Huawei said Monday it has reached a broad, multi-year patent licensing agreement with Qualcomm covering artificial intelligence, 5G, computing and networking, including Qualcomm's purchase of some of Huawei's U.S. patents, according to a Reuters report carried by The Standard. Nikkei Asia reported that Qualcomm will be the net payer under the arrangement, the first time money has flowed from the U.S. chip designer to the Chinese company for patents.

What Happened

In a statement, Huawei said the agreement is its first patent license with Qualcomm that covers 5G technologies. As part of the deal, Qualcomm will buy certain Huawei U.S. patents related to computing, AI and networking, according to the Reuters report.

Huawei did not disclose the value of the agreement. It said that once the deal is completed, the total value of its patent licensing agreements will exceed $6.9 billion.

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Nikkei Asia reported that the deal still needs regulatory approval, including a review in the U.S. Neither company has disclosed financial terms.

Why It Matters

The direction of payment is the headline. Huawei first paid to license Qualcomm's patents in 2001, when it was a much smaller equipment maker relying on others' technology. Qualcomm, whose licensing arm collects royalties from most of the world's phone makers, now finds itself paying Huawei, a sign of how far Huawei's own portfolio has advanced in cellular standards.

The 5G coverage is significant for the same reason. Huawei holds one of the largest collections of patents essential to 5G standards, and any company making 5G chips or devices at scale has had to reckon with it. Bringing Qualcomm under license resolves a gap between two of the most important patent holders in mobile.

The agreement also lands in a tense policy environment. Huawei has been on a U.S. trade blacklist since 2019, which cut it off from advanced chips and key American software. A U.S. company paying Huawei and buying its American patents could face scrutiny in Washington, and Nikkei reported that a U.S. review is among the approvals the deal needs.

Huawei's Licensing Business

Patent licensing has become a growing source of revenue for Huawei as sanctions squeezed parts of its hardware business. The company has said its intellectual property licensing operations have been revenue-positive since 2021. It earned its first licensing income in 2011, from Motorola, and announced a licensing agreement with HP Inc. in August.

The relationship with Qualcomm has not always been smooth. In 2020, the two companies settled a licensing dispute, with Huawei agreeing to pay Qualcomm about $1.8 billion in back royalties, according to Qualcomm's disclosures at the time.

Shenzhen-based Huawei has responded to U.S. restrictions by sharply increasing research spending, and its patent portfolio is one of the clearest returns on that investment.

What to Watch

The deal must clear regulators, including the U.S. review Nikkei described, before it is completed. Key unknowns are the size of Qualcomm's payments, which Huawei patents Qualcomm is buying and whether U.S. lawmakers who have pushed for tighter restrictions on Huawei raise objections. Qualcomm had not commented publicly in the reports available early Monday.