leotek electronics corporation the l eader in e lectro- o ptics tech nology address: no. 50,...

Leotek Electronics CorporationThe Leader in Electro-Optics Technology

Address: No. 50, Lung-Yuan 7th Road, Lung-Tan, Tao-Yuan Hsien, Taiwan, R.O.C.

Tel: 886-3-499-5939, Fax: 886-3-499-5930, E-mail: [email protected], Website: //www.leotek.com.

LEOTEK

TM

技術、市場與資金 – 分享我的個人經驗

Integrating Patents, Venture Capital andDevelopment of Products for Commercialization

-- A Reflection on the Journey of Leotek in Taiwan

Presented by:

Chen H. Wu, Ph.D. ( 吳振和 )

June 7, 2003

Table of Contents

Introduction

The Starting Point

Going Through the Process

The Future Challenge

Conclusions


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I.

II.

III.

IV.

V.

Henry Ford Theory of a 3-Leg Stool• Mr. Henry Ford was once

asked: “ You said that Technology, Marketing and Financing are the three most important ingredients for a company to be successful, can you tell me which one of these three is the most important ?”

• Mr. Henry Ford answered: “ Technology, Marketing and Financing are just like the three legs of a stool, now can you tell me which one of these three is the most important ?”

TechnologyMarketing

Financing

Quality AssuranceHuman ResourcesProduction, SalesMIS, etc.

COMPANY


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I. Introduction

II. The Starting Point

II-1. Product Selection

II-2. Attractive Market Potential

II-3. Competitive Situation


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II-1. Product Selection

• Product: Light-Emitting Diode (LED) products * Energy-efficient product: a world-wide trend * Environmentally friendly, low maintenance cost and compact size: Technology of the future; Everything that lights up will be made by LEDs

• Market: LED traffic signal light grew at a rate of 80~100% per year

• Technology: * My expertise and strength * Team: Available in Taiwan; Taiwan was (and is) the 2nd largest LED country in the world.

• Financing: Available in Taiwan (Many VCs)


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0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1994 1996 1998 2000

Actual (1994~99)

Forecast (2000)

Total U.S. Market Size = 12,000,000 units; 1.5 B$

II-2. Extremely Attractive and Exciting LED Traffic Signal Market


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Calculation of Return of Investment of LED Traffic Signal Lamps

Traffic Signal Type

Ave. on-time

Incandescent Bulbs LED Traffic Signal LampsAnnual

Difference (US$)

Initial Cost Difference

(US$)

ROI

(year)Annual

Electricity (US$)

Annual Maintenance

(US$)

Annual Total (US$)

Annual Electricity (US$)

Annual Maintenance (US$)

Annual Total (US$)

12” Red

50% 52.56 30.00 82.56 4.20 0 4.20 78.36 60.00 0.765

12” Yellow

5% 5.26 30.00 35.26 0.81 0 0.81 34.45 60.00 1.742

12” Green

45% 47.30 30.00 77.30 3.78 0 3.78 73.52 110.00 1.496

Total100%

105.12 90.00 195.12 8.79 0 8.79 186.33 230.001.234

(Ave.)

Conclusion: Based on the above calculations, the average return of investment for a set of traffic signal lamps (including one of each red, yellow and green) is 1.23 years.


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LEOTEK

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Energy Saving of LED Traffic Signal Light


LEOTEK

TMLeotek Electronics CorporationThe Leader in Electro-Optics Technology

LEOTEK


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Facts and Numbers Unit

1. Number of Traffic Intersections in USA 300,000 Each

2. Average Wattage in Each Intersection When Using Conventional Incandescent Bulbs

1,750 Watt

3. Average Wattage in Each Intersection When Using LED Lamps

140 Watt

4. Average Energy Saving Per Intersection 1,610 Watt

5. Energy Saving if All Intersections Are Replaced with LED Lamps

483,000,000 Watt

Energy Saving of 483 Mega-watts can be Realized if All Traffic Signal Lights in the U.S. Are Replaced with LED Lamps or A Saving of US$423,108,000 Annually (US$0.10/KWH)


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Company NameBegan LED Traffic Signal Business

