Ericsson, Huawei and Nokia chase 5G royalties beyond smartphones
-
Loading... - Betty Simpson
- 25 Jan 2023
- 64 Views
- 0 Like
- 0 Comment
Ericsson and Nokia have long since retired from the business of making and selling phones, ceding the market to Apple and a handful of Asian firms. But they still collect billions of dollars from gadget sales. It's all to do with the vast libraries of patents they license to smartphone makers. Each time a device is sold, a few dollars end up with companies better known for building mobile networks.
Ericsson, for instance, pocketed about $590 million from licensing intellectual property for the final three months of 2022, after a fight against Apple in the courts. That was up from the $230 million it made a year before. And Nokia has just signed what could be a lucrative deal with Samsung, the world's biggest smartphone maker.
The terms are confidential, but the deal was signed without recourse to litigation and renews a four-year contract that expired in December. That augurs well for Nokia Technologies, the part of Nokia responsible for brand and patent licensing (phones continue to be made that feature Nokia's name), after a rough 2022. Noting that two of its licensing deals expired in 2021, and that another licensee had exited the smartphone market, Nokia Technologies saw net sales drop by 19% year-over-year for the first nine months, to €916 million (US$996 million).
Right now, a long-running battle against Oppo, a Chinese smartphone producer, is described as Nokia's "biggest renewal problem" by Florian Mueller, a technology patents expert who maintains the FOSS Patents website. Although Nokia has had victories against Oppo in several countries, Mueller reckons it has "recently lost more decisions than it won." Where Nokia has influence, Oppo has little market share, he says. And where Oppo is popular, Nokia has no real "leverage."
There is also concern about the status of Nokia's own licensing agreement with Apple and when it expires. "According to some people, the agreement would have expired last summer, but Nokia's numbers don't suggest that Apple stopped paying," wrote Mueller in a blog published today. "Currently, the most likely dates of expiration would be the end of this year or the middle of next year, given that the last renewal was in mid-2017 (and the related agreement had expired at the end of 2016)."
Pure profit
Much like Ericsson, Nokia generates the bulk of its revenues from equipment, software and services. But licensing is easily the most profitable part of its business. For the first nine months of 2022, Nokia Technologies reported a gross margin of 99.7%, compared with the group one of 40.3%, and an operating margin of 70.3%, compared with 8.2% at group level. Nearly everything Nokia Technologies turns over is booked as gross profit. Read More…
