Why Huawei offering lower patent royalties for Apple and Samsung? Here’s the answer

Huawei has published a white paper on innovation and intellectual property at the Innovation and IP Prospects 2021 Press Conference. In this paper, the company reveals that it will impose new royalties in its 5G patent licensing that lower than the competitors including Qualcomm, Ericsson, and Nokia.

According to the information, Huawei expected to get around 1.2 to 1.3 billion US dollars in revenue from patent licensing between 2019 and 2021. Jason Ding, Head of Huawei’s Intellectual Property Rights Department announced that for every multi-mode 5G smartphone, Huawei will provide a reasonable percentage royalty rate of the handset selling price, and a per-unit royalty cap at US$2.5.

Aside from this announced cap, the company even further negotiate the royalties with companies such as Apple and Samsung. The company also noted that Huawei’s main motive is to provide a product with the best experience not to earn extra revenue.

Huawei’s Chief Legal Officer Song Liuping said that Huawei is a company that mainly produces products and its main source of income is still to provide customers with the best products and services, not to achieve patent licensing revenue.

As early as 2018, Qualcomm disclosed the 5G patent fee collection standards. Globally, 5G mobile phones that use Qualcomm’s mobile network core patents provide 2.275% of the patent fee for single-mode 5G phones, and multi-mode 5G phones (3G/4G/5G) is 3.25%.

On the other hand, the Single-mode 5G mobile phones using Qualcomm’s mobile network standard core patents + non-core patents are 4%, and multi-mode 5G mobile phones (3G/4G/5G) are 5%.

Since there are almost no single-mode 5G mobile phones on the market, Qualcomm’s patent fee rate is between 3.25% and 5%, and a 3,000 yuan (400 to 500 USD) mobile phone needs to pay at least up to 97 yuan (13 USD) in patent fees. However, Qualcomm has also adjusted the upper limit of the price of mobile phones, from the initial 500 US dollars to 400 US dollars.

“Huawei has been the largest technical contributor to 5G standards, and follows fair, reasonable and non-discriminatory (FRAND) principles when it comes to patent licensing,” added Ding, “we hope that the royalty rate we announced today will increase 5G adoption by giving 5G implementers a more transparent cost structure that will inform their investment decisions moving forward.”