Huawei’s devices business may be shrinking as a result of international sanctions, but it can still make revenue from its 5G patents. It has published its 5G licensing rates, two or more years after its major rivals did the same, in a burst of transparency that it said was a result of key standards being finalized.
Sometimes, companies under sales pressure resort to aggressive patent licensing charges to compensate but that is not the case here – Huawei has set a cap of $2.50 per device for handsets plus “a reasonable percentage royalty rate” of the selling price of each unit.
While the latter is not well-defined, the policy does not look out of sync with what is known of the charges from other patent majors. Indeed, its cap is lower than the €3 ($3.60) limit that Nokia announced for 5G two years ago, while Qualcomm charges 2.275% of the selling price of a 5G phone, which could easily be between $10 and $15.
Jason Ding, head of intellectual property, said there would be different approaches for some other 5G products and that for IoT device makers, Huawei would “allow a certain flexibility, but for the smartphone it is quite clear”.
He said the royalties had been decided to strike a balance between getting return on investment in R&D, and affordability for the ecosystem – which would help to drive 5G growth. “As the largest technical contributor to the 5G standard, we believe there should be a balance between R&D investment and the cost of the implementation by the industry,” he told a press conference. “We hope this will give 5G investors a number they can rely on for the cost for estimation and investment decisions.”
Ericsson and Qualcomm published their 5G patent rates in 2017 and Nokia in 2018.
Ding said Huawei expects to achieve licensing sales of between $1.2bn and $1.3bn for the period 2019-2021. Chief legal officer Song Liuping insisted: “We don’t position IP as a major source of revenue. If you compare against other revenue you see the position quite clearly.”
Indeed, Huawei’s royalties expectations seem lower than those of key rivals. Ericsson generated about $1.2bn in licensing in 2020 alone, and Nokia made €1.4bn ($1.7bn) from patent and brand licensing in the same year, while Qualcomm made $7.2bn in licensing revenues. Huawei made $1.4bn in the whole period from 2015 to 2019.