Shanghai Showdown: Apple v. Qualcomm

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What's going on?

According to reports from Bloomberg on Friday, Qualcomm, a major manufacturer of the chips that power smartphones, has filed a lawsuit to ban the manufacture and sale of the iPhone in China where nearly every single iPhone in the world is assembled (and around 25% of them are sold)!

What does this mean?

Theres been a longstanding legal battle between Apple and Qualcomm this year, which started in the US and has now expanded worldwide. In short, Qualcomm claims that Apple hasnt paid enough in royalties to use Qualcomms chips, which currently power the iPhone. Apple, however, argues that Qualcomm is abusing its market dominance and charging unfair prices. While the consensus appears to be that Qualcomms Chinese lawsuit is merely a way to bring Apple back to the negotiating table, it would obviously be a severe blow to Apple if successful.

Why should I care?

For markets: Qualcomms shareholders are gritting their teeth.


The dispute has already seen Apple cut off licensing payments to Qualcomm worth around $2 billion annually, which forced Qualcomm to warn that it would earn less profit this year. Spooked investors sold the stock, and its still down by about 20% versus the beginning of the year, while comparable semiconductor firms have gained about 30%. Qualcomm stock didnt budge much on Fridays news, so investors might be waiting to see what happens next.

The bigger picture: Qualcomms disputed pricing strategies have landed the company in hot water.


Besides its antitrust battles in America, Qualcomm has been massively fined by East Asian regulators over price gouging. On top of that, smartphone companies like Huawei and Apple are increasingly refusing to accept Qualcomms allegedly unfair licensing contracts, which see the company take a flat cut (around 5%) from the sale of every smartphone that uses Qualcomms tech. In the words of one Qualcomm lawyer, the house is on fire for this major supplier as regulators and smartphone makers alike turn against it.

Originally posted as part of the Finimize daily email.

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