Chinese telecommunications giant Huawei Technologies Co expects its patent-licensing arrangements in the industry to expand and help boost revenue, as US trade sanctions continue to hurt its core smartphone and carrier equipment businesses.
More than 2 billion non-Huawei smartphones have already benefited from licensing deals involving the firm's 4G and 5G mobile technologies in the past five years, according to data presented during Huawei's intellectual property (IP) conference on Wednesday at its headquarters in Shenzhen.
Huawei indicated that most premium Android smartphones in the global market use its licensed 4G and 5G technologies. Most of these licensees are from mainland China, the US and other Asian countries, including South Korean smartphone giant Samsung Electronics, according to the company, which did not provide further details.
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"We expect revenue from patent licensing will continue to grow, but the company does not operate this as its main moneymaking business," said Alan Fan, head of the intellectual property rights department at Huawei.
Privately-held Huawei previously estimated that total sales generated from patent licensing reached "about US$1.2 billion to US$1.3 billion" between 2019 and 2021.
Patent licensing is an area that Huawei has increasingly cultivated, as the company seeks to counter the effects of Washington's trade sanctions that have cut off its access to major US-origin technology - including advanced software and cutting-edge chips.
Huawei, the world's largest telecoms equipment maker and formerly China's biggest smartphone vendor, was added to Washington's trade blacklist in 2019. It has scrambled to adapt its operations to tighter restrictions imposed in 2020, covering access to chips developed or produced using US technology, from anywhere.
The company is stepping up efforts to turn its vast pool of patents into revenue via "reasonable pricing" to diversify its sales mix, according to founder and chief executive Ren Zhengfei in an internal meeting in March.
"We need to set up a reasonable pricing benchmark for industries to use our patented technologies fairly, and generate an appropriate return on our research and development," Ren said, adding that royalty charges "should not be too low".
Huawei in March last year revealed for the first time the royalty rate for licensing its 5G mobile technology, saying it "would not seek a royalty rate higher than US$2.50" per 5G smartphone. That pricing was expected to help drive efforts "to promote broader adoption of 5G across all industries".
Beyond smartphone makers, Huawei has also been working with carmakers. The company estimated that there are now 8 million connected vehicles using its mobile technologies.
In July last year, Huawei agreed to license its 4G mobile technology to a supplier of Volkswagen, the world's largest carmaker. At the time, Huawei said the deal was its biggest patent-licensing agreement in the car industry, with its 4G mobile technology expected to be eventually deployed in more than 30 million Volkswagen vehicles with wireless connectivity.
Despite being blacklisted by the US, Huawei remains one of the most prolific patent filers globally. The company last year filed a record 6,952 applications, up 27 per cent from the previous year, through the Patent Cooperation Treaty (PCT) - an international patent law pact that provides a unified procedure for submissions. That made Huawei the world's biggest PCT filer for five consecutive years.
Huawei held a total of 110,000 active patents, across 45,000 patent families, by the end of last year. In the same year, Huawei was the top-ranked company granted patents in both China and Europe, according to the firm's 2021 earnings report.
Meanwhile, at its IP event on Wednesday, Huawei recognised employees behind 11 inventions - including a network that significantly reduced power consumption in artificial intelligence computing to technology that helps autonomous driving in complex road environments - that created value for the company's products and ecosystem.
Huawei has accelerated investments in research and development, spending 142.7 billion yuan (US$21.39 billion) in 2021, which represented 22.4 per cent of the company's total revenue. Over the past decade, Huawei's total research and development investments have surpassed 845 billion yuan.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
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