Over the past two years, Chinese telecommunications equipment giant huawei has been strongly blocked by the United States, forcing the suspension of business dealings with U.S. companies. Recently, it was rumored that the Biden administration plans to further restrict companies from supplying 5G-related products to Huawei. Huawei, facing a tough challenge, recently announced that it is charging royalties to cell phone brands such as Apple and Samsung. In terms of numbers, Huawei has the world’s largest number of patents, and plans to charge far lower royalties than other competitors. Will this initiative enable Huawei to turn the tide?
Huawei piggybacking on diversified operations to cope with the pressure
Under the U.S. ban, Huawei is not only unable to use GMS services, but also unable to source its most important 5G cell phone processor chips. Reuters quoted sources as saying that the Biden Administration plans to revise the terms of U.S. companies and firms’ licenses to supply Huawei, further increasing restrictions on the supply of 5G network-related products to Huawei, which means Huawei’s existing contracts will be forced to break.
Chinese economic commentator “Jinshan” (a pseudonym) told the Voice of America that there is no doubt that Huawei is in a difficult position.
Jinshan said: “Although Huawei is the leading domestic manufacturer of wireless equipment (in China) should not be underestimated, but this Time the blow is really can be said to be fatal. We also see that in addition to its basic plate, Huawei has to develop other aspects of the business, including even pig farming, indicating that the operation is indeed facing great difficulties.”
Experts: charging royalties is a drop in the bucket
Huawei’s new trick to cope with the dilemma is to charge a patent licensing fee for each phone using Huawei’s 5G technology, with the rate set according to the phone’s selling price, capped at $2.50 per phone. Huawei is expected to negotiate with Apple, Samsung and other cell phone manufacturers.
In an exclusive interview with the Voice of America, Professor Qiu Junrong of the Department of Economics at Taiwan‘s National Central University believes that the move will have a limited effect on turning around Huawei’s performance.
Qiu Junrong said: “Nine cows, one hair. It’s a drop in the bucket. This is just a way to save the poor and save the emergency. Huawei has two main business projects, one is the cell phone, one is the 5G infrastructure. 5G infrastructure now seems to be many countries in Europe to block Huawei, the U.S. market is also blocking Huawei. For Huawei is a very serious blow. Look at its cell phone ranking, not to mention the world, in fact, in China has fallen very much. It must have some way to survive, otherwise there is no way to last too long. It didn’t care too much about royalty income at first. Now of course it is, any way to fight for revenue, it will try to do so.”
Qiu believes that the $2.50 fee is far lower than 5G telecoms equipment rivals such as Qualcomm, Nokia and Ericsson, and that handset makers have other options.
Apple (Apple) phones will have Android (Android),” said Qiu Junrong. This is a very, very small item even with Huawei’s patents in it. As for other brands of cell phones, although they will use Huawei’s products, but as long as they can find other alternative parts or methods. In fact, many cell phone vendors still have other options to consider. That said, if Huawei is going to do this, in fact, the phone inside the components, patents are divided into different large manufacturers, if Huawei does this, other manufacturers may also do this, for it, in the long run is probably not a major model that can continue its Life.”
The first price pressure and then raise the price as a competitive strategy
Luo Chengzong, director of the Institute of Finance and Law at Taiwan’s Nantai University of Science and Technology, told Voice of America that price pressures may be Huawei’s competitive strategy.
From the point of view of business competition, I first pressed the price unreasonably low, even below the cost of interest, but when everyone is popularly used, I only gradually raised it, so that it also maintains its competitive nature. Especially Made in China Chinese patents are compared with European patents, so far, they probably do not have the confidence to open the patent fee higher. This is a psychological effect. It can only be lower than the European price, not even equal to it.”
Luo Chengzong said, “On another note, Huawei’s investment in 5G is actually very large. I first cultivate the habit of using it, and after this habit is slowly popularized, I then collect the royalties from it. This is also a general business activity. Including Qualcomm, including Ericsson. These companies also have in the right to collect money well.”
According to China Fund News, until last year, Huawei held more than 100,000 validly granted patents worldwide, of which more than 90% belonged to invention patents. Ding Jianxin, head of Huawei’s intellectual property department, expects them to earn between $1.2 billion and $1.3 billion in intellectual property revenue from 2019 to 2021.
A report released this month by the UN’s World Intellectual Property Organization (WIPO) also shows that Huawei was again the world’s single largest patent filer last year, with more than 5,400 applications, and that China’s patent filings jumped more than 16 percent in 2020, led by Huawei and other companies, making it the world’s top patent filer.
Taiwan’s National Central University scholar James Chiu argued that the value of patents is not measured in terms of quantity.
Although the number of projects is very large, the overall quality is actually very limited,” said Chiu. Sometimes patents are not actually seen to be used effectively. Part of it is actually to prevent others from using the patent, so it will apply for the patent first, so whether it patent can be used effectively or not, there are actually many different levels. In the past, it was a patent war. There are times when you have to use Huawei’s patents as a last resort, but although Huawei has many patents, but not (have) all the patents, if each manufacturer has to forcefully claim the patent license, I’m afraid the cost of the phone is quite a big impact, somehow will form a vicious competition.”
Core technology Qualcomm far exceeds Huawei
Another data analysis company IPlytics’ latest report shows that Huawei now has the most 5G standard-essential patents and a market share of more than 15%, ahead of its U.S. rival Qualcomm.
But many in the industry believe that Qualcomm holds more core technologies than Huawei.
Qiu Junrong said: “If Qualcomm has these patented technologies called the ‘blue ocean’, Huawei’s technology is in the ‘red ocean’, that is, not in the key technology, that is, we can do, to see who first First to win that type of technology. Of course Huawei’s core technology is far behind compared to Qualcomm. This is something that everyone understands, in fact, there is no doubt about it.”
Some analysts believe that Huawei’s advantage is that it has its own production of cell phones and telecommunications equipment products, but Qualcomm’s main business is granting patents, which have a greater influence on the usage patterns of the entire industry.
Experts: having a patent is not equal to having a market
Luo Chengzong, a scholar at Nantai University of Science and Technology in Taiwan, said that Huawei’s active submission of patent applications in recent years is directly related to the Chinese system.
Luo Chengzong said: “Applying for a patent and whether the patent is used or not are two worlds. Chinese people like to get awards, but they don’t know if it’s practical or not. Many patents have no market value, and they are just patents for the sake of patents. The number of patents does not mean the Gold content is high. It depends on what is important in a patent. This is the case where the country is oriented to the development of science and technology. In the United States and Europe and the United States, the state will not be too involved, but by the market to assess, so they will be more pragmatic, and vice versa in the Chinese world is more retreat.”
Analysts: Huawei’s hard times haven’t seen an end
To avoid U.S. sanctions, Huawei sold business assets related to its cell phone brand “Glory” to a consortium of Shenzhen Smart City Technology Development and dozens of agents and distributors last November. Huawei said the sale of “Glory” is to ensure the survival of the “Glory” as the cell phone division is unable to obtain technical components and the consumer business is under great pressure. Economic commentator Jinshan said it seems that Huawei’s hard times have not yet come to an end.
Jinshan said: “5G patents ranked first in the world, indicating that it is still very leading technology in this field, so it can play a complementary role to the current predicament, the good thing is that there is a domestic piece of the basic plate. This piece can also support the basic revenue, only the former scenery is no longer.”
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