As the dawn of 5G is approaching, one may start to wonder who will lead the race. The answer can be forecasted by analyzing the already registered SEPs (Standard-Essential Patent), as the companies who own them will control the flow and spread of said technology. Moreover, this moment presents itself as an investment opportunity, since 5G is not available to most of the general public yet, so this article may help you consider some investment options.
First and foremost, it is important to understand the concept behind SEPs. Technologies are protected by patents, meaning that one may not make commercial use of one without the permission of the patent-holder, who usually allows it in exchange of large sums of money, which are used to cover R&D costs.
The key point of SEPs is that these technologies are essential to manufacture standard compliant products, such as smartphones and tablets, and there is no alternative solution to go around these. They contrast with non-SEPs, which relate to design inventions such as “Slide to unlock”, easily replaceable.
Impact on the Market
5G is expected to revolutionize most sectors of society. Any product or service of a sector subject to connectivity (transport, energy, manufacturing, entertainment, etc.) will make use of 5G technologies and therefore use 5G SEPs.
Past 3G and 4G patent licensing programmes have provided evidence that royalties deriving from these are extremely lucrative. Moreover, 5G will have a broader market, as it will be used in more devices than current 4G technologies.
This means that companies with a larger share of SEPs are expected to be the ones who receive more royalties, i.e., the ones who will have larger revenues.
According to IPlytics, there are over 120 million patent documents regarding 5G technologies and about300 thousand SEP declarations.
The company with most declared 5G patent families is Huawei. However, this company is not listed on the stock market, so one cannot invest by buying shares. Fortunately, Huawei is not on the top 3 with most patents granted, since those spots belong to Samsung, Nokia and LG, respectively, all public companies.
Analyzing the previous major breakthroughs in technology, i.e., 3G and 4G, one can forecast that the top3 best companies to invest before the release of 5G are Samsung, Nokia and LG, for the large amounts of income expected from the exclusivity of commercializing the patented technology and the royalties from those same patents.
Article published in our January Newsletter
BSc in Management