LG Electronics is expected to follow Apple's example and implement the patent monetization strategy for Samsung Electronics. LG Electronics, which withdrew from the mobile phone business in 2021, received 800 billion won of patent revenue from Apple, the world's largest smartphone sales last year. The next target is Samsung Electronics, which ranks second in global smartphone sales. The business relationship between LG Group and Samsung Group can become a variable of LG's electronic patent monetization strategy. It is also observed that if the demand of LG Electronics to pay the patent license fee increases, Samsung Electronics will try to compromise in the patent negotiation, and take LG Display to purchase W-OLED as the condition.
According to the report of the Korean media THELEC on February 20, LG Electronics is expected to actively review its patent monetization strategy for Samsung Electronics. At the beginning of last year, after LG Electronics withdrew from the smartphone business in April 2021, Apple obtained 800 billion won of patent revenue, while Samsung Electronics has not been able to raise relevant patent revenue until now, that is, about a year later.
The patent license fee is in direct proportion to the relevant sales volume. Apple ranks first in global smartphone sales and Samsung Electronics ranks second. The annual sales of Apple's iPhone is 200 trillion won, and the annual sales of Samsung's smart phone department is 100 trillion won. LG Electronics obtained 800 billion won of patent license fee from Apple, which is equivalent to 8 trillion won of sales of the department, with an operating profit margin of 10%. The patent licensing fee that LG Electronics can obtain from Samsung Electronics is estimated to be at least hundreds of billions of won.
It is speculated that despite these expected effects, LG Electronics failed to obtain patent revenue from Samsung Electronics because of the interwoven business relationship between LG Group and Samsung Group and the possibility of cooperation between the two groups in the future. There are many patent applications for television, home appliances, auto parts, etc., and it is impossible for a company to have all the patents.
In addition, LG Electronics should also consider the possibility of Samsung Electronics purchasing W-OLED in large quantities from LG Display. From the perspective of LG Group, if Samsung Electronics purchases 2 million W-OLEDs from LG Display every year for several consecutive years, its direct and indirect commercial effects will be huge.
According to Omdia, a market research institute, the manufacturing cost of 65-inch 4K W-OLED is estimated to be about 680 dollars. If it is multiplied by 2 million units, the total manufacturing cost is 1.36 billion US dollars (about 1.76 trillion won). LG Display signed a 5-year supply contract with Samsung Electronics for 2 million units per year and increased profits to ensure sales of 10 trillion won. In addition, if Samsung Electronics, the world's largest TV market, includes W-OLED in its "Samsung OLED TV" lineup and actively promotes it, OLED's share in the global high-end TV market may increase.
At the end of 2021, Samsung Electronics and LG Display are expected to supply W-OLED, but the contract could not be reached due to the opposition of the group level. At that time, the TV department of Samsung Electronics requested LG Display to supply W-OLED at a price lower than the price of LG Electronics, and requested to ignore the patent license fee of LG Electronics. It is speculated that the reason why LG Electronics did not put forward strong patent monetization requirements for Samsung Electronics is that the two groups have both competitive relations and the possibility of cooperation.
The situation has changed recently. Since the second half of last year, LCD prices have plummeted, the prosperity of the TV industry has deteriorated, and the performance of LG Display has declined. Samsung Electronics is still open to the possibility of purchasing W-OLED of LG Display, but it is not active due to the recent deterioration of the TV industry. LG Display recorded an operating loss of 2 trillion won last year, and it is hard to expect a sharp rebound this year. LG Group, which has to take any measures to save LG Display, can press Samsung Electronics to purchase W-OLED from LG Display using LG Electronics' patent. This is why some people predict that LG Electronics will actively seek to monetize patents for Samsung Electronics.
However, in this case, it is speculated that Samsung Electronics will try to compromise in the patent negotiation with LG Electronics on the condition that it purchases a large number of W-OLED TV panels from LG Display instead of paying LG Electronics an estimated patent license fee of hundreds of dollars. This means that the situation at the end of 2021 may be repeated again.
For this reason, coordination between the two groups is needed again. The business department that mainly infringes LG's electronic communication patent is Samsung Electronics' smart phone department, because Samsung Electronics' TV department must try to negotiate with LG Electronics on the condition of purchasing LG Display's W in large quantities. Samsung Electronics' smartphone business unit and TV business unit belong to the same legal person, but the members of each business unit do not recognize each other as if they are different legal persons. LG Electronics and LG Display are also different companies.
It is expected that Samsung Electronics will respond after comprehensively reviewing the degree of patent infringement between Samsung Group and other business areas of LG Group, the possibility of LG Electronics filing a comprehensive patent dispute and the profitability of purchasing W-OLED panels from LG Display. It is expected that LG Electronics will also develop a strategy and comprehensively review its impact on the entire LG Group.
Although from the second half of last year, the global TV industry has deteriorated with the sharp drop in LCD prices, some people predict that the TV market will recover in the second half of this year. Therefore, Samsung Electronics does not need to purchase W-OLED in large quantities from LG Display at present, but if the TV industry improves in the second half of this year, the situation may change again. Samsung OLED TV brand "Samsung OLED TV" of Samsung Electronics opens the possibility of purchasing W-OLED panel of LG Display. Samsung Electronics plans to ship more than 1.2 million quantum dots (QD) - OLED OLED TVs with Samsung displays this year.
On the other hand, the object patent of the patent license agreement between LG Electronics and Apple is standard patent. It is understood that the patent license agreement between LG Electronics and Apple includes not only standard matching patents, but also declared patents. The standard matching patent is the patent that has been confirmed as necessary for the actual technical standard, and the declared patent is the patent that the patentee has declared as necessary for the technical standard but has not confirmed the standard matching.
In 2013, Samsung Display and LG Display agreed to abandon all patent disputes related to LCD and OLED filed against each other, and put emphasis on seeking patent cooperation methods. In March last year, more than 10 years later, LG Electronics added "patent and other intellectual property licensing business" to its business purpose.
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