Innovalight has signed a research and production deal with Yingli Green Energy (NYSE: YGE) that, ideally, will lead to a marriage of low-cost Chinese manufacturing and U.S. technological expertise.

Innovalight has developed a solar ink that, when added to crystalline silicon solar cells, can boost their efficiency. Right now, adding Innovalight's secret sauce increases efficiency by about a percentage point, i.e., an 18-percent-efficient solar cell becomes a 19-percent-efficient cell. Put another way, adding in the ink turns a 30-megawatt-per-year line into a 35-megawatt line without the need for lots of expensive new equipment. The efficiency boost decreases a bit when the cells are added to the panels -- panel efficiency is invariably lower -- but it still gooses efficiency.

Next year, the ink will add two percentage points to overall efficiency, and in 2012, the target is three. So think of them as the Keebler elves of solar, adding a little magic at the end of the cooking process. JA Solar (Nasdaq: JASO), another Chinese company, signed a three-year deal with Innovalight earlier this year.

While Innovalight could produce its own solar cells, the company has largely shifted to producing solar inks for others and collaborating on research. The shift obviates the need to raise the capital to build solar factories, and it insulates Innovalight to some degree from the brutal price competition in solar.

Companies such as Nanostellar (catalytic powders for diesel engines), e-Solar, and Mission Motors have shifted toward a licensing/component model, as well. The trend started in 2008.

The downside? Large companies are often reluctant to buy materials or sign licensing deals with startups and often spend an inordinate amount of energy and money to develop technologies that get around a start-up's patents. In the semiconductor world, the general rule is that a start-up has to beat a large, established company in court -- or at least get a large settlement -- before they can ink deals.

The fact that both JA and Yingli are Chinese might at first seem odd. China is widely considered a haven for piracy. But here's the motivating factor: Chinese companies often don't have access to cutting-edge technology. Suntech Power Holdings (NYSE: STP) is ranked among the best solar innovators, but others in the solar space are often viewed as followers. Combining with Innovalight effectively allows them to accelerate their product lines.

Innovalight is also insulated from fears about infringement with all or any of its partners because it makes the inks itself. It licenses the techniques for making printing tools but does the ink in-house.

Licensing ultimately marks one of the few ways that Western companies can tap the Chinese market and get around the fact that China will likely continue to enjoy advantages in low-cost manufacturing.

First Solar (Nasdaq: FSLR), Duke Energy (NYSE: DUK), and e-Solar have Chinese alliances in the works, as well.

More from GreenTechMedia: