Under a multi-year patent deal announced today, Finland-based Nokia and China-based Xiaomi plan to work together on a number of technologies, including artificial intelligence (AI), Internet of Things, and augmented/virtual reality. The companies also intend to develop optical transport and fabric technologies for data centers.

A pioneer and one-time leader in the mobile phone market, Nokia began losing market share around 10 years ago as the iOS and Android mobile operating systems overtook its own Symbian OS, and the company has undergone several major organizational shifts since then. Xiaomi, meanwhile, saw explosive growth in the early years after it was founded in 2010, but has since been surpassed by other Chinese smartphone startups.

Collaboration To Target Data Centers

Through their new partnership, Nokia and Xiaomi have agreed to cross-license each other's cellular standard essential patents. Under the agreement, Xiaomi will also acquire some patent assets from Nokia.

In addition, the deal will target large Web services providers and data center operators, with Nokia providing the network infrastructure equipment designed for high-capacity, low-power data processing needs.

Nokia and Xiaomi plan to work together on several data center technologies, including optical transport for interconnecting data centers using Nokia's new FP network processor, and a fabric solution that helps manage the combination of software, computing systems, and networks used by data centers. The companies will also explore opportunities for further cooperation in areas such as Internet of Things, augmented reality, virtual reality, and artificial intelligence.

'Win-Win Patent Agreement'

"In addition to welcoming such a prominent global technology company to our family of patent licensees, we look forward to working together on a wide range of strategic projects," Nokia president and CEO Rajeev Suri (pictured above) said today in a statement.

"Our win-win patent agreement with @Nokia after months of negotiations is a significant milestone for Xiaomi," Xiaomi senior vice president Wang Xiang noted today in a tweet.

While Xiaomi recently slipped out of analyst firm IDC's top five list of leading global smartphone vendors, other data from IDC this month showed the company tied with Apple for the top spot in the world wearables market. Over the past year, Xiaomi has also come out with a virtual reality headset and an intelligent digital assistant similar to Amazon's Alexa.

In March, Xiaomi was reported to have established an AI lab, although the company has not disclosed details about the types of projects the lab will work on.

Nokia, meanwhile, has also had considerable activity with other China-based companies in recent months. On Monday, for example, the company closed a deal with China Huaxin Post & Telecommunication Economy Development Center to create a joint venture called Nokia Shanghai Bell.

Additionally, Nokia announced last month that it would supply advanced networking technology for smart city services in Shanghai, presented plans to help China-based tech firms expand overseas, and -- working with China Mobile -- demonstrated 5G technology designed to provide new telehealth and emergency care services.