Following the decision by Apple to stop making licensing fee payments to Qualcomm, the San Diego, California based maker of smartphone chips is planning retaliation by asking for the banning of iPhone imports into the United States. Qualcomm is understood to be planning on requesting the ITC – International Trade Commission to prevent the iPhone which is manufactured in Asia from being shipped into Apple’s most lucrative market for the device. As a quasi-judicial agency, the Washington-based ITC possesses the powers to prevent the importation of products into the United States. It is known to process cases at a faster rate relative to federal district courts.
The dispute between Apple and Qualcomm concerns patents held by the maker of smartphone chips and which allows it to get a cut from every smartphone capable of high data speeds sold even when the mobile device is not running chips from the semiconductor firm. According to Apple, this is an unfair system which has been caused by Qualcomm using is licensing leverage to assist its semiconductor unit illegally.
Cutting off payments
Earlier in April the dispute between the two technology companies worsened after payments to Qualcomm for technology licenses were cut off by the Cupertino, California-based tech giant. This led to Qualcomm digging in over fears that the move could set a precedent and consequently jeopardizing a lucrative revenue stream.
“They have to do something. The bigger risk is other companies or countries say we’re not going to pay, too. That’s the danger of letting Apple get away with this,” Kevin Cassidy, a Stifel Nicolaus analyst, said.
During an earnings call, Apple’s chief executive officer Tim Cook said Qualcomm hadn’t offered terms that were fair as per the rules that are used in governing patent licensing. Though Cook doesn’t believe Qualcomm could succeed in having the importation of iPhones into the United States banned, if successful such a ban could prevent Apple from accessing a market that constitutes about 40% of its total sales. Last year for instance, revenues from the Americas reached a figure of $86.6 billion. This would be a big blow for Apple as the iPhone accounts for over 60% of the revenues that the tech giant generates annually.
The refusal by Apple to pay technology licensing fees to Qualcomm have also dealt the semiconductor firm a big blow. Qualcomm has already projected that its revenue for the quarter will fall by half a billion dollars should Apple refuse to play ball.