Message from the Officer in Charge of Intellectual Property

Recently, there have been rapid advancements in electrification and automated driving technologies, driven by the goal of achieving carbon neutrality and eliminating traffic accident fatalities. In particular, with the emergence of software-defined vehicles (SDVs), cars are evolving into a product that centers on software, and this has increased opportunities for collaboration with companies outside of the automotive industry, as well as competition. To achieve sustainable growth and enhance corporate value amid the technological innovations and changes occurring in the business environment, we must position intellectual capital—the source of our competitiveness and differentiation— as a vital management resource and utilize it more strategically than ever before.

Since our founding, we have worked to address environmental and social issues, such as fuel efficiency and emissions reduction, through the development of technologies centered on those related to internal combustion engines. The results of such technological development have built the patent portfolio that has supported the Company’s growth. At the same time, as part of our intellectual property (IP) activities, we had been focusing on defensive-minded intellectual capital activities, making use of IP rights such as patents and trademarks to secure as legal right proprietary technologies that enable us to differentiate our products from those of our competitors.

Meanwhile, for technological development in fields such as electrification and automated driving, it is necessary to create added value by combining multiple IP assets, as systems are becoming larger in scale and more complex. In order to do that, in addition to using IP rights to protect our proprietary technologies, we must utilize IP as a management resource for co-creation with other companies through collaborative activities and efforts to promote standardization. In this way, we view IP from a broad perspective that includes not only IP rights, such as the patents we have frequently handled, but also software and know-how. Based on this perspective, it is necessary to engage in offensive- minded IP activities to contribute to business growth and to medium- to long-term corporate value enhancement.

For this reason, we adopted the goal of “realizing IP-focused management through offensive and defensive IP strategies” as our IP Vision. To realize IP-focused management, we will enhance the IP literacy of all employees and aim to naturally incorporate our IP utilization strategies in our business strategies. To incorporate this IP Vision into specific initiatives, we have organized our IP activities around three pillars: “strategy formulation,” “governance,” and “internal and external dialogue,” and are strengthening them accordingly.

For the direction of our technological development, we are focusing on evolving mobility, strengthening fundamental technologies, and creating new value, which serve as drivers for the Company’s growth. By formulating and executing IP strategies in accordance with the business environment and technological characteristics of each of these fields, we aim to establish a sustainable competitive edge while taking on the challenge of new business creation.

Software

As the value of software increases due to the shift toward SDVs, we aim to create software that provides high value to the user on a continuous basis, thereby contributing to the evolution of automobiles and the future of the mobility society. In an SDV, software controls not only conventional vehicle systems, such as the engine, brakes, and steering, but also a variety of other functions such as infotainment, ADAS, automated driving, communications, security, and energy management. Our expertise in large-scale software design, built on comprehensive knowledge of the automobile, together with our ability to implement a wide range of software systems, represents the compilation of DENSO’s intellectual property. By visualizing and maximizing this value, we will help advance the mobility society.

To that end, we are focusing on the diverse IP that comprises software and are developing frameworks for communicating our IP value to customers in an easy-to-understand manner. In tandem with the changes occurring in the business environment for SDVs, we are actively examining how best to demonstrate the value of IP to customers, including new methods for utilizing IP, while advancing our IP activities.

Semiconductors

With automobiles becoming increasingly more electrified and intelligent, semiconductors have become a core technology that supports the mobility society. Also, the market for semiconductors is highly volatile, and product specifications and demand change rapidly. For this reason, we must formulate precise strategies that encompass everything including stable purchases by suppliers. To maintain and further strengthen our business competitiveness under such an environment, it is crucial that we implement an open-and-closed strategy under which we keep our core technologies closed internally and share non-core technologies openly with external partners. We execute business and IP strategies in the sensor, power semiconductor, and System on Chip (SoC) domains with the aim of achieving sustainable business growth and enhancing our market competitiveness.

Power Semiconductor Domain
In the power semiconductor domain, we have adopted a business strategy under which we work to strengthen the supply chain through innovation in our internal production activities and collaboration with partner companies, while adapting our SiC power semiconductors to meet the stringent conditions for in-vehicle installation. We possess a full lineup of IP internally, including everything from wafer manufacturing to power devices and the inverters that incorporate them, enabling us to build an optimized IP portfolio for in-vehicle semiconductors.

We also secure patents for our highly original technologies that offer technological value, which gives us a strong competitive edge over our competitors in terms of both patent quantity and quality (PAI) for wafers, epitaxial layers, and devices. In addition, we are examining growth strategies for sharing our IP with partner companies, including the know-how we possess in the field of manufacturing.

DENSO is working to create new value by drawing on its strengths in mechanics, electronics, automated technologies, software, and semiconductor technologies—which have been cultivated through its experience with in-vehicle product development.

In order to create new businesses, it is imperative that we carry out a comprehensive IP analysis (IP landscape) across all phases of the creation process, from business concept and planning to development, making use of patents and market information.

In the business concept phase, we make use of IP landscapes to identify existing players in the market, assess technologies that serve as strengths, and examine business feasibility. Furthermore, in the planning and development phase, IP landscapes are utilized to analyze challenges, strengths, and weaknesses of key competitors. IP landscapes are also used to create development strategies to secure a competitive edge over these competitors, including from the perspective of IP, and formulate IP strategies in accordance with these development strategies. In these ways, we roll out open-and-closed strategies leveraging our patents and know-how.

For example, in the closed domain for precision vehicle dismantling, where we are pursuing development with a view toward the circular economy, we utilize the technologies gained from developing a broad range of in-vehicle products as well as medical-related technologies, such as surgical support balance arms, that we have been involved in for some time. We also acquired patents related to our automated dismantling technologies. By doing so, we are working to secure a significant competitive advantage. Meanwhile, in the open domain for vehicle dismantling, we collaborate with dismantling and recycling companies, as well as material manufacturers, to promote technological development and create value chains geared toward the widespread adoption of precision vehicle dismantling.

In this manner, we aim to achieve both business expansion and new value creation while integrating the use of IP in our business strategies.

Furthermore, in new value creation domains, we have introduced the new KPI of strategy adoption rate, which represents the rate to which information from IP landscapes has been incorporated into the themes of our business strategies. With this new KPI, we believe we can hone the precision of our business strategies while incorporating IP strategies at the initial stages of business strategy formulation.

At DENSO, in addition to strengthening our strategy formulation for each individual business, it is important that we build an IP portfolio from a Companywide perspective based on value creation stories and technological development policies aimed at resolving social issues. By clarifying the causative connection (value creation path) between our IP activities, which generate important IP through our focus on technological development, and the value we deliver to society, and by examining our patent value score for each type of value we create, we can see steady growth in our patent evaluation score compared with 2014, with the score approximately doubling in the green domain and growing roughly 1.5 times in the peace of mind domain.

With a view toward establishing a robust patent portfolio, we have been holding IP strategy meetings for each business to discuss patent strategies. To expand the scope of our discussion to include not only patents but also IP and to optimize strategies on a Companywide basis, we established the new IP Strategy Meeting through which we examine common IP themes across businesses, determine IP structure and budget, and discuss resource allocation. By doing so, we will further enhance the effectiveness of our IP strategies.

Also, as mentioned previously, we have adopted the unique KPIs of ratio of patent utilization and ratio of strategy adoption in order to steadily realize IP-focused management. By closely monitoring these KPIs, we can assess the progress status of our initiatives to incorporate IP strategies within our business strategies and foster a shared awareness among all relevant personnel. We will also aim to promote initiatives that bring together the entire Company by disclosing these KPIs at the IP Strategy Meeting and reviewing the processes for achieving our targets each fiscal year.

To realize IP-focused management, we aim to enhance IP literacy across the entire Company—not only among personnel engaged in the IP-related fields but also among executives, business strategy planners, sales staff who interact with automakers and suppliers, and members of our purchasing divisions. In this way, we seek to ensure that IP strategies are naturally embedded within our business strategies.

To boost the awareness of IP as one of the Company’s key management resources, we are increasing the frequency of IP dialogues and strategic discussions that include the general managers of our business divisions. At the same time, we introduce our day-to-day IP strategy activities at internal technological exhibitions, providing knowledge and communicating information on IP. We are also strengthening our IP educational activities on a regular basis for all employees, starting from the time they join the Company, to ensure that they acquire basic IP knowledge.

Furthermore, in addition to bolstering internal dialogue, we will place greater importance on constructive external dialogue with third parties, which provides us with indispensable insights from perspectives we are unable to see internally.

As technological innovation accelerates and significant changes occur in the operating environment, we position IP as a vital source of both value creation and competitiveness. To that end, we will promote IP-focused management aimed at strengthening offensive and defensive IP strategies, thereby working to realize sustainable growth and enhance our corporate value.