Huawei Technologies Co. will begin charging mobile giants like Apple Inc. a “reasonable” fee for access to its trove of wireless 5G patents, potentially creating a lucrative revenue source by showcasing its global lead in next-generation networking.
The owner of the world’s largest portfolio of 5G patents will negotiate rates and potential cross-licensing with the iPhone maker and Samsung Electronics Co., Chief Legal Officer Song Liuping said. It aims to get paid despite U.S. efforts to block its network gear and shut it out of the supply chain, but promised to charge lower rates than rivals like Qualcomm Inc., Ericsson AB and Nokia Oyj. Huawei should rake in about $1.2 billion to $1.3 billion in patent and licensing fees between 2019 and 2021, executives said without specifying which of those stemmed from 5G. It’s capping per-phone royalties at $2.50, according to Jason Ding, head of Huawei’s intellectual property department.
China’s largest technology company by revenue wants a seat at the table with tech giants vying to define the rapidly evolving field of connected cars, smart homes and robotic surgery. Battles are unfolding over who profits from 5G that may dwarf the size and scope of the tech industry’s first worldwide patent war — the one over smartphones. But having only just become a major player in 5G standards boards, Huawei is now grappling with U.S. sanctions that have all but crippled its smartphone business and threaten to hamstring its networking division abroad.
Huawei will be flexible in negotiating rates on different 5G products — everything from water meters to smart cars, according to Ding. “One thing for certain is that the $2.50 cap is set on smartphones,” he said.
Once the world’s largest smartphone maker, the Chinese corporation has seen a series of U.S. sanctions almost obliterate its lucrative consumer business. With the Biden administration keeping up the pressure on Huawei, billionaire founder Ren Zhengfei has directed the company to grow its roster of enterprise clients in transportation, manufacturing, agriculture and other industries. Its library of 5G patents could turn into a new growth stream if it can levy royalties from rival smartphone players like Xiaomi Corp., Lenovo Group Ltd. and Oppo.
Companies like Qualcomm thrive on charging royalties on technology they supply to clients like Apple. The two mobile giants have clashed bitterly over what Apple called an unfair $7.50 royalty from every iPhone, which Qualcomm defended as a small price to pay for fundamental technology. On Tuesday, Huawei executives stressed American sanctions shouldn’t affect its ability to cross-license with U.S. companies because those patents are publicly available. The company intends to plow patent fees back into research to maintain its position in wireless networking versus Ericsson and Nokia.
Disputes over patents however are likely to escalate as 5G goes mainstream, enabling a host of future applications from autonomous cars to the internet of things. Companies worldwide have fought over who will profit from fundamental technology, in cases that have pit patent owners including Qualcomm and Ericsson against those who use the systems in their products, such as Apple. Regulators and courts around the world continue to grapple with how to value patents for essential technology, and whether their owners have any rights to limit the use of those inventions. Huawei executives didn’t say how they would enforce their patents in case of disputes.
It’s a thorny issue that’s becoming more important as the world transitions to 5G. The value of standardized technology was a key issue in the smartphone wars, when developers of wireless technology like Nokia, Qualcomm and Motorola fought then-new entrants such as Apple and Microsoft Corp. The new disputes are potentially more lucrative as sales of devices using 5G are forecast to grow to $668 billion globally in 2026 from just $5.5 billion in 2020, according to Allied Market Research.
Source: Bloomberg
