Finnish telecom firm Nokia (NYSE:NOK) and Chinese mobile handset developer Xiaomi recently issued a joint press release announcing a multi-year patent cross license agreement granting both companies access to standard essential patents (SEPs) owned by either firm in the cellular space. In addition, Xiaomi bought patents from Nokia outright. Details on financials and the patents involved were not included in the press announcement.
The terms of the agreement also include a pact to work collaboratively on certain developmental projects. Nokia is providing network infrastructure equipment which will meet high-capacity and low-power criteria which is required by large web service providers and datacenters. Nokia’s FP4 network processor will be used between the companies for Internet protocol (IP) address routing. Together, the companies will develop optical transport solutions for datacenter interconnect as well as a data center fabric solution. Further, Nokia and Xiaomi have also agreed to commit to future collaboration on projects in the Internet of Things, augmented reality, virtual reality and artificial intelligence spaces.
This agreement is the most recent move made by Xiaomi to improve its corporate profile outside of China. This March, Xiaomi began smartphone production at its second factory in India, having entered the country in 2014. In India alone, Xiaomi’s 2016 revenues reached $1 billion and the company hopes that sales in that country to double through 2017. Xiaomi’s domestic sales in China lagged in 2016, when it saw a 36 percent decline in sales compared to 2015 and it was fifth-place in the Chinese market after placing first in 2015. This February, Xiaomi announced that it would develop a phone based on a chipset designed in-house in a bid to differentiate itself from the competition. The company has also recently announced plans to build 1,000 “Mi Homes” across China by 2019 to improve its physical presence in its domestic market.
The cross-licensing agreement also comes at a time when HMD Global, the exclusive licensee of Nokia phones and tablets, looks to bring the Nokia brand back into some familiar markets. News reports on the to-be-released Nokia 8 indicate that the model will likely be geared towards high-end consumers. HMD Global is bringing Nokia back into the U.S. smartphone market in the weeks to come with low-end models costing about $200 to $300 to avoid competition with Apple and Samsung. Although its reported revenues for the first quarter lagged 2.5 percent year-over-year, Nokia’s stock price has risen about 28 percent since the beginning of the 2017 calendar year.
According to a white paper released by Nokia, the company held 30,000 individual patents across 9,900 patent families as of 2016. According to reporting from CNBC, Xiaomi has applied for 16,000 patents since its founding and has been granted 4,000 patents, 1,887 of which are from markets outside of China.
[Correction: A previous version of this story said that Nokia, and not its licensee HMD Mobile, was bringing its own brand back into the U.S. market.]