Qualcomm may have won the latest round, but the fight is far from over. You'll need a lot more popcorn to get through this movie.
For some time now, I’ve wondered what Apple has to gain by picking a fight with one of its past top suppliers. The dispute goes back to the waning days of the Obama administration, when Apple’s influence persuaded the Federal Trade Commission (FTC) to bring suit against Qualcomm for overcharging on Qualcomm patents and then Apple instituted their own suit against Qualcomm.
Essentially, Apple asserts that Qualcomm has charged unfair heightened royalties for the use of its intellectual property, including patents, on the selling price of the whole mobile phone. This is an unusual circumstance of a user suing a supplier while still being supplied the goods. In the U.S., Apple is seeking $1B plus other amounts in the other suits.
Furthermore, Apple has been a behind-the-scenes driver in the U.S. of the FTC complaint lodged against Qualcomm for using unfair trade practices against other semiconductor suppliers in monopolizing the mobile phone device market. This will likely face court review in May.
Perils for Apple
The dispute(s) have continued to wind their way in courts in the United States as well as courts in China, Germany, Korea, etc. Neither company has backed down or shown any apparent interest in settling. So far, Qualcomm has suffered greatly, with its equity value much diminished. But Apple has largely been unscathed from any harm due to these disputes.
But this may be changing soon. Qualcomm has a vast patent portfolio in communication chips and has court actions pending against Apple and its suppliers in these same countries. On March 26, 2019, the U.S. trade judge ruled that Apple violated a Qualcomm patent and recommended a ban on certain iPhone imports. Could this be just the beginning of major trouble for Apple from court decisions?
More troubling is the position for Apple on 5G. Without a doubt, Qualcomm is in a commanding lead with their announced products and mobile phone customers, including major market power Samsung, for 5G mobile phone introductions. Apple has no 5G phone in sight. In fact, they have indicated that this may appear next year in 2020. Their anointed supplier, Intel, appears to have corroborated that this is the earliest to expect such devices.
Looking at these disputes that Apple has largely formulated, one has to wonder what Apple has to gain. Apple’s future depends on the iPhone almost completely. Its wide use throughout the world promotes services that richly accrue to Apple. Why threaten such a “gold mine” with a major supplier that “owns” the communication semiconductor supply. Is Tim Cook “cutting off his nose to spite his face?”
Something has to give in this more-than-two-year scenario. Although Qualcomm has been hurt the most to date, that may be about to change. Indeed, Qualcomm came out on top in a patent infringement case. Will they settle? It makes sense. But Apple’s personality from Steve Jobs to present-day Tim Cook has shown that vengeance runs deep. The twists and turns defy business acumen. Indeed, Apple will likely appeal the patent-infringement ruling. Stay tuned.