GSM, WCDMA and LTE handset royalties to become significant revenue source for device makers


By Telecom
Lead Team: The GSM, WCDMA, and LTE royalties on cellular phones will continue
to grow for the next few years, but are starting to flatten out. 


Mobile
device royalties to touch $20 billion mark, according to ABI Research. GSM
handset royalties are already playing a much less significant role for royalty
revenues, with GSM/WCDMA/LTE handset royalties becoming increasingly
significant.


GSM/WCDMA
handset royalties hold the lion’s share because of the size of the 3G handset
market. Bilateral roaming agreements may cancel out a lot royalties paid, but
what is left is still significant and can weigh heavily on handset vendors with
rising market share but weak patent portfolios.


For
GSM/WCDMA handsets, vendors pay anything from less than 4 percent if they have
a very strong patent portfolio to well into the teens. The average paid,
weighed by market share, will fluctuate between approximately seven and eight
percent. It gets much worse for a company with a weak patent portfolio selling
2G/3G/4G handsets with LTE.


WWAN
royalties on handsets are a significant source of revenue for companies holding
the largest amount of essential patents. In addition to being a source of
revenue for companies, patents are being used more aggressively for offense and
defense against competitors,” said Philip Solis, research director, mobile
networks, ABI Research.


Apple,
Google, HTC, Microsoft, Motorola Mobility, and Samsung are some of the
companies that have been suing other companies or defending themselves in
lawsuits.


Apple has
been very aggressive with its patent lawsuits around the world and is finding
some success in banning product imports in some countries against companies
like Samsung and HTC. In its aggressiveness, Apple is also running into
antitrust issues in a few countries. For example, in Spain, Apple is
undergoing an antitrust investigation after losing a suit against NT-K related
to media tablets, a category where Apple still has strong market dominance.


Recently,
ABI Research announced that the mobile phone outlook will yield growth in the
order of 8 percent, netting 1.67 billion handsets shipped worldwide by the end
of 2012. Particularly notable is for the first time, 3G and 4G handset
shipments will capture more than 50 percent of total handsets shipped.


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