Huawei in the second quarter of 2020 were the number-one smartphone vendor in the world. By the fourth quarter, their sales were down 41%, causing them to become the sixth largest. This has been because of the United State’s sanctions imposed on the company, who cited national security concerns as their justification. They are looking for other revenue streams to cope with this declining performance as sanctions look set to continue. Charging smartphone makers royalties for use of their patented 5G technology is what they’ve decided to do.
5G
5G is the next generation of wireless technology currently being rolled out across the globe. It promises revolution. Most associate 5G with smartphones because it is the common way – the everyday way – people do and will interact with this new technology. It’ll provide serious improvements for entertainment. Faster download speeds enable 4K films to be downloaded in under a minute. Lower latency means that the delay between that a gamer’s input will be lessened, meaning those playing games like PUBG Mobile or using the in-play online betting feature will have much smoother experiences. Other industries will benefit from the more efficient and effective information transfers, like healthcare, transportation, and manufacturing, but consumers will only have situational access to those environments.
Huawei Handset Sales
The U.S.’s sanctions have limited Huawei’s ability to complete deals with leading computer chip providers. It’s prohibited for companies to sell chips to the Chinese company if it contains American technology. Thus, they couldn’t use Google’s Android operating system, which limits their international sales capabilities – not their domestic ones as many Google services are banned. There was also the issue of not being able to use the Taiwanese-based TSMC’s semiconductor too. However, this may become less of an issue as more and more Chinese companies are producing semiconductors in a bid to become less dependent on imports.
Huawei’s hold on the Chinese market for handset sales is still pretty strong. However, in Q4 of 2020, Apple sold record numbers of handsets worldwide, with their revenue increasing in China too. This will worry the company, as they aren’t yet in a position to fend off the competition. There may have been hope that when the Biden administration took office sanctions may be eased and trading could begin, but Biden imposed stricter sanctions, restricting the use of Huawei technology in a number of their projects in infrastructure, the military, and the cloud.
Royalties
Huawei will charge $2.50 every manufacturer for each smartphone capable of 5G connectivity using its technology. In the market, it’s a lower price than its competitors like Nokia. It is Huawei, Nokia, and Ericsson who control over upwards of 60% of the equipment market. The U.S., India, and other countries who have taken action against Huawei will hoping that competitors can step up and produce leading equipment and handsets, as Huawei potentially continue to struggle but also become more aggressive in recovering by pursuing other revenue streams and legal challenges – the company has the most patented 5G technology and are or were a leader in the field – so that their own infrastructures and critical projects aren’t left behind.
