5G Patent Licensing Wars Begin: Nokia undercuts Ericsson and Qualcomm on royalties for 5G smartphones

On August 21st Nokia announced its patent-licensing rate for 5G smartphones at €3 (~$3.47) per smartphone. That rate appears to be less than what Qualcomm and Ericsson are charging for their own 5G patents.

“Nokia innovation combined with our commitment to open standardization has helped build the networks of today and lay the foundations for 5G/NR,” said Ilkka Rahnasto, head of patent business at Nokia. “This announcement is an important step in helping companies plan for the introduction of 5G/NR capable mobile phones, with the first commercial launches expected in 2019.”

For other categories of devices, Nokia said it will determine its licensing rates separately “and seeks to engage in constructive dialogue with relevant industry participants to define the licensing models best suited for those industries.”

Nokia’s announcement underscores what will be a major element in the growth of the 5G industry.  The companies that have contributed to the 3GPP relase 15 New Radio (NR) spec are all likely looking to cash in on patent-licensing agreements.  That’s even though 3GPP won’t submit it’s IMT 2020 RIT proposal to ITU-R WP 5D till July 2019!

Image result for pic of 5G patents illustration

Already some of the global wireless industry’s biggest players have outlined their patent-licensing positions on 5G, even though there won’t be a standard (ITU-R’s IMT 2020) for more than two years.

Qualcomm late last year said that it could charge smartphone manufacturers up to $16.25 in royalties for every 5G phone they sell. However, $16.25 per 5G phone is not necessarily the exact price that 5G handset makers would pay; the company said its rates would vary depending on exactly what kinds of technologies were included in the license, as well as what types of devices manufacturers would sell.  Furthermore, Qualcomm indicated in April the company will adjust its patent-licensing terms, which some analysts said could result in a reduction in licensing fees paid by some of Qualcomm’s bigger customers, like Samsung.  Last November, Qualcomm announced it would charge up to $16.25 in royalties for 5G smart phones.

Similarly, in March of last year, Ericsson said it would charge $5 per 5G phone, though Ericsson said it might reduce that rate to $2.50 per phone under “exceptional circumstances.”  The company states on its website:

5G standardization is supported by the patent and licensing process, and will boost performance between networks, devices and operators, creating new revenue streams with radical new business models and use cases. Progress on the 5G standardization front will also bring enormous opportunities to the way we use our devices to communicate with our surroundings, revolutionizing key industries globally, including: TV and media; manufacturing; healthcare; telecommunications; and transportation and infrastructure.

Monica Magnusson,  VP of IPR Policy at Ericsson recently wrote:  “5G will offer a $619 billion revenue opportunity by 2026 globally. The new possibilities and innovations that 5G will enable seem exciting but harnessing the potential business value and societal benefits from technological breakthroughs will require a commitment to making this technology accessible. That’s why consensus-based standards and fair patent licensing must be prioritised.”

Nokia, Qualcomm and Ericsson are all working to increase the revenues that they derive from patent licensing. During the Nokia’s second-quarter earnings conference call with analysts, Nokia’s CEO Rajeev Suri said that “We expect our current portfolio strength both to continue for many years to come and to give us considerable monetization opportunities. … We’ve always had clear and ambitious targets for new patent creation and we are constantly adding new patents to our portfolio while still maintaining a high-quality threshold.”

4 thoughts on “5G Patent Licensing Wars Begin: Nokia undercuts Ericsson and Qualcomm on royalties for 5G smartphones

  1. China 5G rollout to drive first smartphone shipment rise in 4 years – IDC:

    The global smartphone market is set to return to growth for the first time in 4 years in 2020 on the back of China’s huge investment in 5G technology, according to the latest report from IDC. Worldwide shipments are expected to grow 1.5 percent year on year in 2020 to just over 1.4 billion following falls of 0.3 percent in 2017, 4.3 percent in 2018 and an expected 1.4 percent this year. The 2020 figure is set to include 190 million 5G smartphones, accounting for 14 percent of the total, driven by recent developments in the China market along with anticipation of aggressive activity from the smartphone supply chain and OEMs, said IDC.
    The report expressed the hope that 5G smartphone prices will quickly come down quickly to boost the growth of this market segment. “Following three straight years of declining smartphone volumes there leaves little room for 5G to raise smartphone ASPs,” said IDC, adding that Android vendors are expected to drive down the cost of 5G smartphones starting with a host of first quarter announcements at both CES and MWC. Apple is expected to enter the 5G smartphone market in September 2020, with the real focus around pricing and market availability.

    In contrast to the expected rapid 5G growth in China, demand in other markets such as Australia, Japan, and Korea in Asia/Pacific as well as some European countries is set to be slower than predicted, added IDC. The report said shipments so far in the second half of 2019 have come in much lower than expected, with accelerated 5G adoption globally depending on factors such as the arrival of 5G networks, operator support, as well as substantial price reductions.

    https://www.telecompaper.com/news/china-5g-rollout-to-drive-first-smartphone-shipment-rise-in-4-years-idc–1317726

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