Narrative: Qualcomm is Anticompetitive
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Apple sues Qualcomm in Beijing seeking 1 billion yuan – Reuters (Jan 25, 2017)
The Apple-Qualcomm saga continues. Qualcomm was investigated by the Chinese authorities a couple of years back and although that investigation ended in 2015, Apple appears to be using it in much the same way as it is using the FTC’s action against Qualcomm in the US, as a basis for its own legal action. It’s still almost impossible for any outsider to know how much merit there is on each side of this argument, let alone how individual court systems might ultimately rule, but this fight just keeps getting uglier.
via Reuters
The Qualcomm ‘Tax’ Rebellion – Bloomberg Gadfly (Jan 24, 2017)
This is a great explanation of exactly what’s going on in the lawsuit between Apple and Qualcomm and the various investigations of Qualcomm by competition authorities in several jurisdictions. At root is the fact that Qualcomm charges a licensing fee based on the total cost of devices, not just on the parts Qualcomm makes, a model that’s increasingly out of whack with where the value is in smartphones. It really is starting to feel like the industry has reached a tipping point at which it will no longer put up with this licensing model, and if things don’t go Qualcomm’s way, that will be extremely damaging to its business. Meanwhile, it keeps selling chips to Apple to use in phones, because to stop would be incredibly damaging too.
via Bloomberg Gadfly
Qualcomm Comments on Apple Complaint – Qualcomm (Jan 21, 2017)
This is Qualcomm’s official statement on Apple’s lawsuit filed yesterday in San Diego, and it predictably pushes back on the key points in Apple’s filing. It argues that Apple has been the instigator of the various investigations of alleged anticompetitive behavior by Qualcomm in various jurisdictions, and that Apple has been misleading in its statements to the various authorities involved. Unlike some patent disputes, many of which are ultimately settled out of court, this one looks set to go the distance, given the sheer acrimony involved and the fact that this goes beyond a mere dispute over royalties. Combined with the FTC and Korean case, Qualcomm has plenty on its hands here.
via Qualcomm Comments on Apple Complaint | Qualcomm
Apple Sues Qualcomm Over Patent Royalties in Antitrust Case – Bloomberg (Jan 20, 2017)
First we had the FTC taking action against Qualcomm, and now Apple is joining the fray, and I’d argue that’s not at all coincidental. Apple would obviously dearly love to pay Qualcomm less money for licensing and chips, and the FTC has given it the perfect ammunition by highlighting alleged wrongdoing on Qualcomm’s part. Intriguingly, it appears that Qualcomm has been withholding rebates due to Apple in retaliation for Apple assisting the South Korean authorities with their recent investigations into anticompetitive practices by Qualcomm. But Apple is also going a lot further, by making some of the same arguments put forth in the FTC case about overcharging for essential FRAND patents. This is going to get ugly. I’m seeing – both in this Bloomberg piece and elsewhere – suggestions that this lawsuit stems from high pressure Apple feels around iPhone growth and margins, but that’s nonsense – Apple will always try to get the best margins possible, and when it’s given a way to apply pressure to a supplier, it’ll do so. The FTC action provided just such a way, so that’s the proximate cause here, not any sort of crunch on the Apple side.
via Apple Sues Qualcomm Over Patent Royalties in Antitrust Case – Bloomberg
FTC Charges Qualcomm With Monopolizing Key Semiconductor Device Used in Cell Phones – Federal Trade Commission (Jan 17, 2017)
The link below is to the FTC’s official statement on this action. This isn’t the first time Qualcomm has been accused by authorities of anticompetitive practices, but it’s been possible to dismiss the Chinese action as the action of a country trying to keep a foreign competitor in check. That obviously isn’t the case here, with the FTC taking aim at a home-grown company. The allegations are serious – that Qualcomm illegally ties licensing and chip purchases, that it refuses to license so-called FRAND patents on reasonable terms to competitors, and that it forced Apple into an exclusive arrangement that squeezed out competitors. This won’t be easily dismissed, and the stock price took a quick tumble by about 4% late in the session, though it’s relatively stable after hours so far. Qualcomm has dominated portions of its key markets, but if some of the strategies it’s used to achieve that dominance are undone by regulators, things might open up in interesting ways to competitors.
South Korea slaps Qualcomm with record-setting $850M fine – Ars Technica (Dec 28, 2016)
Following action in China in early 2015, Korea initiated similar action against Qualcomm in late 2016, with similar allegations about anticompetitive practices with regard to patent licensing. The Chinese action was easily (perhaps too easily) dismissed a being part of a Chinese government crackdown on US companies, but similar action in Korea is slightly less so, and of course subsequent action by the US FTC has no similar explanation. Yes, Samsung and LG are two of Qualcomm’s biggest customers, and so there may have been an element of protectionism in Korea too, but this was the first real sign of fire behind the smoke.
via Ars Technica
China Hits Qualcomm With Fine – The New York Times (Feb 9, 2015)
The context for this fine against Qualcomm is a broader crackdown by the Chinese authorities on US-based companies which compete with local ones or which are perceived to be gaining an overly dominant position in China. It would therefore also be easy to dismiss this action as more representative of a broader Chinese policy than of any wrongdoing on Qualcomm’s part. However, given all that’s happened since in Korea, the US, and China, it’s now somewhat harder to dismiss this case as being utterly without merit. There’s still the question of whether Qualcomm has genuinely done something wrong or whether Apple is merely flexing its muscles through seeking common cause with friendly regulators, but this Chinese action can now be seen as the beginning of something much bigger rather than a one-off, even if it took quite some time for that to become clear.
via New York Times