Qualcomm, Huawei Resolve Dispute with New Patent Licensing Deal
Semiconductor maker Qualcomm Inc. has reached a settlement agreement with Chinese telecom solutions provider Huawei Technologies, as well as signing a long term, new patent licensing deal with the latter. Qualcomm shares soared as much as 13% in extended trading on Thursday.
Qualcomm said it resolved the prior dispute related to a license agreement with Huawei in July 2020 by expecting the tech giant to pay $1.8 billion for back royalties in the fiscal fourth-quarter ending September 2020. The new global patent licensing deal grants Huawei back rights to certain patents effective January 1, 2020.
“We delivered earnings above the high end of our range, continued to execute in our product and licensing businesses and entered into a new long-term patent license agreement with Huawei, all of which position us well for the balance of 2020 and beyond,” said Steve Mollenkopf, CEO of Qualcomm.
The San Diego-based chipmaker reported total earnings of $4.89 billion in its third-quarter ended June 28, 2020, beating the estimate of $4.8 billion by Reuters analysts. For its current fiscal quarter, Qualcomm predicts an approximate 15% year-on-year reduction in handset shipments due to the pandemic, including the impact from the delay of a global 5G flagship phone launch. Meanwhile, adjusted revenue in the current quarter is expected to be between $5.5 billion to $6.3 billion, according to its statement on Wednesday. Earnings per share will be $1.05 to $1.25 cents.
The company entered into a second interim agreement with Huawei in the first fiscal quarter in 2019, in which Huawei agreed to make three quarterly payments of $150 million for royalties for sales of licensed products.
“As 5G continues to roll out, we are realizing the benefits of the investments we have made in building the most extensive licensing program in mobile and are turning the technical challenges of 5G into leadership opportunities and commercial wins,” Mollenkopf said.
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However, the U.S. government put Huawei on an “Entity List” in May 2019 due to the accusation that its technology is a threat to US national security, following an executive order from President Trump officially banning Huawei from U.S. communications networks. A year later, Washington expanded these rules by requiring any contract chip producers in the world that use U.S. semiconductor equipment and technology to obtain its approval before producing chips designed by HiSilicon, a semiconductor developer fully owned by Huawei.
According to a report published by analyst firm Canalys, Huawei overtook Samsung as the world’s biggest smartphone vendor in the second quarter of 2020, shipping more smartphones worldwide than any other manufacturer. Huawei shipped 55.8 million devices, down 5% year on year while second-place Samsung shipped 53.7 million smartphones.
