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

BEIJING — Chinese telecommunications elephantine Huawei is turning to patents for a lifeline arsenic the institution seeks to forge a way guardant successful precocious spot exertion — the prized tech which the U.S. is trying to chopped disconnected from China.

In 2022, Huawei announced it signed much than 20 caller oregon extended licensing agreements for its patents. Most were with automakers, for 4G and LTE wireless technology, the institution said.

Mercedes Benz, Audi, BMW and astatine slightest 1 U.S. automaker were among the licensees, said Huawei's planetary intelligence spot caput Alan Fan. He said helium wasn't capable to accidental which American company.

Huawei has much connected the mode — and filed a grounds fig of much than 11,000 patent applications with the U.S. successful 2022, according to IFI Claims Patent Services. Their investigation showed conscionable nether fractional typically get approved each year.

But the sheer fig of patents filed meant Huawei ranked 4th past twelvemonth by the fig of patent grants successful the U.S., IFI said. Samsung was first, followed by IBM and TSMC.

"The U.S. is inactive a important marketplace that everybody wants to person a portion of," said IFI Chief Executive Mike Baycroft. "They privation to marque definite erstwhile they're processing those technologies that they're protecting those IP [intellectual property] rights for the U.S. marketplace for the European market."

Over the past 2 years, Huawei's U.S. patents person accrued the astir successful areas related to representation compression, integer accusation transmission and wireless connection networks, according to IFI.

The U.S. authorities enactment Huawei connected a blacklist successful 2018 that restricted its quality to bargain from American suppliers. By October 2022, the U.S. made it wide that nary Americans should enactment with Chinese businesses connected high-end semiconductor tech.

Huawei's revenue dropped for the archetypal time connected grounds successful 2021, and the user part that includes smartphones reported income plunged astir 50% to 243.4 cardinal yuan ($36.08 billion).

For Huawei, licensing its patents to different companies has the imaginable to claw backmost a spot of that revenue.

Alex Liang, spouse astatine Anjie & Broad successful Beijing, pointed retired that having ceased operations successful definite concern areas allows the institution to recognize patent gross that antecedently existed chiefly connected paper.

"Huawei's concern is akin to Nokia's erstwhile the archetypal procreation iPhone came out," Liang said. "Nokia was rapidly losing marketplace stock to Apple and tons of their patents nary longer [had] to beryllium licensed successful speech for different licenses to support their telephone business."

Nokia generated 1.59 cardinal euros ($1.73 billion) successful sales past twelvemonth from patent licensing — astir 6% of its full revenue. The institution said successful 2022 it signed "over 50 caller patent licence agreements crossed our smartphone, automotive, user electronics, and IoT [Internet of Things] licensing programs."

Nokia and Huawei extended their patent licensing statement successful December. Huawei besides announced licensing deals with South Korea's Samsung and China's Oppo.

"As acold arsenic I know, Huawei is aggressively pushing for the monetization of its patents," Liang said.

"It is 1 of the astir important [key show indicators] of their IP department, if not yet the azygous astir important," helium said.

"So immoderate different companies that stock method areas with Huawei — specified arsenic telecommunication, phones, IoT, automobiles, PC, unreality service, and truthful connected — should each beware that a elephantine patent monetization subordinate is jumping into their respective excavation and volition marque a splash."

Huawei pushed backmost astatine the thought it was gathering a concern successful patent monetization.

The company's IP caput Fan said his section is "a firm function, not a concern unit," and that it redirects royalties to the probe departments that filed the patents to money further research.

"We actively enactment patent pools and akin platforms, which licence patent not conscionable for us, but besides for different innovators astatine the aforesaid time," Fan said successful a statement.

The institution antecedently said it expected $1.2 cardinal to $1.3 cardinal successful revenue from licensing its intelligence spot betwixt 2019 and 2021. Huawei did not interruption down circumstantial figures, and lone said it met its intelligence spot gross expectations for 2021.

A concern of that size would inactive beryllium a tiny fraction of the company's wide revenue. Huawei said successful December it expects 2022 gross of 636.9 cardinal yuan, small changed from a twelvemonth ago. Cloud and connected cars are different concern areas the institution has sought to develop.

Huawei has "been floundering astir since the demise of their handset business," said Paul Triolo, Senior Vice President for China and Technology Policy Lead astatine Albright Stonebridge Group. "I don't deliberation they had a prime successful presumption of benignant of boosting their licensing revenue."

"The question is what bash they bash for 6G [in] 5 years?" helium said. "Are they inactive going to play a patent game? They can't truly manufacture the equipment. They're benignant of stuck if they can't fig retired the semiconductor portion successful presumption of going forward."

Still, Huawei said it spent 22.4% of 2021 gross connected probe and development, bringing full class spending to much than $120 cardinal implicit the past decade.

Some of the probe is successful semiconductor manufacturing. Huawei has filed for a patent successful the highly specialized country of lithography exertion utilized for making precocious chips, according to a disclosure precocious past twelvemonth connected the China Intellectual Property Administration website.

"It's important successful the consciousness that each idiosyncratic portion of a analyzable exertion similar EUV [extreme ultraviolet] is not that hard to benignant of marque advancement on," Triolo said. "Turning that into a commercialized strategy astatine standard that tin boost commercially is simply a huge, immense task."

Right now, Netherlands-based ASML is the lone institution successful the world that tin marque the utmost ultraviolet lithography machines needed to marque precocious chips.

Not lone did it instrumentality ASML astir 30 years to make EUV connected its own, but the institution had the payment of unrestricted entree to thousands of suppliers and planetary manufacture groups, Triolo said. "What China truly lacks is these planetary consortia."

But helium didn't regularisation retired the anticipation that China's nationalist champion could assistance Beijing physique up its semiconductor industry.

"Huawei has a precise susceptible radical of engineers," Triolo said. It's "probably a five-to-seven twelvemonth process to physique thing commercially viable — lone if everything goes well, if there's important funding. The Chinese authorities is going to person to measurement up here."

Other Chinese companies are besides pouring resources into intelligence property.

IFI's rankings of companies' and their subsidiaries' planetary patent holdings showed a fig of Chinese giants among the apical 15, including the authorities probe enactment Chinese Academy of Sciences.

Appliance companies Midea and Gree besides ranked precocious globally, among South Korean and Japanese heavyweights, the information showed.

"The emergence successful Chinese innovation has been successful plain show for a agelong time," said IFI CEO Baycroft. "Why shouldn't we expect that China is innovating contiguous similar everybody else? Like Japan, similar Germany, everybody's successful this game. It's not conscionable the U.S."

— CNBC's Arjun Kharpal contributed to this report.