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 corporate seeks to forge a path ahead in superior chip expertise — the prized tech which the U.S. is attempting to chop off from China.

In 2022, Huawei introduced it signed greater than 20 new or prolonged licensing agreements for its patents. Most have been with automakers, for 4G and LTE wi-fi expertise, the corporate mentioned.

Mercedes Benz, Audi, BMW and not less than one U.S. automaker have been among the many licensees, mentioned Huawei’s world mental property head Alan Fan. He mentioned he wasn’t capable of say which American firm.

Huawei has extra on the best way — and filed a report variety of greater than 11,000 patent purposes with the U.S. in 2022, in accordance with IFI Claims Patent Companies. Their evaluation confirmed just below half sometimes get accredited every year.

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

“The U.S. continues to be a considerable market that everyone desires to have part of,” mentioned IFI Chief Government Mike Baycroft. “They need to be certain that once they’re growing these applied sciences that they are defending these IP [intellectual property] rights for the U.S. marketplace for the European market.”

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

The U.S. authorities put Huawei on a blacklist in 2018 that restricted its capability 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.

Huawei’s income dropped for the primary time on report in 2021, and the buyer division that features smartphones reported gross sales plunged practically 50% to 243.4 billion yuan ($36.08 billion).

For Huawei, licensing its patents to different firms has the potential to claw again a little bit of that income.

Alex Liang, companion at Anjie & Broad in Beijing, identified that having ceased operations in sure enterprise areas permits the corporate to comprehend patent income that beforehand existed totally on paper.

“Huawei’s scenario is just like Nokia’s when the primary era iPhone got here out,” Liang mentioned. “Nokia was shortly dropping market share to Apple and plenty of their patents not [had] to be licensed in trade for different licenses to guard their cellphone enterprise.”

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

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

“So far as I do know, Huawei is aggressively pushing for the monetization of its patents,” Liang mentioned.

“It is likely one of the most essential [key performance indicators] of their IP division, if not but the only most essential,” he mentioned.

“So every other firms that share technical areas with Huawei — similar to telecommunication, telephones, IoT, vehicles, PC, cloud service, and so forth — ought to all beware {that a} large patent monetization participant is leaping into their respective pool and can make a splash.”

Huawei pushed again on the concept it was constructing a enterprise in patent monetization.

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

“We actively help patent swimming pools and related platforms, which license patent not only for us, but in addition for different innovators on the similar time,” Fan mentioned in a press release.

The corporate beforehand mentioned 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 mentioned it met its mental property income expectations for 2021.

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

Huawei has “been floundering round for the reason that demise of their handset enterprise,” mentioned Paul Triolo, Senior Vice President for China and Expertise Coverage Lead at Albright Stonebridge Group. “I do not assume that they had a alternative when it comes to kind of boosting their licensing income.”

“The query is what do they do for 6G [in] 5 years?” he mentioned. “Are they nonetheless going to play a patent sport? They cannot actually manufacture the gear. They’re kind of caught if they cannot determine the semiconductor piece when it comes to going ahead.”

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

Among the analysis is in semiconductor manufacturing. Huawei has filed for a patent within the extremely specialised space of lithography expertise used for making superior chips, in accordance with a disclosure late final 12 months on the China Mental Property Administration web site.

“It is important within the sense that every particular person piece of a sophisticated expertise like EUV [extreme ultraviolet] isn’t that tough to kind of make progress on,” Triolo mentioned. “Turning that right into a industrial system at scale that may enhance commercially is a big, large process.”

Proper now, Netherlands-based ASML is the one firm on the earth that may make the acute 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 advantage of unrestricted entry to hundreds of suppliers and worldwide trade teams, Triolo mentioned. “What China actually lacks is these worldwide consortia.”

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

“Huawei has a really succesful group of engineers,” Triolo mentioned. It is “in all probability a five-to-seven 12 months course of to construct one thing commercially viable — provided that every little thing goes nicely, if there’s substantial funding. The Chinese language authorities goes to should step up right here.”

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

IFI’s rankings of firms’ and their subsidiaries’ world patent holdings confirmed various Chinese language giants among the many high 15, together with 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 info confirmed.

“The rise in Chinese language innovation has been in plain sight for a very long time,” mentioned IFI CEO Baycroft. “Why should not we count on that China is innovating as we speak like everyone else? Like Japan, like Germany, everyone’s on this sport. It is not simply the U.S.”

— CNBC’s Arjun Kharpal contributed to this report.