Huawei, Volkswagen supplier enter 4G licensing deal as US sanctions-hit telecoms giant widens business

·4-min read

Huawei Technologies Co has agreed to license its 4G mobile technology to a supplier of Volkswagen, the world’s largest carmaker, as the Chinese telecommunications giant moves to diversify its business to help overcome crippling trade sanctions imposed by the United States.

The deal is Huawei’s biggest patent licensing agreement in the car industry, as its 4G mobile technology is expected to be deployed in more than 30 million Volkswagen vehicles with wireless connectivity, according to an announcement from the Shenzhen-based company on Wednesday. It did not provide the identity of the Volkswagen supplier.

Industry insiders said the company in the Huawei licensing deal is Rolling Wireless, one of the world’s leading suppliers of 4G and 5G network access devices to the car industry. Luxembourg-based Rolling Wireless did not immediately respond to a request for comment.

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Volkswagen also declined to identify the supplier, but confirmed the transaction. “This licensing in the supply chain is a model of how the increasingly close cooperation between the mobility industry and the information and communications industry can succeed,” a Volkswagen spokesman said on Wednesday in an emailed statement to the South China Morning Post.

The transaction, the financial terms of which were not disclosed, marks a major win for Huawei, which has sharpened its licensing push amid tighter restrictions foisted by Washington last year on the company’s access to advanced chips developed or produced using US technology, from anywhere.

Workers wait for attendees by the entrance to the private Huawei Technologies Co pavilion on the opening day of the MWC Barcelona trade show in Barcelona, Spain, on June 28, 2021. Photo: Bloomberg
Workers wait for attendees by the entrance to the private Huawei Technologies Co pavilion on the opening day of the MWC Barcelona trade show in Barcelona, Spain, on June 28, 2021. Photo: Bloomberg

“As an innovative company, we own a leading patent portfolio for wireless technologies, which creates great value for the automotive industry,” said Song Liuping, legal officer at Huawei, in a statement on Wednesday. “We are pleased that key players from the automotive industry recognise that value. We believe this licence [for our advanced mobile technology] will benefit consumers worldwide.”

In April, Huawei worked with Chinese carmaker Arcfox to launch the first electric car with Huawei HI, a complete intelligent automotive solution that runs on the firm’s own HarmonyOS platform and Lidar chip, and has 5G connectivity.

While mobile network operators around the world are pursuing 5G development, Huawei’s deal with the Volkswagen supplier indicates that carmakers remain keen to support 4G, which connects the vast majority of mobile consumers around the world.

“This will be an important step for [original equipment manufacturers] to develop the future 5G car,” said Will Wong, an analyst at market research firm IDC in Singapore. “5G may not be so crucial in the car industry now, but it will be important for vehicle-to-everything technology [which allows cars to communicate with moving parts of the traffic system around them]. Carmakers will need to build use cases and let consumers know that they could also stay connected even with their cars. “

Recent efforts by Huawei, the world’s largest telecoms equipment maker and a major global smartphone vendor, to widely license its mobile technology shows how much the company, with about 194,000 employees and operations in 170 countries, has been struggling under the US trade blacklist.

People check a Volkswagen ID.4 X electric vehicle displayed inside an ID. Store X showroom of SAIC Volkswagen in Chengdu, capital of southwest Sichuan province, on January 10, 2021. Photo: Reuters
People check a Volkswagen ID.4 X electric vehicle displayed inside an ID. Store X showroom of SAIC Volkswagen in Chengdu, capital of southwest Sichuan province, on January 10, 2021. Photo: Reuters

The new deal comes less than two years since Huawei founder and chief executive Ren Zhengfei offered to license the company’s 5G technology to an American company to create a powerful new competitor that could develop its own large-scale market. There were no takers in the US, however, because the offer did not address Washington’s long-standing security concerns about Huawei, which the company has repeatedly denied.

Patent licensing is one of the businesses Huawei looks to expand. Earlier in March, Huawei announced the royalty rate for licensing its 5G mobile technology for the first time, charging no higher than US$2.50 per unit for every smartphone that complies with the standard, with a goal to “to promote broader adoption of 5G across all industries”.

Huawei’s revenue from patent licensing between 2019 and 2021 was estimated to be about US$1.2 billion to US$1.3 billion, the company said in March. It has entered into more than 100 patent licence and cross-licence agreements with major global information and communications technology companies across Europe, the US, Japan and South Korea.

By the end of 2020, Huawei held over 100,000 active patents in more than 40,000 patent families worldwide, according to the company.

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