Huawei fattens its annual R&D budget to at least $15 billion

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HONG KONG (Reuters) – China’s Huawei Technologies said on Thursday it will increase its annual spending on research and development (R&D) to between $15 billion and $20 billion, as it races to be a global leader in 5G technology.

Huawei, which previously pledged to invest $10 billion to $20 billion annually on R&D, spent 89.7 billion yuan ($13.23 billion) on it in 2017, accounting for 14.9% of its total revenue.

Huawei will dedicate 20% to 30% of that amount to basic science research, up from its previous expectation of 10%, China’s largest telecommunications equipment and smartphone maker said in a statement.

The company is among the world’s top R&D spenders. Amazon and Alphabet, the two biggest spenders on R&D in the United States, spent $22.6 billion and $16.6 billion, respectively, in 2017, according to financial data company Factset.

About 80,000 of its employees, or 45% of its total workforce, are engaged in R&D, Huawei said on its website.

The increased spending comes as the United States, Australia and Britain push back against Huawei’s network communications technology on security grounds amid increasing international political tensions.

A UK government report last week said technical and supply-chain issues with Huawei’s network equipment exposed Britain’s telecom networks to security risks, reversing previous endorsement.

That added to an espionage debate as US and Australian politicians allege the firm facilitates Chinese government spying – an accusation that Huawei had repeatedly denied.

The company said on Thursday it intends to charge fair and reasonable (FRAND) rates for its 5G intellectual property to facilitate the adoption of the new technology, which is expected to come into large-scale use in 2020.

Chinese companies led by Huawei are estimated to own about 10% of the essential patents for 5G worldwide, a significant jump compared with their share in 4G and 3G eras.

($1 = 6.7812 Chinese yuan)

(By Sijia Jiang; Reporting by Sijia Jiang; Editing by Gopakumar Warrier)

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