For the past two years, Qualcomm and Apple were entangled in the biggest corporate court battle in America. When Apple, along with the United States Federal Trade Commission first sued Qualcomm for $1 billion, it was, as claimed, a protest against monopoly. Joined by Intel, Samsung, and Foxconn, Apple almost ripped apart Qualcomm and its brand image across more than three nations in the world. Qualcomm countered and have courts banned iPhone sales in the US, China, and Germany.
But surprisingly, when the day of the hearing arrived, the corporations who were at war since 2017, surprisingly decided to settle down. But why? Why would two corporations who cost each other billion and tried their best to destroy each other’s brand image and reputation somehow became friends again? Let’s break down why Qualcomm and Apple settled and what it means for the future of mobile technology business.
Apple Was Collapsing, So It Had To Settle
Apple, despite leading Qualcomm to pay billions of dollars in fines and withholding its royalty payments did a great deal of damage to Qualcomm. But, Qualcomm struck at the running income of Apple by banning its sales in two nations, while also forcing it to withdraw its older models of iPhone 7 and iPhone 8 from the US market as well. Now sales ban means Apple has no revenue in three of its market locations and international finances are plundering down.
So, for Apple, a settlement was the best way to get out of its miserable market condition. Apple was accused of sharing Qualcomm secrets to Intel, Qualcomm’s competitor in chip technology, and it was also accused of copyright infringement on Qualcomm’s property. So, Apple was losing and was probably going to lose it all had the matter had been gone through a court proceeding. And court proceedings take months to complete.
Therefore, Apple cut an undisclosed deal, paid royalties, and ensured another six years of prosperous business with Qualcomm.
The Battle of 5G: The Business of the Future
There’s nothing new in the fact that Qualcomm has been able to design the first set of 5G modems for next-generation mobile phones. And with Qualcomm holding that upper hand, anyone who’d align with it would profit extensively when 5G mobile phones enter the market in the next couple years. Apple, on the other hand, is the biggest mobile phone manufacturer and seller in the world, with unprecedented control over the premium phone segment. A deal between two of the most powerful companies in the industry to introduce the world to new technology is most likely to result in market dominance and of course, a lot of money.
Qualcomm and Apple, after this settlement, are now laying their eyes on launching first 5G phone ever by the end of 2020.
Kill The Competition and Establish a Monopoly
Qualcomm has already maintained a monopoly in chip manufacturing and design business, however, it has recently been opposed by competitors like Intel. This deal clears the road for Qualcomm. Intel has officially announced that this surprise settlement has forced it to move out of the 5G race and it would no longer invest further resources in this venture anymore. So, Qualcomm is the undaunted and unchallenged winner of the 5G competiton and once again has its monopoly over the chip-making business.
Settlement Bring Qualcomm A Lot More Money
After Apple paid the “undisclosed amount” to Qualcomm to settle down, Qualcomm’s share prices were raised by $2/share, giving it a 20% boost in the market. Plus, Apple has also signed for another six-year agreement with Qualcomm to use its chips against royalty payments to Qualcomm. With its royalties reinstated and the withheld amount paid back in full, Qualcomm is back in a strong financial position and is now recovered all f the money it paid in fines to the EU and the Chinese government. Thus, Qualcomm is once again one of the profitable tech company in the world.
But How Apple Profits In All of It?
Apple certainly has not benefited much from this deal as of yet. But, as said, Apple would most probably become the first company to launch a 5G phone. Whenever that happens, Apple would surely take advantage of being the only provider and hence, would surely attract a huge share of consumers towards itself.
So, while Apple was fighting with monopoly, it actually sided with it as who won’t want more money. Since the deal is closed and the agreement is final, it’s only a matter of time that Apple becomes the first company to launch the first 5G phone. Until someone does something better. Samsung?