companies to sell their products

targeting the international market.

Within two years of its foundation, Samsung Electronics succeeded in the first export of

monochrome Television to Panama in 1971, achieving 100 million dollars in export by 1978. They

established Production Corporation and Sales Corporation in US, Germany, Portugal, and all over

the world, getting into full scale international market sales. In 1983, the company developed 64K

DRAM, succeeding as the third nation after US and Japan, which became the foothold in gaining

power in the international market. Hyundai Motors developed the first independent model, Pony,

in 1974, and succeeded in exporting 6 cars to Ecuador in 1976. They also succeeded in exporting

the first Excel Sedan to United States in 1986, achieving total export of one million cars only with

Excels. With this groundwork, the company established manufacturing factories in US, China, India,

Europe, Russia, Brazil, and many other places all over the world, and has now turned into a

corporation with 6,000 sales networks in 190 countries. It is same with LG Chemicals. The

company began manufacturing the nation’s first resin casting and plastic products in 1950~60s,

establishing the foundation as a chemical corporation. Since the second CEO Ja-Kyung Koo was

appointed in 1970s, not only did the company earnestly make inroads into petro-chemistry

industry which is used as a raw material for plastic, but also began turning their eyes into

internationalization. Total export amounts of one million dollars in 1970, exceeded to 50 million

dollars in 1978, up to current sales of 2011 amounting to 11.2 billion dollars.

Although Japan possesses world-class technologies, their global marketability power seems to

weaken. The market price seems to somewhat recover lately indeed after the administration’s

exchange rate policy. It has shown improvements in some degree with yen slack lowering the

price competitiveness, and hence increasing the number of consumers demanding Japanese

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products. However, Japanese yen policy is only a temporary solution. It would require more

fundamental solution to fully recover from current economic recession.

Innovation through various perspectives might be necessary for the fundamental solution of

economic recession, but this research may suggest Japanese companies to turn their eyes from

domestic market to more aggressive company management in the global market. In other words,

if companies establish appropriate product strategies and patent strategies in global market’s

point of view, Japan can leap up once again as a Fast Mover based on the outstanding Japanese

technology, and reorganize the change in the dynamics of the global market.

Documents

2013-10_patent_Korea_Japan-Analysis[1]