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

GUANGZHOU, China – Huawei will ask smartphone makers for a royalty to use their patented 5G technology, as the Chinese technology company wants to open a new revenue stream, even though other parts of its business have been hit by US sanctions.

The company said it would charge a “reasonable percentage of the sale price of the device and a limit per capital rate” at $ 2.50 for smartphones that can connect to 5G and previous generations of mobile networks.

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

The payment of royalties on key patents related to cellular technology could help Huawei make up at least a portion of the revenue hit in other parts of its business, such as smartphones, as a result of U.S. sanctions.

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

Standard bodies have the task of creating it. Companies such as Huawei, Nokia, Swedish telecommunications giant Ericsson, US chipmaker Qualcomm and many others are contributing to the standard development process.

In doing so, these companies invent technologies that they then patent. The patents, which are critical to the standards of, for example, 4G or 5G, are considered a “standard essential patent” or SEP.

For example, if a smartphone manufacturer wants to release a 5G device, they will probably have to use the SEPs of one or more of these companies. In return, these companies can pay a royalty.

This is a practice that has been around for a long time.

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

Huawei has declared 3,007 5G patent families, the highest of any company in the world, according to the research organization GreyB. Patent families are a group of the same or similar patents that are filed in different countries.

GreyB estimates that approximately 18.3% of the 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 price tag on smartphones for smartphones is at the bottom compared to its competitors.

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

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

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

“The reason for this is firstly Huawei’s position in the world, in many countries, Huawei has faced difficult challenges in selling their products,” said Muzammil Hassan, head of the intellectual property licensing and commercialization department at GreyB , said.

Huawei has been hit by a number 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 placed on a U.S. blacklist called the Entity List, which barred U.S. businesses from exporting technology to Huawei. Last year, Washington moved to cut Huawei off the most important chips.

These actions led to Huawei’s smartphone opportunities declining.

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 about the intellectual property process. Last year, Huawei filed two lawsuits against Verizon alleging that the U.S. airline infringed patents on the Chinese telecommunications giant.