We have seen Microsoft strike licensing agreements with a number of manufacturers in the past few years and today the company announced that it has made a deal with Foxconn, one of the largest manufacturers of consumer devices to collect a portion of money made from the android and Chrome OS phones.
As you may already know, Foxconn is one of the largest manufacturers of consumer electronics and surprisingly, it manufactures around 40% of the world’s consumer electronic devices. Manufacturing 40% of consumer electronics is not a small deal, which means that the company is much larger than what we perceive. Last year, the company was in the news for having trouble with their labor relations in the plant producing Apple’s iPhone but one should realize that Apple isn’t the only client of this Taiwanese company. Foxconn manufactures smartphones, tablets, TVs etc for a number of famous companies like Samsung, Microsoft, Sony, Toshiba etc.
Making a deal for getting royalties from one of the major manufacturers is sure to increase the money inflow in the company. The deal whose details are not revealed as of now (and we don’t expect it to be revealed like all other licensing agreements from the company) would give Microsoft the right to collect royalties from Foxconn for any android or Chrome OS product manufactured by the company.
If you have been following Microsoft, you would know that this is not the first time, Microsoft has made licensing agreement with a manufacturer. This may be the largest deal without doubt but since the past few years we have seen the company making such licensing deals with a number of major manufacturers like HTC, Samsung, Nikon etc. The numbers of such agreements are so large that now, more than 50% of the companies that make android smartphones pay royalties to Microsoft. Although most of the companies have agreed to pay Microsoft, many other like the Google owned Motorola, are still fighting in the courts against such payments.
A deal with the manufacturer itself would speed in the process of such payments. However, as the company has deals with both the ODM and the OEM (like the licensing agreement with Foxconn as well as HTC), Microsoft will only be collecting royalties from any one of them as agreed between the two parties.
An excerpt from the press release by Microsoft is as given below:
“We are pleased that the list of companies benefiting from Microsoft’s Android licensing program now includes the world’s largest contract manufacturer, Hon Hai,” said Horacio Gutierrez, corporate vice president and deputy general counsel of the Intellectual Property Group at Microsoft. “By licensing both brand name companies and their contract manufacturers, we have successfully increased the overall effectiveness and global reach of the program.”
“Hon Hai is the world’s largest contract electronics manufacturer that holds more than 54,000 patents worldwide,” said Samuel Fu, director of the Intellectual Property Department at Hon Hai. “We recognize and respect the importance of international efforts that seek to protect intellectual property. The licensing agreement with Microsoft represents those efforts and our continued support of international trade agreements that facilitate implementation of effective patent protection.”
In 2011, the amount collected by Microsoft from its license agreements was much more than what it earned from its mobile business and android being the largest mobile platform in the world, the company is sure to get richer with every android phone sold.