Huawei – Nowhere to run pt XVIII.

“relaxation” is not really a climb-down.

• The “relaxation” of the US’s stance against Huawei can be taken either as a sign of fear of missing out or as a move to ensure that US companies continue to have a big role to play in the setting of future standards.
• One thing I am almost certain of is that this “relaxation” is not is a prelude to the lifting of any sanctions against Huawei meaning that the rally in Huawei suppliers is not justified.
• The US Commerce Department has clarified its stance on Huawei stating that US companies can collaborate with Huawei on the setting of the standard for future iterations of 5G and other emerging standards.
• While Huawei was not heavily involved in the setting of older standards such as 4G and 3G, RFM research indicates that it has a very strong presence in the 5G working groups which is likely to continue into other technologies and standards.
• If US companies are not permitted to engage in these standards bodies then there is a high probability that it will be Chinese IP that is used even if the US has a superior offering to make.
• Instead, the US is taking the same approach that the Chinese did following the failure of their home-grown TD-SCDMA 3G standard which is to increase its influence in the global standard
• Most people are in agreement that the fragmentation of a communication standard of this nature is bad news for everybody.
• Consequently, I don’t agree with the generally held perception that this is an indication of weakness or a sign of imminent relaxation of sanctions on Huawei.
• This is similar to the position opined by Light Reading (see here)
• Instead, this is a move to ensure that Huawei does not dominate the global standards for future technology correcting an unintended consequence of the sanctions which excluded US companies from standards bodies where they have to cooperate with Huawei.
• That being said, I still think that Huawei’s contributions to the 5G standard have been widely overstated.
• This is because everyone is relying on the number of patents that are declared to have been essential to the 5G standard (where Huawei comes out way in front) as an accurate representation of the real contribution to a standard.
• Patent counting is so fundamentally flawed (which I have argued here) that I do not think that it provides an accurate representation of reality.
• Furthermore, other studies (see here) have found even lower levels of patents that have been declared to essential to actually be essential, casting further doubt over the patent counting method.
• Another method that has been used in the past is based on counting non-self citations of patent portfolios as a way of estimating their importance.
• This method essentially measures how many times other patent applications have referred to a portfolio as prior-art which I have long believed gives a better view of where the real essential patents in a standard lie.
• This method is not without flaws which I discussed back in 2007 (see here), but on balance I still think this is a better method than a straight patent count.
• Unfortunately, I have not seen a non-self citation study on either 4G or 5G meaning that there is no hard evidence to support or undermine Huawei’s claims to the 5G IP crown.
• The net result is that I don’t think that this move by the US Commerce Department changes very much and certainly does not help Huawei’s position.
• This position remains dependent on the much larger struggle between the USA and China where Huawei is an unwitting pawn.
• If there is a reconciliation between the USA and China at a high level resulting in the promised (but increasingly unlikely) phase II trade deal then much of this would go away.
• This is an increasingly unlikely outcome meaning that Huawei may quickly become a Chinese company selling Chinese products for Chinese users in China only.
• Nokia and Ericsson are in the front line to benefit.