A Huawei logo is seen on the screen of a cell phone in his store in Viña del Mar, Chile, July 18, 2019. REUTERS / Rodrigo Garrido
HONG KONG (Reuters Breakingviews) – Huawei is not that easy to wipe out for Western countries. The Chinese telecommunications equipment giant founded by Ren Zhengfei has a huge treasure trove of next-generation wireless patents. As a global standard for 5G emerges, Huawei’s technology may become essential for operators.
For years, the Shenzhen-based company has dominated the mobile infrastructure market, outperforming rivals Nokia and Ericsson by offering cheaper alternatives. But the US concern that Beijing may use Huawei equipment for espionage has gained popularity: Officials in the UK and France are purging their own networks of kits made in China. A similar reaction elsewhere will seriously affect a business that generated nearly $ 43 billion in revenue for Huawei last year, about a third of the company’s total.
However, replacing antennas and mast towers is one thing. Even if people like Britain’s Vodafone and BT remove all existing Huawei equipment, a move the UK government conservatively estimates will cost £ 2bn, global operators will continue to rely on Huawei’s technology to roll out networks the next generation. Research firm IPlytics has found that the Chinese team owns the majority of 5G-related patents, and of that, about 15% of the essential ones.
In a nutshell, these are technical specifications that global operators can build to ensure that different networks are compatible with each other. Having a unified standard will be vital to 5G, which is intended to seamlessly connect billions of machines, cars, and devices worldwide.
The booty from Huawei’s patents is primarily based on technology for mobile base stations, which means that even if Nokia and Ericsson rebuild Huawei’s infrastructure across Europe, they will still have to use the experience of the Chinese group. For now, Huawei does not benefit much financially from its intellectual property. It prefers “cross-licensing” by exchanging access to its own patent portfolios with those of its rivals.
Huawei can stop cross-licensing in markets that have been banned, leaving mobile phone operators hooked on paying royalties and fees, which can be a lucrative business. Qualcomm, for example, which owns most of the critical mobile chip technologies, has raised more than $ 17 billion in license payments since 2017.
Already this year, the Chinese company has sued Verizon in the United States for patent infringement and is seeking more than $ 1 billion, Reuters reports. There is a risk that Beijing will take advantage of Huawei’s technological advantage as a political lever.
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