Finland's Nokia and Chinese smartphone maker Xiaomi announced an agreement on Wednesday to cross-license patents from each other, which will help both companies develop new products.
The deal will see both companies license so-called standard essential patents — patents which are essential to allow products to comply with an industry standard — from each other.
Nokia will provide network infrastructure equipment to deliver high capacity, low power requirements that are needed by companies that are processing and delivering lots of data. The two firms will also work together on technologies focused on the data center.
Both companies have agreed to "explore opportunities for further cooperation" in areas such as the internet of things, augmented and virtual reality, and artificial intelligence, according to a press release.
Nokia has been a key player in developing many of the standards used by the mobile industry even today and makes money from licensing the patents it has built up over the years. As such, its patents can be key for companies looking to expand globally in the mobile market without running into legal problems.
Xiaomi is one such company. It was once the darling of the Chinese smartphone market, growing rapidly each quarter, but has recently struggled versus newer entrants such as Oppo and Vivo. As such, Xiaomi has been looking to expand into other markets with India becoming one region where it has seen success.
But it is yet to move out of Asia with its smartphones, although the company says it's in 30 countries and regions. That's mostly thanks to its other connected products which are sold abroad. Nokia's patents could help it continue its mobile and connected device expansion. A spokesperson for Xiaomi told CNBC on Wednesday that the Nokia deal will help with global expansion, but it doesn't mean the company is focusing on one particular market.
Xiaomi also has its own patent portfolio. It has applied for over 16,000 patents in the seven years it has been in existence and has been granted 4,000. Of those, 1,887 are overseas. The Chinese firm is looking to build out its portfolio of products which already includes TVs, smartphones, and air conditioners.
"Xiaomi is committed to building sustainable, long-term partnerships with global technology leaders. Our collaboration with Nokia will enable us to tap on its leadership in building large, high performance networks and formidable strength in software and services, as we seek to create even more remarkable products and services that deliver the best user experience to our (product brand) Mi fans worldwide," Lei Jun, chairman and CEO of Xiaomi, said in a press release.