Estimated Percentage of Market Share

No. of Patents in LED Traffic Signal

Ranking

Dialight 1992 ~40% 1 1

Ecolux 1992 ~30% 2 2

Precision Solar

1993 ~15% 2 3

Electro-Tech 1992 ~10% 2 4

Atlite/Cooper 1994 ~2% 0 5

ITCPI 1995 ~1% 0 6

Traffic Parts 1995 ~1% 0 7

Leotek 1998 ~1% 1 8

II-3. Competitive Situation in LED Traffic Signal Lights (1999)

Dialight40%

Ecolux30%

Precision15%

Atlite2%

ITCPI1% Leotek

1%

TrafficParts

1%Electro-

Tech10%


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DialightEcolux Precision

Solar

Electro-Tech

AtliteLeotek

ITCPI

Total U.S. Market Size:• 12,000,000 Lamps• 1.5 billion US$


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1999 Market Size: • 170,000 Lamps• 20 million US$

Traffic Parts


III. Going Through The Process

III-1. The Dilemma

III-2. The Answer

III-3. The Strategy

III-4. The Achievement


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III-1. The Dilemma (Year 1999)

• Market Share: ~95% of market share occupied by 4 major companies; Leotek had only ~1%

• Technology: These 4 companies combined owned 7 major patents; Leotek had only 1.

• Financing: 3 of these 4 companies were subsidiaries of large companies with strong financial backing; Leotek had very little financing.

• In Addition: These companies entered the market much earlier, with well-known names, strong management and technology teams, well established management systems, etc.


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My Question• The LED traffic signal light market is being

occupied by many established companies, do I have any chance here?


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My Answer• No, I don’t think I have any chance here.

• Even if I think I had a chance here, I don’t know how to do it because I don’t own much of any marketing, technology or financing.

So, should I give up ??? YES


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Go over,go under,go around,

orgo through

But never give up

從上面 , 從下面 , 從旁邊 , 或從中間 ,

但永不放棄

My Question• The LED traffic signal light market is being

occupied by many established companies, do I have any chance here?


LEOTEK

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My Answer• No, I don’t think I have any chance here.

• Even if I think I have a chance here, I don’t know how to do it because I don’t own much of any marketing, technology or financing.

So, maybe I should not give up.But, if I don’t, is there an “Answer” ???

III-2. The Answer: The Lion and The Gazelle


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Every morning in Africa, a Gazelle wakes up, it knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest Gazelle or it will starve to death. It doesn’t matter whether you are a Lion or a Gazelle…….when the sun comes up, you’d better be running.

III-2. The Answer: The Lion and The Gazelle


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The original statement:

It doesn’t matter whether you are a Lion or a Gazelle ………. When the sun comes up, you’d better be running.

My interpretation:

It doesn’t mean you are always going to win because you are a Lion; and it doesn’t mean I am always going to lose because I am a Gazelle. All I need to know is what do I need to do to win

III-2. The Answer: SWOT


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• Their Weakness: * Even though big and strong, but move too slowly (an old Lion) * High product manufacturing costs * High operating costs: marketing and Overhead * Slow in new product development * Products too diversified

• Leotek’s Strength: * Flexible and move fast (a young Gazelle) * Strong technology base * Lower costs in manufacturing, marketing and Overhead

III-3. The Strategy


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1. Develop Better Products: * Analyze and understand product technology * Determine competitors product weakness and improve upon it * Develop products with much better quality and lower installation costs * File patents to protect the technology

• Optical Design - Better optical designs allow Leotek to use fewer LEDs to meet the ITE specifications at lower cost - Filed 2 patents

• Driving Circuit Design - Better temperature compensation circuit design allows Leotek to have lower cost of the driving circuit - Filed 1 patent

• Installation Design - Easier and faster installation designs allow 5- minute installation compared to 20-minute installation of competitor’s products - Filed 4 patents

Key Technology in LED Traffic Signal Light


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Example: Installation of LED Traffic Signal Light


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Incandescent Light Bulb

Housing

Reflector

Front Lens

Terminal Strip

Door To Controller



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Incandescent Light Bulb

Housing

Reflector

Front Lens

Terminal Strip

Door To Controller

LED Module

Average Installation Time = 20 minutes

Competitor’s Module



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Leotek’s Module


LED Module

Key Feature:

