Founder Ren Zhengfei urges Huawei to step up patent licensing as telecoms giant seeks to remake itself amid US sanctions

·3 min read

Chinese telecoms giant Huawei Technologies Co is stepping up efforts to turn its vast pool of patents into revenue via "reasonable pricing", founder Ren Zhengfei said in an internal meeting, as the company continues a drive to diversify its sales mix while still subject to crippling US sanctions.

"Previously our intellectual property [efforts] were made for self-defence and to keep our own business safe," Ren told the company's IP team in an internal meeting in March, with an internal memo documenting the meeting posted on Huawei's employee forum last week.

"[However] after years of accumulation ... we need to set up a reasonable pricing benchmark for industries to use our patented technologies fairly, and generate an appropriate return on our research and development," Ren told his employees, stressing the company's edge in 5G mobile network patents and other technologies.

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Ren noted that royalty charges "should not be too low" as that could have the effect of curbing innovation and the willingness to invest in R&D within society, and he also warned the company to prepare for a "protracted battle" to make patent licensing a success for Huawei.

Huawei held a total of 110,000 active patents across 45,000 patent families by the end of last year, and in 2021 alone the company ranked number one for the number of granted patents in both China and Europe, according to the company's annual results filing.

Ren urged the company to update its IP strategies and bring out the "commercial value" of these confidential technology results by licensing them to external partners.

Patent licensing is just one new area Huawei is examining as it seeks to counter the effects of US trade sanctions that have cut off the company's access to advanced US origin technology - including cutting-edge chips.

Huawei's consumer business, which includes smartphones, has born the brunt of the sanctions, with 2021 revenue down 50 per cent from a year earlier to 243.4 billion yuan (US$38.24 billion).

In 2019, Ren offered to license the company's 5G technology to an American company to create a powerful new competitor that could develop its own large-scale market. However, there were no takers in the US as the offer did not address Washington's long-standing national security concerns about Huawei. The Shenzhen-based giant has always denied links to China's military and security apparatus.

Last year the company revealed the royalty rate for licensing its 5G mobile technology for the first time, saying it "would not seek a royalty rate higher than US$2.50" per 5G smartphone, with a goal to "to promote broader adoption of 5G across all industries".

Jason Ding, the head of intellectual property at Huawei, said that revenue from patent licensing between 2019 and 2021 was estimated to be "about US$1.2 billion to US$1.3 billion". To date, the company has entered into more than 100 patent licence and cross-licence agreements with major global information and communications technology companies across Europe, the US, Japan and South Korea.

In 2021 Huawei also agreed to license its 4G mobile technology to a supplier of Volkswagen, the world's largest carmaker, to deploy its technology in more than 30 million Volkswagen vehicles with wireless connectivity.

Apart from 5G technology, the company has also filed a patent application on the mainland for a semiconductor packaging innovation, according to a statement released on Tuesday by the China National Intellectual Property Administration.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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