China takes on Hitachi as 17-year-old rare earth patent ends

SHANGHAI — Some Chinese producers of rare-earth magnets are seeking to use this month’s expiration of a key patent held by Hitachi Metals to expand exports of the micro devices used in products from motors to smartphones.

The expiration of a 17-year-old patent that defines the structure of such magnets paves the way for previously blocked Chinese producers to sell to U.S. customers, said Sun Baoyu, chairman of Shenyang General Magnetic Co. It’s formed an alliance with six Chinese producers to promote their products and fight Hitachi over other patents, that the Japanese company says largely prevent rivals from making magnets.

“Hitachi’s whole patent package’s base is this ingredient patent,” said Li Weifeng, a Shanghai-based analyst with Everbright Securities Co. It is a “very basic” patent for the magnets, he said.

The end of the patent will pit the seven producers in the alliance and potentially others who try to tap into the market against Hitachi and eight Chinese companies that have paid for the right to make and ship the magnet. An increase in exporters of the magnets could cut prices of the product used in Apple’s iPhones and Toyota hybrid-electric cars.

Hitachi holds more than 600 patents for rare-earth magnets globally, some of which it acquired after taking over Sumitomo Special Metals Co. in the 2000s, said spokesman Akio Minami.

“The company considers it’s almost impossible for other companies to commercially manufacture the magnets if avoiding all of our patent network,” said Minami, “Since we don’t know details of action by the seven Chinese companies, we refrain from making comments on this matter.”

Magnet makers in China are struggling with overcapacity after an earlier price boom spurred a flood of investments. The nation produces about 100,000 metric tons of sintered rare-earth magnets annually, compared with almost 300,000 tons of capacity, according to Everbright’s Li.

Japanese companies hold most of the world’s rare-earth magnet patents, while China produces about 90 percent of global supply, Li said. Chinese exports of the magnets were 18,800 tons last year.

“Hitachi and those who have entered the market would worry about a flood of Chinese competitors,” said Le Yukun, head of metals and mining with BOC International Holdings, Bank of China’s investment banking unit. “Prices will fall if the Chinese alliance wins.”

The expired U.S. patent 5,654,651 covers magnets with neodymium, a rare earth element, and cobalt, according to Sun. The Chinese alliance plans to sue Hitachi in the U.S. over several other patents that cover production, he said.

“Japan and U.S. are the most important overseas markets for magnets,” Shenyang General’s Sun said, adding that clients are concerned about Hitachi’s patents.

Beijing Zhongke Sanhuan High-Tech Co. and Ningbo Yunsheng Group Co., China’s two largest producers of rare-earth magnets, are among the eight Chinese companies that have paid to use Hitachi’s patents. Zhongke Sanhuan is licensed to use more than 400 Hitachi patents related to sintered rare-earth magnets and methods for their manufacture globally, according to a company statement on its website.

Everbright’s Li expects more trade disputes as Chinese producers seek to boost magnet exports, though he doesn’t expect they would win legal disputes against Hitachi on the remaining patents. BOC’s Le agrees Chinese producers aren’t likely to win any disputes over remaining patents.

More in Herald Business Journal

More business, more competition for Everett kidney dialysis center

Nonprofit Puget Sound Kidney Centers sees large for-profit competitors enter state market.

Suitors, beware: In Seattle, Amazon also brought disruption

The company has grown there from a workforce of about 5,000 to more than 40,000 in 33 buildings.

Boeing rushes to bring back retirees as temps

It’s unclear if this could be a definitive turn in the downsizing tide.

Tax cuts won’t generate as much economic growth as Trump says

There’s little historical evidence that tax cuts actually pay off in boosting economic growth long-term.

City of Marysville adds HR director

The City of Marysville has hired Bill Kolden as its new human… Continue reading

Economic Alliance to host After Hours event at Clothes for Kids

The next Economic Alliance Snohomish County Business After Hours event is from… Continue reading

Speed Networking planned by Lynnwood Chamber

The next Good Morning, Lynnwood Chamber Speed Networking is from 7:30 to… Continue reading

More self-awareness could help build a better medical system

Marcy Shimada of Edmonds Family Medicine writes the second in a series about fixing our health care system.

Scratch-and-sniff brochures aimed to prevent disaster

Puget Sound Energy has distributed more than a million scratch-and-sniff brochures to… Continue reading

Most Read