HP, Dell Disable HEVC Decoding in Laptops to Avoid Royalty Fees

HP and Dell have begun disabling hardware HEVC (H.265) decoding on select business and midrange laptops—including ProBook, EliteBook and Latitude lines—even though Intel and AMD processors support it, a move traced to rising patent-pool royalties that increase U.S. rates from $0.20 to $0.24 per unit for large volumes effective January 2026; by turning off decoding at the OEM level they can avoid paying what could amount to millions annually given the millions of units shipped in Q3 2025. The change forces software fallback that degrades battery life and performance, has prompted user and IT backlash and risky workarounds, and highlights a disconnect between silicon capability and product features. For investors, the episode signals margin-driven OEM tradeoffs that may accelerate adoption of royalty-free codecs like AV1, create product fragmentation (premium models vs. budget devices), and pose reputational or regulatory risk while potentially reducing near-term value capture from processor-integrated media features.

Analysis

HP and Dell have intentionally disabled hardware HEVC (H.265) decoding on select business and midrange laptops—specifically ProBook, EliteBook and Latitude lines—despite Intel and AMD processors including native support, a change traced to rising patent-pool royalties that increase U.S. rates from $0.20 to $0.24 per unit for volumes above 100,001 effective January 2026. Gartner data cited in reporting shows both OEMs shipped millions of units in Q3 2025, so the per-unit increase can translate into multi-million-dollar annual costs and explains the OEM-level toggle to avoid royalties on lower-tier models.

The immediate user impact is degraded battery life and performance from software fallback for HEVC playback in browsers and apps, with IT teams and consumers reporting CPU overhead, overheating and unreliable workarounds that may void warranties; community reports and Synology’s prior codec pullback underscore this as a repeatable cost-management tradeoff. OEMs justify the move for business-oriented models where video editing is not primary, but the disconnect between silicon capability and delivered features has generated reputational and potential regulatory risk.

Strategically, this episode accelerates incentives toward royalty-free codecs (AV1) and creates product segmentation where premium models retain full media features while budget lines are feature-crippled, which could shorten useful life for affected machines. Intel and AMD have been largely silent, so investors should watch firmware/driver developments, OEM earnings commentary, and browser/app adoption metrics for AV1 to assess whether cost savings outweigh brand and obsolescence risks.

Key Decisions for Investors

• Reduce or hedge near-term exposure to HPQ and DELL until managements provide clear remediation plans or customer-impact disclosures, given demonstrated margin-driven feature cuts and negative consumer sentiment
• Monitor INTEL (INTC) and AMD (AMD) communications and firmware/driver rollouts before adjusting semiconductor positions, because OEM-level disabling decouples silicon capability from end-user value and limits upside from integrated media features
• Increase exposure to platforms and content players accelerating AV1 hardware/software support (e.g., streaming and browser ecosystems) as medium-term beneficiaries of a shift to royalty-free codecs
• Track HPQ/DELL unit shipment and margin commentary in upcoming earnings and Gartner releases to quantify cost savings versus potential churn and service costs, and use event-driven hedges if margin guidance diverges materially
• Watch for regulatory or consumer-complaint developments and rising litigation risk as a catalyst for sharper share-price moves, and consider protective positions if complaint volumes or advertising-investigation signals escalate