The Chinese tech giant Huawei says it earned patent revenues of $560 million last year, a significant increase over the previous year. It is the latest sign that Huawei has diversified its revenue sources and is making a good profit on its IP portfolio. The company also has a strong presence in cloud and connected car technologies.
Huawei has made a concerted effort to build up its IP portfolio in recent years as the U.S. government grows skeptical of China’s 5G technology and other technologies that are deemed to pose security risks. The company is a leading player in the global market for mobile phones and 5G infrastructure.
However, its traditional operator business is in decline, as are sales of its premium smartphones. As a result, it has been forced to cut costs and rely more on patent licensing.
The company has entered into patent licenses with phone makers such as Samsung and Oppo and automakers such as Audi, Mercedes Benz, BMW, Porsche, Subaru, Lamborghini, and Bentley. It has also signed cross-license agreements to share patents with other device components firms. Last year, Huawei spent $23 billion on research and development, with 114,000 staff working on research, or about 55% of its total.
Huawei also focuses on growing its ecosystem through openness, collaboration, and partnership, aiming to accelerate ecosystem-based innovation for mutual success. The company said that Huawei works with over 40,000 ecosystem partners to deliver more value for customers.
While Huawei’s overall revenue is still relatively small compared to its market size, it is a big earner for the company licensing unit. The company booked altogether 1.5 billion euros in 2021 from its patent licensing, the most recent figures available.
But a more significant issue for the company is its perception as a supplier of low-cost, inferior products in mature markets such as Europe and the United States. As a result, it must carefully manage its pricing strategy in those markets, especially in the high-end segment. According to research firm IDC, its rivals in the low-end market, such as OnePlus and Vivo, have been quick to grab the share lost by Huawei.
While the issue of Huawei is mainly political and geopolitical, it also has essential technical aspects. It would be nothing short of madness to allow the telecommunications giant to worm its way into the next generation of global telecommunications networks in free sovereign nations and to vacuum up personal data and control electronic commerce. But unless the Chinese Communist Party fundamentally changes its economic and military development strategies, that may be what is to come. The author is a senior fellow at the Heritage Foundation and co-author of a report on China’s economy, military development, and foreign policy. He previously served as an assistant to President Obama for national security issues.
