Huawei will charge royalties to smartphone makers that use its 5G technology

GUANGZHOU, China – Huawei will start charging a fee to smartphone makers for using its patented 5G technology, as the Chinese technology company aims to open a new revenue stream, even if other parts of its business have been affected by the cause of US sanctions.

The company said it will charge “a reasonable percentage rate of charge for the phone’s selling price and a unit charge limit” of $ 2.50 for smartphones capable of connecting to 5G mobile networks and previous 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 part of the revenue affected in other parts of its business, such as smartphones, as a result of US sanctions.

In the past, Huawei has levied royalties on companies such as Apple.

The standardization bodies have the task of creating them. Companies such as Huawei, Nokia, the Swedish telecommunications equipment giant Ericsson, the American chip manufacturer Qualcomm and many others contribute to the development of standards.

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

If, for example, a smartphone manufacturer wants to launch a 5G phone, they will probably have to use the SEPs of one or more of these companies. Instead, these companies may charge a fee.

It is a long-standing practice.

Deciding what is and what is not a SEP can be difficult and can lead to high-level disputes between two parties.

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

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

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

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

In 2018, Nokia said that the licensing rate for its 5G SEP portfolio will be capped at 3 euros ($ 3.58) per device. Ericsson said it will charge $ 2.50 to $ 5 per device.

Huawei has charged companies royalties for its 4G patents. The Chinese company estimates that it will receive between $ 1.2 billion and $ 1.3 billion in revenue from patent licensing between 2019 and 2021.

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

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

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

But in 2019, the Chinese phone maker was put on a US blacklist called the Entity List, which blocked US companies from exporting some technologies to Huawei. Last year, Washington moved to disrupt Huawei’s key supply of chips.

These actions caused Huawei’s smartphone deliveries to drop.

Meanwhile, a number of countries such as the US and Australia have effectively blocked Huawei equipment from being part of their respective 5G networks.

There are now signs that Huawei has become more aggressive when it comes to intellectual property disputes. Last year, Huawei filed two lawsuits against Verizon, claiming that the American carrier infringed the patents held by the Chinese telecommunications giant.