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Qualcomm’s Huawei deal paves the way for the rollout of 5G

San Diego chip giant Qualcomm Incorporated (NASDAQ: QCOM) announced its earnings report for the third quarter of fiscal year 2020 yesterday, as it announced two major shifts in the smartphone semiconductor sector. First, Qualcomm confirmed that it had settled licensing disputes with Huawei, and second, it revealed that the launch of a major flagship 5G smartphone will be delayed. Here are all the relevant details.

Qualcomm’s Huawei settlement is worth $ 1.8 billion, company retains 5G shipping forecast in first calendar year 2020

The smartphone and silicone industry is dominated by patent ownership – with the few happy companies that own key technologies that can set the tone for the entire industry. While countries around the world were moving towards fifth-generation (5G) cellular networks, Qualcomm and Huawei should have battled it out for supremacy, due to the pair’s possession of the aforementioned major patents.

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To that end, Qualcomm’s announcement that it has ended all disputes with Huawei and has reached a $ 1.8 billion settlement with the Chinese telecommunications giant is welcome as it will remove a major roadblock in the rollout of 5G. Huawei is one of two technology companies in the world that sells both 5G smartphone equipment and telecommunications carrier equipment, and the company’s plans to gain an edge in the 5G smartphone fashion market were marred earlier this year when the U.S. Department of Commerce prevented Taiwanese semiconductor manufacturer Taiwan Semiconductor Manufacturing Corporation (TSMC) sells products manufactured on its leading semiconductor nodes to the Chinese company.

Visual description of the various components with which a smartphone can connect to a 5G modem. Depending on availability, consumers have the option of using an mmWave 5G network or a Sub-6 GHz 5G network, the former offering higher speeds.

To understand the significance of the deal between the two companies, a report by research firm GreyB detailing the non-SEP patents (standard essential patents) shows how neck-and-neck Qualcomm and Huawei really were. The data shows that from September 2019, Huawei led the package with 5G patents because it owned the rights to 13,474 technologies.

Qualcomm came in second with 12,719 patents, with Samsung in third. It also shows that Samsung is taking the lead in mmWave patent ownership, and after Qualcomm, Santa Clara chip giant Intel Corporation has the highest patent ownership for beamforming technologies. GreyB also reports that as of March last year, Huawei was in charge of the declared 5G EP patents, and Qualcomm was the second to last in a list of six companies. Given 5G technologies’ reliance on 4G and LTE standards for critical areas such as duplexing, experts have also reflected on the fact that Huawei’s edge in the area may be artificial.

During yesterday’s earnings call, Qualcomm also chose to maintain shipping estimates of 5G devices for the calendar year 2020. These remain unchanged for a range between 175 million and 225 million shipments, and the company expects actual figures to fall in the upper end of the estimate. The company’s confirmation that a major flagship 5G smartphone slowdown will end, which will impact its outlook for the fourth quarter of fiscal 2020 (ending September), reveals that most of the impact of this lag on Qualcomm will be on the company’s product group, Qualcomm CDMA Technologies (QCT).

The company revealed that a portion of sales for this smartphone have shifted to the current quarter and another segment of sales will take place at the end of this year – likely in December. Following yesterday’s earnings report, Qualcomm’s shares are up nearly 11% in pre-market trading at 9:03 a.m.ET as the market shares its optimism about the Huawei settlement.

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