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September 14, 2004...It looks like the '05 blue spectrum laser diode marketing year is starting off with a subtle bang... and early... with the fall season seeing "the first shots over the bow" being quietly leveled by Nichia and aimed at its fellow Japanese companies. According to Nikkei Net in an article titled Electronics Firms To Start Mass-Producing Blue Lasers In '05 (subscription to Nikkei Net Interactive required to access full online text of article, which also appeared in The Nihon Keizai Shimbun Wednesday morning edition) NEC Electronics, Toshiba Corp "and others" are predicting the start of volume production of Nichia's... or Nichia-like... blue lasers in 2005. The article, which carried no individual byline, started out noting that Nichia has heretofore been the sole supplier of the key components driving next gen DVDs, a fact we've often underscored in our ongoing coverage of the topic via CompoundSemi News and LIGHTimes.

What the article did disclose that appears to be news to the blue spectrum device community, were the latest price ranges for both recorders and the blue spectrum laser diodes that enable them, plus a few fresh tidbits that captured our attention, such as the fact that some systems integrators, in both the HD-DVD and Blu-ray disc camps, appear to be verging away from Nichia as their sole supplier. When you look at our Sept. 9 coverage of the launch of blue laser based systems from Kano Technologies (which we continue to run to your right, this issue, for your viewing convenience), one gets the feeling the shift in sole suppliers portends of the blue LED intellectual property (IP) saga starting all over again. I wouldn't be surprised to eventually see companies like Kano Technologies sued for buying disputed IP-based products in much the same manner Sharp found itself sued by Nichia for buying parts that include LEDs that allegedly infringed with Nichia's patents.

According to Nikkei, prices for recorders are likely to stay in the 300,000 yen (JPY) (appx. $2733 USD) to 450,000 yen (appx. $4,100) range, which is consistent with what Kano is asking for their Blue Wav line. Moves into volume production will eventually lower everyone's costs of production, all the way up and down the value and supply chain. No reason to lower prices sooner than necessary. Also according to the Nikkei Net article, Nichia is selling their laser diodes for up to 100,000 yen (appx. $911) to the various next gen DVD makers. Technology strides aside, just under $1000 per diode could give anyone sticker shock when it's just one component in a system, even if it is the key component. Buyers to date include Sony, Matsushita Electric, and 11 other firms in the Blu-ray Disc standards camp and Toshiba and NEC in the HD-DVD camp. The next standards meetings of the DVD Forum, by the way, will be held in October 7th in Japan and November 3-4 in Prague. At this stage, HD-DVD appears to be in the lead (it's sort of like Beta vs. VHS) with Blu-ray catching up quickly as they add Microsoft's digital compression technology to their scheme, and progressively more design wins, like Kano's introductions. The one thing all fielded products have in common is the dependency on GaN-based blue laser diodes that match the performance of Nichia's devices. And that still isn't an easy component to harness without infringing on Nichia's IP.

If you don't think this is a high stakes game, think again. Sony has just set up a consortium with three USA investment firms and has reached a tentative agreement to take over none onther than the famed Metro-Goldwyn-Mayer Inc. (MGM) Hollywood movie house for about 4.8 billion dollars (appx. 530 billion yen) plus assumption of the movie company's debt. My mother was with MGM in the 30s as a script girl for producer John Ford. The store of great movies goes back to the silents there. That's a lot of classic movies to put on blue laser driven DVDs... and Sony will likely own most of them at the rate they're going. The potential market is staggering and Sony is a force to be appreciated... and catered to.

Further, according to the Nikkei article, "NEC Compound Semiconductor Devices Ltd. has developed mass production technology for the parts, and parent NEC Electronics will begin sample shipments as early as the first half of 2005. NEC Kansai Ltd. will produce the lasers and outsource assembly domestically." Hmmm... that's something we'll have to ask our NEC blue laser based DVD market guru, Ryoichi Hayatsu, to clarify for us. Rick has dazzled our Blue 2003 and Blue 2004 audiences consistently with his candid and insightful progress reports, and the topic will likely be an even hotter one at Blue 2005 in Taiwan next June given the projected Japanese ramp. By then what do you bet Taiwan blue LED manufacturers will be eyeing the blue laser market, especially the packaging houses. Rick made a request of the Blue 2004 attendees, for example, for solutions in moving blue laser diodes from existing glass packages into less costly plastic packages with stronger adhesives that can withstand high volume production methods. Nikkei also pointed out in their report that "Toshiba has developed production technology that will lower the cost of blue lasers to about 5,000 yen (appx. $45) per unit" and that they intend to begin production in the first half of next year, initially supplying its own next-generation DVD recorder operation and that "Matsushita will begin in-house production as early as next year as well" saying further that "The DVD recorder that debuted at the end of July uses Nichia lasers, but the firm plans to switch to its own lasers for a model slated for introduction in 2005, thereby reducing the price." Now there's the loaded statement that caught my attention. How do their lasers differ from Nichia's and do they differ enough to perform as well without infringement challenges?

Everyone seems to be getting in on the race to produce their own version of the blue lasers... but does that term mean die from Nichia and packaging or upward integration up the foodchain by the above named, plus Sony and Sanyo Electric, who are reported to have "sent samples to multiple DVD recorder manufacturers, and seek to swiftly move their proprietary blue lasers into mass production"...? And Sharp was mentioned as also considering in-house production. (Sharp is already, obviously acquainted with Nichia's legal team). The clue is down where the article noted that Sony and Nichia indeed have a patent-sharing arrangement on blue lasers. Word has it they're in an ongoing patent tie-up involving over 800 patents on the subject... not to mention their ongoing patent disputes with the blue laser breakthrough artist himself, UCSB professor Shuji Nakamura who headed Nichia's original efforts. The article also said, quite clearly, "that Toshiba, Sanyo and others are developing their own technologies." The caveat is the "But" part. The article ends by saying... "But... in the development process, firms may need to negotiate with Nichia concerning patent licensing."

My guess is that this is one of those Japanese to English translation things and that there's considerably more to the story. Plus, it's probably a traditional Japanese business thing, whereby they battle among themselves in the beginning and then join ranks as the technology spreads out, first elsewhere in Asia, then throughout the rest of the world (ROW). You can bet that if any of the above are making their own blue laser die, and if those die are hearty enough to meet the demanding specs, that they're cloning the Nichia process and are indeed already negotiating licensing arrangements with Nichia. You can't stop the tide, which has been proven by Nichia's established pattern of licensing (or cross-licensing or simply agreeing not to continue suing one another) their blue spectrum LED processes, first to the Big 5, then to their Taiwan competitors. But... (there's that word "But" which really means "negating everything said earlier") you can certainly do everything you can do everything you can to try and change the direction of the flow so that every little wave laps onto your beach.

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