Analyzing Nokia’s China Patent Licensing Opportunity
Nokia earns $2 billion in Apple deal
Through its Nokia Technologies unit, Nokia sells and licenses its innovations to companies that need them to build outstanding products. Technology licenses earn Nokia royalties, whose rates can be 0.25% to 0.75% of the recommended price of a device such as a smartphone.
In May, Nokia renewed its technology licensing agreement with Apple (AAPL), ending several months of a dispute over patent infringement. Nokia later announced that it had received a payment of $2.0 billion from Apple in relation to their patent licensing agreement.
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Xiaomi gives Nokia its first patent deal in China
After settling with Apple, Nokia announced a wide-ranging agreement covering network equipment sales and patent sales and licensing with Xiaomi—one of China’s (MCHI) fastest-rising stars in the smartphone vendor market.
The agreement with Xiaomi marked Nokia’s first patent deal in China, and it could pave the way for more technology licensing deals for Nokia in the country.
Breakout of Chinese smartphone brands
Chinese brands are rapidly taking over the global smartphone market after successfully holding global leaders Samsung (SSNLF) and Apple in their domestic market. Chinese smartphone makers, including Xiaomi, Huawei, Oppo, and Vivo, controlled 87% of their domestic market in 2Q17, and market research firm Counterpoint Research says their share of the global market reached a record 48% in the quarter.
With China’s top six mobile brands projected to sell 575 million smartphones this year, the revenue potential for Nokia in China’s mobile technology licensing market looks enormous.