Xiaomi has spent over $1 billion on IP royalties over the past three years, IPO documents show
By Jacob Schindler | IAM
File this under: things I missed while going through Xiaomi’s 600-page IPO prospectus. An analysis at Chinese tech news portal Sina points out that the company revealed its IP licensing outlays for the past three years (hat tip to Don Merino for digging this up and sharing on LinkedIn).
Here are the figures, converted to present US dollars (the original data can be found on page 447 of this document):
To be specific about what's being reported, Xiaomi describes these figures as "royalty fees paid to third-party intellectual property holders". On the balance sheet, they are recorded as a component of the company's cost of sales in the smartphone segment.
The increasing figures are no surprise given the new licence agreements Xiaomi has entered into over the years. In 2016, it signed deals with Qualcomm (for mainland China), Microsoft and Via Licensing. In late 2017, Xiaomi agreed to a global Qualcomm licence as well as a new deal with Nokia. That half-billion dollar plus figure for 2017 may include a one-off catch-up payment to Nokia.
We can compare these royalty figures to Xiaomi’s smartphone revenues, which it breaks out in its IPO prospectus. Due to the above-mentioned catch-up payments we can’t be sure how well these figures match up to actual running rates, but they give a rough picture of the Chinese company’s aggregate royalty burden.
Of course, one major licensor with which Xiaomi does not have an agreement in place is Ericsson. The two sides are litigating in India, where the Delhi High Court has ordered Xiaomi to deposit interim royalties (originally 100 rupees per device sold in India) for the duration of the case. It’s not clear whether those payments have been accounted as royalties in these figures; in any case, an eventual global licence deal with Ericsson could be expected to add measurably to Xiaomi’s royalty burden.
Another interesting point of comparison is Xiaomi’s royalty spend versus its R&D spend. Licensing fees were the bigger expense in two out of the three reported years:
In case you missed it, you can find much more IAM analysis of Xiaomi’s IPO filing – which discloses the company’s portfolio size, application spend and cost of third party patent acquisitions – at this link.