Huawei charges license fees for smartphone manufacturers with its 5G technology

A smartphone with the Huawei and 5G network logos can be seen on a PC motherboard in this illustration image taken on Jan 29, 2020.

Dado Ruvic | Reuters

GUANGZHOU, China – Huawei will begin charging smartphone manufacturers a license fee to use its patented 5G technology as the Chinese tech company looks to generate new revenue streams even as other parts of its business suffer a blow from US sanctions to have.

The company announced that it will charge a “reasonable royalty percentage on the cell phone retail price and a license fee cap per unit” of $ 2.50 for smartphones that can connect to 5G and earlier generations of cellular networks.

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

Collecting royalties on key patents related to cellular technology could help Huawei get at least some of its sales in other businesses like smartphones due to US sanctions.

In the past, Huawei has billed royalties to companies like Apple.

5G patents and how they work

Standardization bodies have the task of creating these. Companies like Huawei, Nokia, Swedish telecommunications equipment giant Ericsson, US chipmaker Qualcomm and many others contribute to the standard development process.

These companies develop technologies that they then have patented. The patents that are critical to the standards of, for example, 4G or 5G are considered the “essential standard patent” or SEP.

For example, if a smartphone manufacturer wants to bring out a 5G handset, they will likely need to use the SEPs of one or more of these companies. In return, these companies can charge a license fee.

It’s a practice that has been around for a long time.

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

Huawei and 5G patents

According to an analysis by the intellectual property research organization GreyB, Huawei has 3,007 declared 5G patent families, the highest of any company in the world. Patent families are a group of identical or similar patents that have been filed in different countries.

GreyB estimates that around 18.3% of those Huawei 5G patent families are SEPs that are 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 license fee for smartphone manufacturers is on the low end compared to its competitors.

In 2018 Nokia announced that the license rate for its 5G SEP portfolio would be capped at 3 euros per device. Ericsson said it will charge $ 2.50 to $ 5 per device.

Huawei has levied corporate license fees for its 4G patents. The Chinese company estimates that it will generate patent license revenues of $ 1.2-1.3 billion between 2019 and 2021.

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

“The main reason for this is Huawei’s global position. In many countries, Huawei faced major challenges in selling its products,” said Muzammil Hassan, head of the department for licensing and marketing of intellectual property at GreyB.

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

But in 2019, the Chinese phone maker was put on a US blacklist called the Entity List, which prevented American companies from exporting technology to Huawei. Washington moved last year to cut off Huawei’s critical chip shipments.

These actions have resulted in Huawei’s smartphone shipments dropping.

Meanwhile, a number of countries like the US and Australia have effectively prevented Huawei devices from being part of their respective 5G networks.

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

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