Huawei turns to patents for a lifeline — including those in the U.S.

BEIJING — Chinese language telecommunications large Huawei is popping to patents for a lifeline as the firm seeks to forge a path ahead in superior chip know-how — the prized tech which the U.S. is making an attempt to minimize off from China.

In 2022, Huawei introduced it signed greater than 20 new or prolonged licensing agreements for its patents. Most had been with automakers, for 4G and LTE wi-fi know-how, the firm stated.

Mercedes Benz, Audi, BMW and not less than one U.S. automaker had been amongst the licensees, stated Huawei’s international mental property head Alan Fan. He stated he wasn’t in a position to say which American firm.

Huawei has extra on the method — and filed a file variety of greater than 11,000 patent functions with the U.S. in 2022, in accordance to IFI Claims Patent Providers. Their evaluation confirmed just below half sometimes get authorized every year.

However the sheer variety of patents filed meant Huawei ranked fourth final 12 months by the variety of patent grants in the U.S., IFI stated. Samsung was first, adopted by IBM and TSMC.

“The U.S. is still a substantial market that everybody wants to have a part of,” stated IFI Chief Government Mike Baycroft. “They want to make sure when they’re developing those technologies that they’re protecting those IP [intellectual property] rights for the U.S. market for the European market.”

Over the final two years, Huawei’s U.S. patents have elevated the most in areas associated to picture compression, digital info transmission and wi-fi communication networks, in accordance to IFI.

The U.S. authorities put Huawei on a blacklist in 2018 that restricted its capacity to purchase from American suppliers. By October 2022, the U.S. made it clear that no People ought to work with Chinese language companies on high-end semiconductor tech.

The potential of patents

Huawei’s revenue dropped for the first time on record in 2021, and the consumer division that includes smartphones reported sales plunged nearly 50% to 243.4 billion yuan ($36.08 billion).

For Huawei, licensing its patents to other companies has the potential to claw back a bit of that revenue.

Alex Liang, partner at Anjie & Broad in Beijing, pointed out that having ceased operations in certain business areas allows the company to realize patent revenue that previously existed primarily on paper.

“Huawei’s situation is similar to Nokia’s when the first generation iPhone came out,” Liang said. “Nokia was quickly losing market share to Apple and lots of their patents no longer [had] to be licensed in exchange for other licenses to protect their phone business.”

Nokia generated 1.59 billion euros ($1.73 billion) in sales final 12 months from patent licensing — about 6% of its complete income. The corporate stated in 2022 it signed “over 50 new patent license agreements across our smartphone, automotive, consumer electronics, and IoT [Internet of Things] licensing programs.”

Nokia and Huawei prolonged their patent licensing settlement in December. Huawei additionally introduced licensing offers with South Korea’s Samsung and China’s Oppo.

“As far as I know, Huawei is aggressively pushing for the monetization of its patents,” Liang stated.

“It is one of the most important [key performance indicators] of their IP department, if not yet the single most important,” he stated.

“So any other companies that share technical areas with Huawei — such as telecommunication, phones, IoT, automobiles, PC, cloud service, and so on — should all beware that a giant patent monetization player is jumping into their respective pool and will make a splash.”

Huawei pushed again at the thought it was constructing a enterprise in patent monetization.

The corporate’s IP head Fan stated his division is “a corporate function, not a business unit,” and that it redirects royalties to the analysis departments that filed the patents to fund additional analysis.

“We actively support patent pools and similar platforms, which license patent not just for us, but also for other innovators at the same time,” Fan stated in a assertion.

The corporate beforehand stated it anticipated $1.2 billion to $1.3 billion in income from licensing its mental property between 2019 and 2021. Huawei didn’t break down particular figures, and solely stated it met its mental property income expectations for 2021.

A enterprise of that measurement would nonetheless be a tiny fraction of the firm’s total income. Huawei stated in December it expects 2022 income of 636.9 billion yuan, little modified from a 12 months in the past. Cloud and linked vehicles are different enterprise areas the firm has sought to develop.

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Huawei has “been floundering around since the demise of their handset business,” stated Paul Triolo, Senior Vice President for China and Expertise Coverage Lead at Albright Stonebridge Group. “I don’t think they had a choice in terms of sort of boosting their licensing revenue.”

“The question is what do they do for 6G [in] five years?” he stated. “Are they still going to play a patent game? They can’t really manufacture the equipment. They’re sort of stuck if they can’t figure out the semiconductor piece in terms of going forward.”

Nonetheless, Huawei stated it spent 22.4% of 2021 income on analysis and improvement, bringing complete class spending to greater than $120 billion over the final decade.

Progress in chip tech?

A few of the analysis is in semiconductor manufacturing. Huawei has filed for a patent in the extremely specialised space of lithography know-how used for making superior chips, in accordance to a disclosure late final 12 months on the China Intellectual Property Administration website.

“It’s significant in the sense that each individual piece of a complicated technology like EUV [extreme ultraviolet] is not that difficult to sort of make progress on,” Triolo stated. “Turning that into a commercial system at scale that can boost commercially is a huge, huge task.”

Proper now, Netherlands-based ASML is the solely firm in the world that may make the excessive ultraviolet lithography machines wanted to make superior chips.

Not solely did it take ASML about 30 years to develop EUV by itself, however the firm had the good thing about unrestricted entry to hundreds of suppliers and worldwide trade teams, Triolo stated. “What China really lacks is these international consortia.”

However he did not rule out the risk that China’s nationwide champion may assist Beijing construct up its semiconductor trade.

“Huawei has a very capable group of engineers,” Triolo stated. It is “probably a five-to-seven year process to build something commercially viable — only if everything goes well, if there’s substantial funding. The Chinese government is going to have to step up here.”

Different Chinese language firms are additionally pouring sources into mental property.

IFI’s rankings of firms’ and their subsidiaries’ international patent holdings confirmed a variety of Chinese language giants amongst the prime 15, including the state analysis group Chinese language Academy of Sciences.

Equipment firms Midea and Gree additionally ranked excessive globally, amongst South Korean and Japanese heavyweights, the knowledge confirmed.

“The rise in Chinese innovation has been in plain sight for a long time,” stated IFI CEO Baycroft. “Why shouldn’t we expect that China is innovating today like everybody else? Like Japan, like Germany, everybody’s in this game. It’s not just the U.S.”

— CNBC’s Arjun Kharpal contributed to this report.

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