Apple experienced a sudden air pocket dip (which was promptly bought) after a Bloomberg report that Qualcomm has filed lawsuits in China seeking to "ban the sale and manufacture of iPhones in the country," a move which is the chipmaker’s biggest shot at Apple so far in a bitter legal fight between the two companies.
San Diego-based Qualcomm filed the suits in a Beijing intellectual property court claiming patent infringement and seeking injunctive relief, according to Christine Trimble, a company spokeswoman, and hopes to inflict pain on Apple in the world’s largest market for smartphones, cutting off production in a country where most iPhones are made. Greater China accounted for 22.5% of Apple’s $215.6 billion sales in fiscal 2016.
"Apple employs technologies invented by Qualcomm without paying for them," Trimble said.
The two companies have lobbed legal shots and lawsuits at each other for years, and are currently months into a legal dispute that centers on Qualcomm’s technology licensing business. While Qualcomm gets the majority of its sales from making phone chips, it pulls in most of its profit from charging fees for patents that cover the fundamentals of all modern phone systems. The suits come at a sensitive time for Apple, which just introduced iPhone 8 and X models which aim at "reasserting leadership in a market that’s steeped in competition from fast-growing Chinese makers."
Suppliers and assemblers in China are rushing to churn out as many new iPhones as possible ahead of the key holiday season, so any disruptions would likely be costly. As reported yesterday, the iPhone X is already suffering major problems involving its facial recognition technology, which if unresolved could lead to product launch delays.
Some more details from Bloomberg on the latest litigation:
The legal battle started earlier this year when Apple filed an antitrust suit against Qualcomm arguing that the chipmaker’s licensing practices are unfair, and that it abused its position as the biggest supplier of chips in phones. Qualcomm charges a percentage of the price of each handset regardless of whether it includes a chip from the company, and Apple issick of paying those fees.
Qualcomm has countered with a patent suit and argued that Cupertino, California-based Apple encouraged regulators from South Korea to the U.S. to take action against it based on false testimony. Earlier this week, Qualcomm was fined a record NT$23.4 billion ($773 million) by Taiwan’s Fair Trade Commission, a ruling the company is appealing. Qualcomm is also asking U.S. authoriti
While on the surface the latest legal salvo may sound serious, the market's reaction - to this as well as to everything else - has been largely negligible, as BTFD algos rushedin to quickly fill the gap created by triggerhappy sellers.