A smartphone with the Huawei and 5G community emblem is seen on a PC motherboard on this illustration image taken January 29, 2020.
Dado Ruvic | Reuters
GUANGZHOU, China — Huawei will start charging smartphone makers a royalty to make use of its patented 5G expertise because the Chinese language expertise agency appears to be like to open a brand new income stream, at the same time as different components of its enterprise have taken successful as a result of U.S. sanctions.
The corporate mentioned that it’ll cost “an inexpensive proportion royalty price of the handset promoting value, and a per unit royalty cap” at $2.50 for smartphones able to connections to 5G and former generations of cell networks.
This value is decrease than a few of Huawei’s rivals together with Finnish telecoms firm Nokia.
Charging royalties on key patents associated to mobile expertise might assist Huawei make up no less than a part of the income hit in different components of its enterprise, resembling smartphones, because of U.S. sanctions.
Up to now, Huawei has charged royalties to firms resembling Apple.
5G patents and the way they work
Requirements our bodies are tasked with creating these. Corporations resembling Huawei, Nokia, Swedish telecom equipment giant Ericsson, U.S. chipmaker Qualcomm and many others contribute to the standards development process.
In doing so, these companies devise technologies which they then patent. The patents, which are critical to the standards of say 4G or 5G, will be deemed a “standard essential patent” or SEP.
If for example a smartphone maker wants to release a 5G handset, they’re likely going to need to use the SEPs of one or more of these companies. In return, these companies can ask for a royalty fee.
It’s a practice that has been around for a long time.
Deciding what is and what isn’t an SEP can be tricky and can lead to high profile litigation between two parties.
Huawei and 5G patents
Huawei has 3,007 declared 5G patent families, the highest out of any company in the world, according to analysis by intellectual property research organization GreyB. Patent families are a group of same or similar patents filed in different countries.
GreyB estimates that around 18.3% of those Huawei 5G patent families are SEPs that are in use, more than any other company.
The other top patent holders are South Korean firms Samsung and LG Electronics, Nokia, Ericsson and Qualcomm.
Huawei’s $2.50 cap on royalties for smartphone makers is on the lower end compared to its rivals.
In 2018, Nokia said the licensing rate for its 5G SEP portfolio will be capped at 3 euro ($3.58) per device. Ericsson said it will charge $2.50 to $5 per device.
Huawei has charged royalties for companies for its 4G patents. The Chinese firm estimates it will receive about $1.2 billion to $1.3 billion in revenue from patent licensing between 2019 and 2021.
In the past, Huawei has not been very aggressive on royalties or litigation. But that could now change.
“The reason for that is first of all Huawei’s position in the world, in a lot of countries, Huawei has been facing tough challenges selling their products,” said Muzammil Hassan, head of the intellectual property licensing and commercialization department at GreyB.
Huawei has been hit with a number of sanctions by the U.S. which has accused the company of being a national security threat. Huawei has repeatedly denied this claim.
But in 2019, the Chinese phonemaker was put on a U.S. blacklist called the Entity List which blocked American firms from exporting some technology to Huawei. Last year, Washington moved to cut Huawei off from key chip supplies.
These actions have caused Huawei’s smartphone shipments to plunge.
Meanwhile, a number of countries such as the U.S. and Australia have effectively blocked Huawei gear from being part of their respective 5G networks.
There are now signs Huawei has been getting more aggressive on intellectual property litigation. Last year, Huawei filed two lawsuits against Verizon alleging the U.S. carrier infringed patents held by the Chinese telecoms giant.