Qualcomm signed a non-binding memorandum of understanding (MoU) for the licensing of its technology for the next three years with three Chinese smartphone vendors: Oppo, Vivo, and Xiaomi. The deal is estimated to be worth more than $12bn. Xiaomi, Oppo, and Vivo sold nearly 200 million smartphones combined in 2016.
Setting the ground for 5G licensing
This comes as much needed positive news for Qualcomm after recent woes regarding its ongoing legal fight against Apple and a potential takeover from long-time competitor Broadcom.
China is a very important market for Qualcomm. This is where most phones, including iPhones, are being manufactured and sold. Additionally, the Chinese companies and the government have traditionally been very difficult to deal with. Qualcomm was fined $975m by the NDRC (China’s anti-monopoly regulator) in 2015 and has been hit by local manufacturers’ bad practices such as under-reported sales. Since then, Qualcomm has made a lot of progress, notably with Huawei, Oppo, Xiaomi, Gionee, Meizu, and ZTE with a set of licensing agreements signed throughout 2016.
This new official partnership announcement is a little different, however. Firstly, it is a non-binding agreement, which means that, despite the show of intent from the Chinese smartphone makers, the expected $12bn of revenues is far from guaranteed. Secondly, Ovum believes that the patents considered in this agreement primarily relate to 5G technology. This is important because those are not linked to the 3G and 4G licensing practices for which Qualcomm is being sued by Apple and was recently fined $774m by Taiwan’s FTC.
The legal battle with Apple could have very important implications for the validity of some of the patents that Qualcomm is licensing not just to Apple, but also to other smartphone makers. It also opens the door to competition such as Intel which has also made significant investments in China. Securing a 5G licensing roadmap in China will help improve future competitive outlook for Qualcomm and move attention away from other current issues.
Consumer Technology Profile: BBK Electronics’ multibrand strategy – Vivo, Oppo, and OnePlus, TE0004-001191 (September 2017)
Ronan de Renesse, Practice Leader, Consumer Technology