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

Tulalips break ground on new Quil Ceda Creek Casino Hotel

A 150-room hotel was added to what is now a $140 million complex expected to open in spring 2019.

For modern women, 98-year-old rejection letters still sting

In a stark new video, female Boeing engineers break the silence about past inopportunity.

Angel of the Winds pays $3.4M for Everett arena naming rights

The casino replaces Xfinity as the lead sponsor for the publicly owned downtown Everett events center.

What can be learned from the optimism of Churchill, Elon Musk

A new movie, “The Dark Years,” depicts Winston Churchill during the perilous… Continue reading

Teddy, an English bulldog, models Zentek Clothing’s heat regulating dog jacket. (Ian Terry / The Herald)
Everett clothing company keeps your dog cool and stylish

Zentek uses space-age fabrics to moderate the temperature of pets and now humans.

Providence Hospital in Everett at sunset Monday night. Officials Providence St. Joseph Health Ascension Health reportedly are discussing a merger that would create a chain of hospitals, including Providence Regional Medical Center Everett, plus clinics and medical care centers in 26 states spanning both coasts. (Kevin Clark / The Daily Herald)
Merger would make Providence part of health care behemoth

Providence St. Joseph Health and Ascension Health are said to be talking. Swedish would also be affected.

Bombardier promotes its C Series airliner as American made

It says more than half its all-new jet is made in US factories with final assembly near Montreal.

Everett engineers learn lessons from Mexico City catastrophe

Structural scientists went to help after the September earthquake there and studied the damage.

Airports want to nearly double passengers’ user fees

Delta says airports will rake in $3.6 billion in passenger facility charge taxes this year.

Most Read