The domestic smartphone market has reached its ceiling, and patents have become the biggest concern for overseas expansion

After nearly four years of rapid development, the growth of the domestic smartphone market has reached its "ceiling".

On November 13, the Ministry of Industry and Information Technology released its latest monitoring report, which showed that the domestic mobile phone market is shrinking: in October 2014, the country shipped 28.194 million smartphones, down 4.4% year-on-year and 6.5% month-on-month. From January to October, smartphone shipments reached 312 million, down 10.4% year-on-year. The decline in shipments of domestic brands was even more obvious. From January to October, domestic brand mobile phone shipments totaled 286 million, down 25.4% year-on-year.

The data shows that after four consecutive years of explosive growth from 2011 to 2014, the domestic new smartphone market has become saturated and is transforming into a stock replacement market. The result of this change is that many domestic smartphone brands are undergoing a comprehensive reshuffle, and in addition to competing in the domestic market, large domestic mobile phone companies are seeking to transform into overseas markets.

Currently, ZTE and TCL (Alcatel) are at the forefront of the US market, Huawei has a wide presence in the European market, and more domestic mobile phone manufacturers such as Xiaomi, vivo, and Gionee are rushing to expand into emerging markets such as India, Indonesia, Brazil, and Africa. However, as domestic mobile phones expand into overseas markets, problems such as patent lawsuits that have never been encountered in the domestic market have begun to emerge. Prior to this, HTC's lesson of being banned from the US market due to Apple's patent lawsuit also made many domestic mobile phone manufacturers feel apprehensive.

Public data on the website of the State Intellectual Property Office shows that Coolpad, OPPO, Xiaomi, vivo, Gionee, and Meizu have 334, 103, 10, 7, 7, and 4 invention authorizations respectively, while Lenovo has 554 invention authorizations. However, Motorola, which was acquired by Lenovo, has about 2,300 invention patent authorizations, making up for Lenovo's patent shortcoming. In comparison, Huawei and ZTE have 22,169 and 14,493 patent authorizations respectively.

From the perspective of international patent layout, ZTE accounts for one-third of China's communications industry with more than 40,000 domestic and foreign patents; among the more than 20,000 international patent PCT applications in China's communications industry, ZTE accounts for half with nearly 10,000 international patent applications. In the field of 4G LTE, ZTE smartphones rank fourth in the world and first among Chinese companies with nearly 1,000 patents, and have many patents in key areas such as human-computer interaction. As of August 31, 2014, Huawei has applied for 12,000 invention patents related to terminal products and more than 1,000 appearance patents. At the same time, it has obtained 1,600 patent authorizations in China and more than 500 patent authorizations in Europe and the United States.

In an exclusive interview with Yiguancha in September this year, Cheng Lixin, CEO of ZTE Corporation in the United States, also said that this is the primary problem that domestic mobile phone brands such as ZTE encounter when entering mature markets in Europe and the United States. If this problem is not solved, once a lawsuit is filed due to patent issues, it may lead to the ban of product sales in the market, resulting in a total loss.

For domestic mobile phone manufacturers, as their scale increases and their overseas expansion trend intensifies, strengthening patents has become the most pressing issue.

"The shipment volume of domestic smartphones continues to rise, which also provides a good opportunity for patent holders to maintain their rights. On the one hand, the benefits of rights protection will increase if the cost of rights protection remains unchanged; on the other hand, the necessity of using patents to curb competition has become stronger." Li Junhui, a special researcher at the Intellectual Property Research Center of China University of Political Science and Law, said in an interview with the media. "For patent holders, especially those holding core or basic patents, the opportunity is very good now."

Regarding the difficulties faced by domestic mobile phone manufacturers in going overseas, Li Junhui believes: "China started late and has a weak foundation. Domestic mobile phone manufacturers can work together and cross-license with international mobile phone manufacturers. This can clear some patent obstacles, thereby reducing the cost of developing international markets and lowering risks."

However, some industry analysts said that as the domestic mobile phone market's incremental market is rapidly decreasing, domestic mobile phones are forced to start expanding into overseas markets on a large scale. Most domestic brands lack attention to patent issues. Coupled with the coveting of international giants such as Nokia, Ericsson, and Microsoft, domestic mobile phone manufacturers will inevitably face patent wars in overseas markets in the future.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.