Huawei turns to patents for a lifeline — together with these within the U.S.

BEIJING — Chinese language telecommunications big Huawei is popping to patents for a lifeline as the corporate seeks to forge a path ahead in superior chip know-how — the prized tech which the U.S. is making an attempt to chop 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 corporate mentioned.

Mercedes Benz, Audi, BMW and at the very least one U.S. automaker had been among the many licensees, mentioned Huawei’s world mental property head Alan Fan. He mentioned he wasn’t in a position to say which American firm.

Huawei has extra on the best way — and filed a document variety of greater than 11,000 patent functions with the U.S. in 2022, in line with IFI Claims Patent Companies. Their evaluation confirmed slightly below half sometimes get accepted every year.

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

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

Over the past 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 line with 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 Individuals ought to work with Chinese language companies on high-end semiconductor tech.

Huawei’s income dropped for the primary time on document in 2021, and the buyer division that features smartphones reported gross sales plunged almost 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 appreciate patent income that beforehand existed totally on paper.

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

Nokia generated 1.59 billion euros ($1.73 billion) in gross sales final yr 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, client electronics, and IoT [Internet of Things] licensing packages.”

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 among the most vital [key performance indicators] of their IP division, if not but the one most vital,” he mentioned.

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

Huawei pushed again on the thought 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 comparable platforms, which license patent not only for us, but additionally 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 measurement would nonetheless be a tiny fraction of the corporate’s total income. Huawei mentioned in December it expects 2022 income of 636.9 billion yuan, little modified from a yr in the past. Cloud and related automobiles are different enterprise areas the corporate has sought to develop.

Huawei has “been floundering round because the demise of their handset enterprise,” mentioned Paul Triolo, Senior Vice President for China and Know-how Coverage Lead at Albright Stonebridge Group. “I do not assume that they had a selection by way of 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 recreation? They cannot actually manufacture the tools. They’re kind of caught if they cannot determine the semiconductor piece by way of going ahead.”

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

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

“It is important within the sense that every particular person piece of an advanced know-how like EUV [extreme ultraviolet] will not be that troublesome to kind of make progress on,” Triolo mentioned. “Turning that right into a industrial system at scale that may enhance commercially is a large, enormous process.”

Proper now, Netherlands-based ASML is the one firm on the earth that may make the intense 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 1000’s of suppliers and worldwide business teams, Triolo mentioned. “What China actually lacks is these worldwide consortia.”

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

“Huawei has a really succesful group of engineers,” Triolo mentioned. It is “in all probability a five-to-seven yr course of to construct one thing commercially viable — provided that the whole lot goes properly, if there’s substantial funding. The Chinese language authorities goes to need to step up right here.”

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

IFI’s rankings of firms’ and their subsidiaries’ world patent holdings confirmed plenty of 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 information 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 anticipate that China is innovating right now like all people else? Like Japan, like Germany, all people’s on this recreation. It is not simply the U.S.”

— CNBC’s Arjun Kharpal contributed to this report.