Narrative: Qualcomm is Anticompetitive
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Apple Hires Senior Qualcomm Engineer as Wireless SoC Lead (May 29, 2017)
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Qualcomm Sues Apple Manufacturers Withholding Royalty Payments (May 17, 2017)
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Qualcomm Reportedly Seeking to Ban US iPhone Imports Over Apple Non-Payment (May 3, 2017)
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★ Qualcomm Announces Apple is Withholding Payments, Reduces Guidance (Apr 28, 2017)
In commenting on Qualcomm’s recent earnings report, I mentioned that if Apple and its suppliers continued to hold back royalty payments as part of their dispute, Qualcomm would be affected more severely in future quarters than in Q1, and that has now proven to be the case. In Qualcomm’s original guidance for this quarter, it had said that its guidance range didn’t include a scenario where it received no payments at all from these companies, but it now appears that’s the scenario that’s playing out. Apple has said it won’t make any payments until the dispute is resolved and new royalty rates set, which is a great way to put pressure on Qualcomm to either settle quickly or at least move the court case along swiftly, but means Qualcomm will be severely impacted in the meantime. It’ll be very interesting to hear Apple’s commentary on all this on its earnings call next Tuesday because it will have to set aside at least some of the amounts due as a contingency, and I’m curious to see how that affects its reported costs and margins.
via WSJ
Qualcomm Details Apple Dispute Financials in Earnings Release (Apr 19, 2017)
Qualcomm has just reported its earnings for the March quarter, and one of the most interesting aspects is its commentary on its dispute with Apple. It says that Apple’s suppliers reported but did not pay around $1 billion in royalties in the quarter, which exactly offset the $1 billion Qualcomm is refusing to pay Apple under the Cooperation Agreement the two companies have, and which Qualcomm says Apple breached. Importantly, that Agreement ended in December, so there are no more payments to be withheld, which means if Apple suppliers continue to withhold royalty payments, they’d affect Qualcomm financially going forward in a way they didn’t this past quarter. As such, it’s given a wider EPS guidance range (25 cents) than usual (it was 10 cents in the last two quarters, for example) because of the uncertainty over these royalty payments (the math here is tricky but I reckon that’s about a $400m range in net income terms). Beyond the Apple dispute, the results are a little tricky this quarter because on paper they look terrible, with revenues and profits way down over the same quarter last year. But that’s partly because Qualcomm had to reduce from its GAAP revenues the nearly one billion dollars it’s due to pay BlackBerry as a result of arbitration between the two companies. The actual results are much better, in keeping with recent trends at Qualcomm, lawsuits aside.
via Qualcomm (see also slide deck)
BlackBerry awarded $814.9 million in arbitration dispute with Qualcomm – MarketWatch (Apr 12, 2017)
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Qualcomm Files Response to Apple Lawsuit (Apr 11, 2017)
Qualcomm has now officially filed a response to Apple’s lawsuit over anticompetitive practices and breach of contract, including both answers to the specific allegations in the suit and a number of counter-claims. One of the main counterclaims is that, by “inducing” regulators to look into Qualcomm, Apple breached the companies’ “Cooperation agreement” and therefore was no longer entitled to certain payments it had received previously. The document further alleges that Apple made many false statements in the course of both its own suit and the discussions it had with regulators, and tried to insert itself into relationships between Qualcomm and other Apple suppliers. Perhaps most interestingly, Qualcomm brings to light something which was covered in the press at the time but didn’t get much attention: the allegation that Apple deliberately hamstrung the Qualcomm chips in the iPhone 7 such that performance would be consistent with those models that had Intel modems, and then prevented Qualcomm from talking about it. On the face of it, that allegation has nothing to do with the broader allegations, but it’s an area where Apple’s public reputation could be vulnerable, and I’m guessing it’s been included in the suit to garner more attention than Qualcomm would get through focusing on the patent and other issues alone.
via Qualcomm (full document here (PDF))
Qualcomm blocked Samsung from selling Exynos chips: Korean Regulator – ZDNet (Mar 27, 2017)
Another crazy wrinkle in the ongoing set of regulatory and legal actions against Qualcomm over anticompetitive practices: the Korean regulator responsible for the fine against Qualcomm last year says that one of the conditions of the contract between the companies was that Samsung would not be allowed to sell its own Exynos chips to any other vendors. What’s particularly crazy here is that Samsung is both Qualcomm’s biggest customer for chips and a contract manufacturer of those chips, so the two are inextricably intertwined here but are still going through this painful process. Samsung isn’t suing Qualcomm as Apple is, but it’s still likely cooperating with the authorities who are looking into its dealings in various markets. Just another sign of how far relationships between Qualcomm and some of its biggest customers have got, that they’re willing to start airing their grievances despite their close ties.
via ZDNet
Apple’s U.K. Suit Against Qualcomm Adds to Global Patent War – Bloomberg (Mar 4, 2017)
Just a quickie here – Apple has now sued Qualcomm in the UK too, on top of its existing suits in China and the US. There’s not a lot more detail in this article or, apparently, in the court filing itself, but the thrust of the UK case seems to be the same as in the other cases already filed.
via Bloomberg
Intel’s 7560 Modem Could Push Next iPhone to 1Gbps – PCMag (Feb 21, 2017)
There’s some conjecture here on two points: that simply because Intel has added CDMA/EVDO capability to its next LTE modem Apple will use it globally, and that a modem capable of delivering peak throughput of a gigabit per second will actually do so in real world environments. The latter is an obvious stretch, given that real-world performance is always a fraction of the theoretical peak, but the former may well be a stretch too. I’m not convinced that Intel could ramp up production quickly enough to be the supplier for all of the next generation of iPhones – that would be a massive step up over its iPhone 7 supply. And I’m not convinced that Apple, having finally gained a measure of redundancy by dual sourcing modems for the iPhone 7, would so quickly jump back into single sourcing, especially given the performance limitations of the current generation Intel modems. That’s not to say this would never happen, and it’s obviously a very interesting point of leverage in the context of the current bad blood between Apple and Qualcomm, but I still think it’s somewhat far fetched at this point.
via PCMag