- Huawei is planning to collect patent royalties for 5G devices
- Compared with its major competitors, Huawei's proposed royalty standard is relatively low
- Possible IP-related conflicts and global technology system fragmentation should draw the company's attention
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The Chinese telecommunications giant is showing aggressive intellectual property litigation to hedge the risk of U.S. sanctions.
On March 16, Huawei released its Whitepaper on Innovation and Intellectual Property 2020 at a forum held in the company's Shenzhen headquarters. At the same event, Huawei's Head of Intellectual Property Rights Department, Jason Ding, announced that Huawei is currently mulling over patent royalties for every 5G mobile phone with a per-unit royalty cap of up to USD 2.5. Meanwhile, per Mr. Ding, the rates for other 5G-enabled devices may vary.
Compared with those of its peers in the field, Huawei's prospective royalty rates are rather affordable. In early 2018, Qualcomm announced its 5G royalty fee standard equivalent to 2.275% to 5% per device. Ericsson's standard is up to USD 5 per unit, and Nokia's standard is up to EUR 3. Here below, we discuss the reasons and possible impacts of Huawei's new move.
The impact of trade restrictions
In 2020, Huawei achieved revenue of CNY 891.4 billion, up 3.8% year on year. Its operating profit, however, decreased by 6.9% year-on-year to CNY 72.5 billion, and operating cash flow plummeted by 61.5%, compared with 2019. It is well known that Huawei's most critical problem last year was the latest Sino-American standoff. While this issue remains acute, the company’s managed to keep its total revenue growth, with 54.2% of it contributed by the consumer business.
Besides, Huawei's operations and market share have also been significantly impacted. In the fourth quarter of 2020, Huawei's smartphone deliveries fell by 42.4% year on year to 32.3 million units, with a global market share of only 8.4%, ranking fifth. In 2020, the global deliveries of Huawei 5G smartphones decreased by 21.5% year over year, with a market share of only 14.6%, ranking third worldwide. By contrast, Xiaomi and Apple's delivery volumes have increased.
According to data from CINNO Research, in January 2021, China's market delivered 30.7 million smartphones, with a year-on-year growth of 35%, while Huawei took merely 15.2%, falling to fourth place. Considering that its domestic market share used to be at 46% in its peak period (2019), Huawei's consumer business is facing an unprecedented crisis now.
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