Leave reflector, socket and wiring in place



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Leotek’s Module


LED Module

Major Advantages of Leotek’s Module• 5 minutes installation

time vs. 20 minutes

• Lower installation costs

• Less traffic interruptions

• No need to dispose

reflectors and light bulbs

• Can re-install light bulb if

needed

Competitors’ Patents Area of

Technology

Leotek’s Patents Granted/Pending

(Year 2000) Dialight Ecolux/ Gelcore

Electro-Tech

PSC/ Others

Optical Design 2 1 2 0 1

Driving Circuit Design

1 0 0 2 1

Installation Design 4 0 0 0 0

Total 7 7


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Use Better Technology to Develop Better Products

Mission Accomplished: Develop Better Products

III-3. The Strategy


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1. Develop Better Products: * Analyze and understand product technology * Determine competitors’ product weakness and improve upon it * Develop products with much better quality and lower installation costs * File patents to protect the technology

2. Recruit Marketing V.P. from Competitor: * Convince him Leotek has the best products among all leading manufacturers * Convince him Leotek is capable of becoming the number one company in the industry * Provide incentives to join a fast growing company

Done

III-3. The Strategy


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3. Manufacturing Lowest Cost Products: * Utilize superior technology, lower labor and overhead costs in Taiwan to manufacture lowest cost products

4. Capital Infusion * Capital infusion of 4.35-M$ to finance rapid growth

5. Aggressively Grabbing Market Share: * Energy crisis in California in 2001 provided great market opportunity for Leotek * Occupied 50% market share in California and 20% market share world-wide in 2001 and became the number three manufacturer in the world

Capitalization of Leotek

0

2

4

6

8

10

12

14

1992 1994 1996 1998 2000 2002

ActualFuture

Capital Infusion Date

CapitalInfusion(M-US$)

Capitaliza-tion

(M-US$)

May, 1993 0.036 0.036

Dec, 1993 0.25 0.29

April, 1995 0.33 0.62

Sept, 1996 0.29 0.91

Mar, 1997 0.58 1.49

July, 1998 0.87 2.36

Dec., 1998 0.58 2.94

July, 1999 1.91 4.85

Dec., 1999 1.91 6.76

Oct., 2000 4.35 11.11

July, 2002 2.31 13.42


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Unit: Million US$

III-4. The Achievement: Leotek’s 2001 Sales Revenue

0

2

4

6

8

10

12

14

16

18

1995 1996 1997 1998 1999 2000 2001

Orignial ForecastAdjusted ForecastActual


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Unit: Million US$

Turn-over Rate:(Revenue/Capitalization)

= 1.56

Revenue per Employee:

= $327,000

Change of U.S. LED Traffic Signal Light Market Share


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CooperLghting

5%

Electro-Tech5%

Precision15%

Others5%

Dialight40%

Gelcore30%

Year 2000

Leotek’s market share jumped from 3% in 2000 to 20% in 2001

Gelcore35%

Dialight35% Leotek

20%

Precision5%

All Others2%

CooperLighting

3%

Year 2001


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LED Traffic Signal Market Position in 2001

Dialight EcoluxPrecision Solar

Electro-Tech

Atlite

LeotekITCPI



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2001 Market Size: • 900,000 Lamps• 90 million US$

Traffic Parts


LEOTEK


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From Patents to Miracles

用專利創造奇蹟 2003 年 3月

Summary• Leotek was established in 1993, with no products,

no market and very little money (US$36,000 capital).

• Spent 5 years searching for products to manufacture, to market and sell.

• Decided to focus on LED traffic signal lights in 1999 with a market share of 1% in U.S.A.

• In 2001, Leotek became the world 3rd largest LED traffic signal light manufacturer, with a world-wide market share of 20%


LEOTEK

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The Key: Use Technology to Create Miracles

IV. The Future Challenge

IV-1. What’s next ?

IV-2. Goal in LED traffic signal light

IV-3. LED commercial product market

IV-4. When you are in a pack

IV-5. Summary


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IV-1. What’s Next ?

