I don’t think anyone was expecting this punch. According to a new report from Bloomberg, Qualcomm is thinking about asking the International Trade Commission (a U.S. trade agency despite the misleading name) to ban imports of iPhones into the U.S. This is the latest twist in the ongoing conflict between Apple and Qualcomm.
Qualcomm hopes that the ITC could rule on the issue sooner than other courts, which would give the company a clear advantage against Apple. As iPhones and iPads are all manufactured in China, Apple has to import its devices into the U.S. in order to sell them in its home country.
While Qualcomm probably doesn’t expect a full ban on Apple devices, Qualcomm is buying some time and leveraging its arguments using multiple angles.
On Friday, Apple stopped paying royalties to Qualcomm, saying that current rates are unfair. This represents hundreds of millions of dollars per quarter for Qualcomm, a company that is much smaller than Apple.
Qualcomm is a key chipset supplier for many of the smartphone makers around the world, manufacturing the systems-on-a-chip or LTE modems that power your devices. For instance, Apple has been using Qualcomm LTE chips for many of the recent iPhones. For the iPhone 7, Apple is buying LTE chipsets from both Intel and Qualcomm in order to diversify its supply chain.
But that’s just one part of Qualcomm’s business model. The company also has a ton of patents related to wireless technologies. So even if you ship a smartphone with an Intel chipset, you still have to license patents from Qualcomm. While revenue from chips is growing faster than licensing revenue, it still represents around a third of Qualcomm’s total revenue.
Apple is saying that it is paying more royalties than it should. Qualcomm is supposedly forcing Apple to license too many patents and taking a cut on each iPhone sale. Apple is asking for $1 billion.
Qualcomm and Apple have both filed other suits as well, which is quite usual when two global companies fight about patent licensing deals.
Each company is trying to strong-arm the other. Apple wants to pay less royalties, so it is using this suit to renegotiate the deals. Qualcomm wants to save its patenting business model because other smartphone makers could ask for lower royalties if Apple wins.