Huawei 'Strikes Back': Global 5G Patent Battle Might Be Getting Started

In 2020, Huawei employed 105,000 researchers, accounting for 53.4% of the company's total number of workers. Huawei invests about 15% of its revenue into research every year, with a cumulative amount of capital spent on R&D of over USD 100 billion as of the end of 2020. At present, it has signed more than 100 patent cross-licensing agreements with major ICT companies globally. Collecting royalties can be regarded as a return for Huawei's continuous investment in the 5G field. At the same time, Huawei also expresses an attitude to the US-led alliance, casting off its 'victim' image in the past two years.

Thirdly, as a dominant player in the 5G area, by using royalties, it could recapture its market share. As mentioned above, in China's domestic market, Huawei's market share dropped by 40% to 15.2% in January 2021, falling to fourth place. According to a source who is familiar with the market, the burden of domestic mobile phone manufacturers is already heavy. In the past, under pressure from several patent monopolies, such as Qualcomm, the average profit margin of domestic mobile phone manufacturers was very low (less than 5%). In recent years, mobile phone manufacturers have had little flexibility and a lack of cooperation opportunities with Huawei. Thus, Huawei has not been able to reach royalty agreements with these manufacturers.

However, an alternative solution is for Huawei to incorporate overseas smartphone manufacturers, such as Apple and Samsung. Subsequently, it could gradually expand its cooperation with domestic mobile phone manufacturers as a feasible strategy. In addition, the scope of the 5G patent license is not limited to smartphones and may also extend to IoT and EV fields in the future while gaining a larger market share.

The fourth aspect is for Huawei to collect royalties in line with the Chinese government's policies. According to the Chinese Fourteenth Five-year Plan (link in Chinese), Chinese leaders plan to sharpen the use of antitrust, intellectual property (IP), and standards tools to advance industrial policies. Before this plan, it was controversial to address the intellectual property problem of China because excessive protection of intellectual property rights will suppress the enthusiasm of innovative companies. However, along with the development of technology and society, as well as the fact that the Sino-American trade relationship has transformed into a new stage, the enthusiasm of innovative companies has been activated. Protecting intellectual property rights has become more and more necessary, which will force domestic companies to innovate. Huawei's decision of collecting royalties is also adapted to the trend at this time.

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