China Takes on Hitachi as Rare Earth Patent Ends

Some Chinese producers of rare-earth magnets are seeking to use this month’s expiry of a key patent held by Hitachi Metals Ltd. (5486) to expand exports of the micro magnets used in products from motors to smartphones.

The expiry 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 Inc. (AAPL)’s iPhones and Toyota Motor Corp. (7203) 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