Qualcomm-business model with first scratches?

Qualcomm earns its money with microchips - and licensing revenues. Qualcomm has an impressive patent portfolio for this purpose, with equally impressive growth rates to date. However, this trend has now changed.

As recently reported, Qualcomm has successfully defended its business model in an appeal court. The business model provides for licensing agreements for the use of a number of Qualcomm patents if certain Qualcomm chips are acquired. The licensing revenues are an integral part of Qualcomm's business model for exploiting its patent portfolio. In the past, there have been frequent disputes with customers in this area. Just over a year ago, Apple reached an agreement with Qualcomm after a legal action over the license fees. Qualcomm is considered an important technology supplier, especially in the 5G segment.

Taking this into account, a look at the patent performance, especially that of the last 2 years, is surprising:

After an impressive upward trend over more than 10 years, the patent value curve flattens out in 2018, only to finally fall in 2019.

For the first time since the beginning of the patent value calculations, the value of the patents is falling, even though the total number of living patents is actually rising at first. It is only since the beginning of 2020 that the growth in (alive) patent registrations has slowed slightly, but this may also be due to the publication deadline for patents and the resulting delay in the publication of new patents.

This means that obviously the individual patents are decreasing in value and thus are primarily responsible for the falling trend.

If we look at the average patent value, we can see that there is already a slight stagnation at the beginning of 2017 and then a downturn. Whereby it must be clearly noted that the average values are still at an extremely high level of over 1.3 million €. Still a very high level compared to the rising sector average of 205.000 Euro (see dotted line in the graph).

Having that said, the growth topics, especially 5G, are of particular relevance. For this reason, those patents with a strong 5G reference were once again considered separately. For this purpose those patent classes were filtered out in which 5G patents are typically applied for.

The graph clearly shows that there is no significant downturn at the end of the curve. However, a flattening of the dynamics and growth rate can also be observed here. Interestingly, this does not apply to the number of patent applications. Here the trend is unbroken; apart from the typical priority-related weakening since the beginning of 2020, patent applications are rising steadily here.

Also here an indication for falling individual patent values.

As can be seen from the evaluation of the individual patents, there are two main reasons for this:

The technical quality - which has increased over the years and remains at a very high level - has been declining somewhat since the end of 2018. In addition, intellectual property rights have also lost their "legal aspects" - a slight downward trend has already been discernible since 2017. Here, among other things, the age of the patents and the state of the process are evaluated.