The dividend era of TWS headphones has begun, but many giants are involved in the "vortex" of patent infringement

Perhaps no one has ever thought that a pair of small and lightweight TWS headphones can tap into a market worth nearly 10 billion or even larger.

In recent years, we have seen many companies that were dormant in the sluggish smartphone market, but later gained market share in TWS headsets by making early arrangements, and their performance has rebounded. There are obviously many sub-industries that have been popularized by TWS headsets, and the lithium battery industry, which has been quite popular in the industry recently, is one of them.

It is reported that in addition to the participation of veteran manufacturers such as VARTA, LG Chem, EVE Energy, Ganfeng Lithium, VDL, Penghui Energy, and Xinwanda, industry insiders told Jiwei.com that industry leaders such as Nanfu Battery have also joined.

The dividend era is coming

Jiwei.com learned from the industry that in today's TWS brand market, first-tier manufacturers including Apple, Huawei, Samsung, OPPO, Xiaomi, Sony, BOSE, and JBL have basically adopted the button battery design.

It is reported that the button battery is actually a lithium-ion battery with a button-shaped appearance. The ratio of thickness to diameter is less than 1. It can effectively improve problems such as jamming and noise during sound transmission. At the same time, it has the characteristics of high energy density, small size and good sealing, which can greatly improve the quality and user experience of TWS headphones.

According to statistics, the sales volume of TWS headphones will reach 150 million and 230 million pairs in 2020 and 2021 respectively, which means that the corresponding battery demand in the TWS headset market alone will reach 300 million and 460 million units respectively. Not only is the market size considerable, but the product gross profit margin of button batteries has also risen with TWS headphones. Penghui Energy once revealed that the current gross profit margin of button batteries is in the range of 50%-70%.

In order to seize industry opportunities, major supply chain companies have taken action.

In the plan for the private placement of A-shares disclosed by Yiwei Lithium Energy in March, it was mentioned that 1.05 billion yuan of the funds raised will be invested in the bean-shaped (button) lithium-ion battery project for TWS applications; and Ganfeng Lithium also recently stated that the company plans to increase the TWS headset battery production capacity to 200,000-250,000 units/day in the fourth quarter of 2020.

"In addition to being widely adopted by major brands, several industry leaders have begun to actively expand production, which means that button batteries are gradually becoming a major development trend in the future. We believe that with the abundance of resources and the improvement of costs, more and more brands will adopt this design." An industry insider engaged in TWS headset design told the author.

Not only that, according to industry insiders, since many smart wearable terminal products have relatively high requirements for the performance of the above-mentioned aspects, in the future, in addition to TWS headphones, perhaps more wearable devices and IoT devices will use button batteries.

However, judging from the current situation in the industry, the speed of button battery production capacity expansion is obviously not keeping up with the growth rate of the TWS headset market, and the overall situation is in short supply. An industry insider engaged in procurement revealed to Jiwei.com that VARTA button batteries, one of the main suppliers in the industry, are very popular in the industry and are basically always out of stock.

The reason why VARTA battery sales are so hot may be related to its remarkable achievements in patent layout.

Patents may be the key to success or failure

Before domestic enterprises emerged in this field, VARTA was the "only one" among many first-line brands in the world. However, contrary to expectations, domestic manufacturers entered the market and quickly seized market share, bringing a considerable impact to VARTA.

However, at the beginning of this year, VARTA also fought back in its own way - it filed a lawsuit against Amazon, Costco, and Best Buy, three major retail giants, claiming that the Bluetooth headset bean-shaped batteries sold on these three e-commerce platforms infringed its patent property rights. Previously, VARTA also sued Samsung Electronics America in the United States, claiming that its headset products were suspected of infringement, and pointed the finger at Yiwei Lithium Energy.

Although EVE Energy responded after the incident, saying that VARTA applied for a temporary injunction in the Brunswick Court in Germany in January this year. During the trial, EVE Energy provided testimony of non-infringement that the company's bean-shaped battery was substantially different from the patent involved, proving that the company's bean-shaped battery was an independent innovative technical solution. Therefore, VARTA also withdrew its application for a temporary injunction filed in the Brunswick Court. According to German law, VARTA may not file a temporary injunction again based on this case.

However, Jiwei.com found that, including the above-mentioned case, VARTA has as many as 25 patent lawsuits related to button batteries that have not yet expired. The case with the longest estimated expiration date is even October 26, 2031.

The author learned from lawyers familiar with patent cases that if the above-mentioned cases do not involve jurisdictional objections or judicial appraisals, the first-instance judgment can usually be issued within one year. If the above two procedures are involved, it will take longer, possibly two years. However, as long as the court does not issue a behavior preservation order, generally this period will not affect product production and sales.

However, the lawyer added: "In order to avoid unnecessary risks and troubles, brand manufacturers usually have an intellectual property guarantee letter before reaching a cooperation agreement with suppliers, in which the suppliers promise to bear all responsibilities in case of infringement, and even directly deal with the lawsuit."

To sum up, the accumulation of patents is actually the main reason why VARTA was able to fight back so strongly this time.

Jiwei.com found out from the information that VARTA currently owns a total of 5,648 patents, including 5,195 invention patents, 75 design patents, and 378 utility model patents.

Industry insiders told the author: "Currently, the mainstream button batteries in the industry mainly follow two technical routes, winding and stacking. VARTA's products are of winding design. The company has a large number of related feature patents. It is very difficult for other companies to circumvent its patents and adopt this design, so many domestic manufacturers choose to adopt stacking design."

"In fact, many terminal brands now attach great importance to patent issues, especially first-tier manufacturers. Under this premise, there will definitely be considerations and restrictions in this regard when choosing suppliers. This is also the reason why VARTA has always been favored by major manufacturers." The above-mentioned industry insider said.

Faced with the ever-growing industry pie, domestic manufacturers who see this situation will obviously not sit idly by. Therefore, companies are also constantly increasing their efforts in patent layout.

Jiwei.com found that EVE Energy and its affiliated subsidiaries currently own 964 battery-related patents, including 507 invention patents, 58 design patents, and 399 utility model patents. Ganfeng Lithium owns 363 battery-related patents, including 236 invention patents, 126 utility model patents, and 1 design patent. Zijian Electronics owns 93 battery-related patents, including 36 invention patents, 56 utility model patents, and 1 design patent.