Success is a journey,not a destination

成功是一個歷程 ,而不是一個終點


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IV-2. Goal in LED Traffic Signal Light


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DialightEcolux

Precision Solar

Electro-Tech

Atlite

ITCPI



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2004~5 Market Size: • 2,000,000 Lamps• 150 million US$

Traffic PartsLeotek

ONE WAY


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Potential Energy Saving of LED Products


LEOTEK


LEOTEK


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Energy saving of 483 mega-watts can be realized if all traffic signal lights in the U.S. are replaced with LED lamps

If all commercial signs are replaced with LEDs, a number of nuclear power reactors can then be eliminated


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IV-3. LED Commercial Product Market


LEOTEK


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Color Kinetics

DuraLED

PermLight

Leotek

Total U.S. Market Size:• 1.5 billion US$ (2002)• Annual Growth Rate = 20%


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Products: • Street Name Sign• Channel Letter• Illuminated Commercial Signs• Border Tube

Sloan LED


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Area of Application

Number of Patent Granted/Pending Details

LED Light Bulb 2 Both patents granted in U.S. & Taiwan

LED Step Light 1 Granted in Taiwan

LED Signs 2 Both patents granted in U.S. & Taiwan

LED Traffic Signal Light 9

4 patents granted in both U.S. and Taiwan, including 2 patent pending in 22 other countries;

Claims have been allowed in 2 patents in U.S.;

4 patents pending in U.S. and Taiwan

LED Commercial Products 3 Pending in U.S.

Total 17 ---


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Leotek’s Patent Applications (2003)

Leotek’s 2003 Target

0

5

10

15

20

25

30

1995 1996 1997 1998 1999 2000 2001 2002 2003

Sales Revenue (M$)

Target


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Unit: Million US$

Turn-over Rate:(Revenue/Capitalization)

= 1.56 (2001)

= 2.15 (2003)

Revenue per Employee: = 327 K$ (2001)

= 330 K$ (2003)


LEOTEK


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IV-4. When You Are in A Pack

• Let marketing lead technology

• Evaluate market potential and competition before jumping into a new product

• Avoid developing products that are hard to sell or not sellable

• Quickly develop marketable products that are patentable

• Competitive-ness is the key


LEOTEK


LEOTEK

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IV-5. New Products

The following are products that have been developed and introduced to the market place by Leotek


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LED Street Name Signs

18”

18”

48”~96”

Market Potential = 0.8~1.0 B$


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LED Street Name Signs

18”

Leotek is the world leader in this technology

Channel Letter Module (CLM)


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LED Border Tubes (BTL)


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Illuminated Commercial SignsFixed Signs

(Neon Replacement Signs)


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Illuminated Commercial SignsAirport Way-finding signs

24”


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Illuminated Commercial SignsVarious Menu Boards

V-5. Summary


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TechnologyMarketing

Financing

Quality AssuranceHuman ResourcesProduction, SalesMIS, etc.

COMPANY • When you are behind the pack - Use technology to create miracles

• When you are in a pack - Use Marketing to lead technology

• When you are ahead of the pack - Make sure you have strong marketing, technology & financing

A Brilliant

Performance

Begins with

Confidence

Saying of The Day


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In a cyclic society, the onus is on business not just to keep up, but to stay a step ahea

d - Maddy Dychtwald, Cycles: How We Will Live, Work, and Buy


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The key to success is not to look for the perfect answers, you have to keep

moving - Carly Fiorina, HP

V. Conclusions (1/4)


LEOTEK

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Go over,go under,go around,

orgo through

But never give up

從上面 , 從下面 , 從旁邊 , 或從中間 ,

但永不放棄


LEOTEK

TM

Every morning in Africa, a Gazelle wakes up, it knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest Gazelle or it will starve to death. It doesn’t matter whether you are a Lion or a Gazelle…….when the sun comes up, you’d better be running.




LEOTEK

TM

Success is a journey,not a destination

成功是一個歷程 ,而不是一個終點



LEOTEK

TM

A hundred years from now it will not matter what my bank account was, the sort of house I lived in, or the kind of car I drove…….

but the world maybe different because I made contributions to the world that I once lived.


LEOTEK

TM

Thank you for your time and attention !!!

leotek electronics corporation the l eader in e lectro- o ptics tech nology address: no. 50,...

Documents

led traffic signal lights

year technology

led lamps

set of traffic signal

journey of leotek

traffic parts1995

saving of us

annual total us