Huawei will charge royalties to smartphone makers using its 5G technology

GUANGZHOU, China – Huawei will begin charging smartphones to use their patented 5G technology as the Chinese technology company wants to open a new revenue stream, though other parts of its business have had success because of U.S. sanctions.

The company said it will charge “a reasonable percentage of the phone’s selling price and a unit fee per unit” at $ 2.50 for smartphones capable of connecting to 5G networks and earlier generations.

This price is lower than some of Huawei’s competitors, including the Finnish telecommunications company Nokia.

Charging royalties on key patents related to cellular technology could help Huawei account for at least a portion of the revenue affected in other parts of its business, such as smartphones, as a result of U.S. sanctions.

In the past, Huawei charged rights to companies like Apple.

Regulatory bodies have the task of creating them. Companies such as Huawei, Nokia, the Swedish telecommunications equipment giant Ericsson, the American chip maker Qualcomm and many others contribute to the process of developing standards.

In doing so, these companies devise technologies that they then patent. Patents, which are fundamental to 4G or 5G standards, will be considered an “essential standard patent” or SEP.

If, for example, a smartphone manufacturer wants to launch a 5G phone, they will likely need to use the SEPs of one or more of these companies. In return, these companies can request a fee commission.

It is a practice that has existed for a long time.

Deciding what is and what is not a SEP can be tricky and can lead to litigation between two parties.

Huawei has 3,007 declared 5G patent families, the highest of all companies in the world, according to analysis by the intellectual property research organization GreyB. Patent families are a group of identical or similar patents filed in different countries.

GreyB estimates that about 18.3% of these Huawei 5G patent families are SEPs that are used, more than any other company.

The other major patent holders are South Korean companies Samsung and LG Electronics, Nokia, Ericsson and Qualcomm.

Huawei’s $ 2.50 limit for smartphone makers is lower compared to its rivals.

In 2018, Nokia said the license fee for its 5G SEP portfolio will be limited to 3 euros ($ 3.58) per device. Ericsson said it will charge between $ 2.50 and $ 5 per device.

Huawei has charged companies royalties for its 4G patents. The Chinese firm estimates it will receive revenue of about $ 1.2 billion to $ 1.3 billion from patent licenses between 2019 and 2021.

In the past, Huawei was not very aggressive about royalties or litigation. But that could change now.

“The reason for this is, first and foremost, Huawei’s position in the world, in many countries, Huawei has faced difficult challenges to sell its products,” said Muzammil Hassan, head of the licensing and marketing department. of intellectual property of GreyB.

Huawei has been hit by several sanctions by the US, which have accused the company of being a threat to national security. Huawei has repeatedly denied this claim.

But in 2019, the Chinese phone maker entered the U.S. blacklist, called the Entity List, which prevented U.S. companies from exporting some technology to Huawei. Last year, Washington moved to cut Huawei off key chip supplies.

These actions have led to a shift in shipments of Huawei smartphones.

Meanwhile, several countries such as the United States and Australia have effectively blocked Huawei’s gear from being part of their respective 5G networks.

There are now indications that Huawei has become more aggressive in intellectual property litigation. Last year, Huawei filed two lawsuits against Verizon alleging that the US operator infringed the patents of the Chinese telecommunications giant.