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

BEIJING – Chinese telecommunications giant Huawei is turning to patents as a lifeline as the company seeks to forge a way forward in cutting-edge chip technology – highly prized technology that The US is trying to cut off from China.

In 2022, Huawei announced that it had signed more than 20 new or expanded licensing agreements for its patents. Most are with automakers, for 4G and LTE wireless technology, the company said.

Huawei’s global head of intellectual property, Alan Fan, said Mercedes Benz, Audi, BMW and at least one US automaker were among the licensees. He said he couldn’t say which American company.

Huawei is so much more — and filed a record number of more than 11,000 U.S. patent applications in 2022, according to IFI Claims Patent Service. Their analysis shows just under half are generally approved each year.

But the huge number of patents filed meant Huawei ranked fourth last year in the number of patents granted in the US, IFI said. Samsung is first, followed by IBM And TSMC.

“The US remains an important market that everyone wants to be in,” said IFI CEO Mike Baycroft. “They want to make sure that as they develop those technologies, they protect those IPs [intellectual property] rights to the American market for the European market.”

According to IFI, in the past two years, the number of Huawei’s US patents has increased the most in areas related to image compression, digital information transmission and wireless communication networks.

The US government put Huawei on a blacklist in 2018, restricting its ability to buy from US suppliers. By October 2022, the United States explicitly stated that no Americans should work with Chinese enterprises on high-end semiconductor technology.

by Huawei sales fell for the first time was recorded in 2021, and the consumer division including smartphones reported a sales drop of nearly 50% to 243.4 billion yuan ($36.08 billion).

For Huawei, licensing its patents to other companies has the potential to recoup some of that revenue.

Alex Liang, partner at Anjie & Broad in Beijing, points out that the shutdown in certain business areas allows the company to realize patent revenue that previously existed mainly on paper. .

“Huawei’s situation is similar to that of Nokia when the first generation iPhone came out,” Liang said. “nokia has quickly lost market share to Apple and many of their patents are gone [had] licensed in exchange for other licenses to protect their telephony business.”

Nokia recorded sales of 1.59 billion euros ($1.73 billion) last year from patent licensing – about 6% of its total revenue. The company says that by 2022 it has signed “more than 50 new patent licensing agreements across our smartphones, automobiles, consumer electronics and IoT. [Internet of Things] licensing program.”

Nokia and Huawei renewed their patent licensing agreements in December. Huawei has also announced licensing deals with South Korea’s Samsung and China’s Oppo.

“As far as I know, Huawei is actively promoting monetization of its patents,” Liang said.

“It’s one of the most important things [key performance indicators] of their IP department, if not the most important one,” he said.

“So any other company that shares technical areas with Huawei – such as telecommunications, phones, IoT, automotive, PC, cloud services, etc. – should be careful that one person Giant patent monetization players are jumping on their respective groups and will create a sensation.”

Huawei has rejected the idea that it is building a business that makes money off of patents.

Fan, the company’s head of IP, says his division is “a corporate function, not a business unit,” and that it passes royalties on to patent-filed research divisions to finance them. support for further research.

“We actively support the patent pool and similar platforms, licensing patents not only to us but to other innovators at the same time,” Fan said in a statement.

The company previously said projected revenue of $1.2 billion to $1.3 billion from licensing its intellectual property between 2019 and 2021. Huawei did not give specific numbers but only said it met expectations for intellectual property revenue for 2021.

A business of that size would still be a tiny fraction of the company’s total revenue. In December, Huawei said it expected 2022 revenue of 636.9 billion yuan, little changed from a year ago. Cloud and connected cars are other business areas the company is looking to grow.

Paul Triolo, Senior Vice President of China and Head of Technology Policy at Albright Stonebridge Group, said that Huawei has been “embarrassed since its phone business collapsed”. “I don’t think they have a choice on how to increase their licensing revenue.”

“The question is what do they do for 6G [in] 5 years?” he said, “Are they still going to play a patent game? They can’t actually manufacture the device. They’ll be stuck if they can’t find the future piece of semiconductor.”

However, Huawei said it spent 22.4% of its 2021 revenue on research and development, bringing total category spending to more than $120 billion over the past decade.

Some of the research is in semiconductor manufacturing. According to a reveal late last year on Chinese intellectual property management website.

“It is important that each individual part of a complex technology like EUV [extreme ultraviolet] Triolo said. “Making it into a trading system at a scale that can drive commerce is a very, very big task.”

Right now, based in the Netherlands ASML is the only company in the world can make the ultraviolet lithography machines needed to make cutting-edge chips.

Not only did ASML take about 30 years to develop the EUV on its own, Triolo said, but it also benefits from unrestricted access to thousands of international suppliers and industry groups. “What China really lacks is these international corporations.”

But he did not rule out the possibility that the Chinese national champion could help Beijing build up its semiconductor industry.

“Huawei has a very capable group of engineers,” said Triolo. “It could be a five to seven-year process to build something commercially viable — only if everything goes well, if there’s substantial funding. The Chinese government will. interfere here.”

Other Chinese companies are also pouring resources into intellectual property.

IFI’s ranking of global patent holdings by companies and their subsidiaries shows a number of Chinese giants in the top 15, including the state research institution of the Korean Institute of Technology. Chinese Academy of Sciences.

The data shows that home appliance companies Midea and Gree also rank highly globally, among Korean and Japanese heavyweights.

“China’s rise in innovation has been clearly seen for a long time,” said IFI Baycroft CEO. “Why shouldn’t we expect that today China is innovating like other countries? Like Japan, like Germany, everyone is in this game. It’s not just the US.”

— Arjun Kharpal of CNBC contributed to this report.