The day before Halloween, the Wall Street Journal reported that Apple was designing next year's iPhones and iPads without Qualcomm chips. Instead, Apple would use Intel and MediaTek components according to the report.
Nothing is final yet, and Qualcomm says it could and would still sell its products to Apple. But the window of opportunity for Qualcomm will presumably close in the not too distant future. At this point, if Qualcomm could reach an agreement with Apple, it would have to be considered a "design win" for Qualcomm (though at first sight it would merely be the continuation of a longstanding business relationship).
In case Qualcomm can't turn this around, a settlement of the earth-spanning antitrust and patent licensing disputes between the two companies will become considerably harder to reach. At a stage at which Apple relies entirely on other companies' chipsets, the only commercially relevant questions for the two to sort out will be about (re)payments and rebates for the past, and about standard-essential patent (SEP) licensing revenues for the past and for the future. In that scenario, Qualcomm will have to prove in court that Apple actually does need a license to any valid and enforceable Qualcomm SEPs, and that will take time.
It could be--but presuambly isn't--a coincidence that one day after the Wall Street Journal article, Qualcomm filed a breach-of-contract lawsuit against Apple in the Superior Court of California for the County of San Diego (this post continues below the document):
17-10-31 Qualcomm v. Apple Breach of Contract Complaint by Florian Mueller on Scribd
One of the reasons for which I doubt that the timing is a coincidence is that Qualcomm has previously appeared to make filings just before or after news that matter to investors, or before earnings calls. For example, in July it announced infringement lawsuits against Apple just before it became known that another customer (financial analysts tend to think it's Huawei) stopped paying patent royalties.
The short version of the Superior Court complaint is that Qualcomm is seeking damages and to enforce the right to perform a certain kind of audit (specific performance) because Apple allegedly violated a Master Software Agreement for Limited Use by disclosing confidential information about Qualcomm's program code to a rival chipset maker, Intel. For example, the complaint alleges the following:
"[I]n 2017, Apple requested that Qualcomm provide details about how Qualcomm's implementation of a particular interprocessor communication was designed to meet a certain wireless carrier's requirements. Qualcomm’s proprietary implementation of this communication protocol is not dictated by any standard and it contains Qualcomm's highly confidential trade secrets. Apple, however, included in the 'CC'd Persons' distribution list for this request an engineer from Intel (a competitive vendor) and an Apple engineer working with that competitive vendor. In a separate incident, Qualcomm received correspondence indicating that rather than preventing information regarding Qualcomm's proprietary implementations from being shared with Apple engineers working with competitive vendors, Apple appears to have merely redacted the code name that Apple uses for Qualcomm on that correspondence. As another example, an Apple engineer working on a competitive vendor's product asked an Apple engineer working on Qualcomm's product to request assistance from Qualcomm relating to a downlink decoding summary for carrier aggregation."
Also, Qualcomm makes reference to a "posting" by someone who Qualcomm believes could be an Intel engineer:
"[...] Qualcomm became aware of a posting regarding Intel Corp. layoffs that appears to have been posted by a former modem design engineer, and which contains several statements of concern that on August 14, 2017 Qualcomm specifically requested Apple investigate. The post references a CNBC article reporting on the ITC action filed by Qualcomm against Apple and goes on to say: 'We were told to ignore intellectual property rights when designing the modem. There was even a conspiracy to copy Qualcomm's technology by hints from Apple about the 'reference device'.' This statement appears to be made by an Intel engineer working on the Apple (Intel branded) modem."
Let's see how Apple will respond to these allegations. Only one thing is certain: this does nothing to justify Qualcomm's licensing practices, so whatever may or may not come out of that case in state court, the fundamental issues (which are of concern to the industry at large, not exclusively Apple and Intel) are still the same. A good offense is sometimes the best defense, but at first sight, the new complaint doesn't look like something that would give Qualcomm a great deal of leverage in settlement negotiations. In the short term this is just further escalation, and I doubt very much that this will "persuade" Apple to use Qualcomm chips in next year's iPhones and iPads. And if the bridge is burned, this dispute might take as long as Apple v. Samsung (actually, Samsung is still doing a lot of business with Apple, which is more than Qualcomm may be able to say in a year from now).
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