Qualcomm (QCOM) Sues Apple In China, Seeks IPhone Sales Ban

Qualcomm Inc. (NASDAQ:QCOM) recently filed a lawsuit in China against Apple Inc. (NASDAQ:AAPL) to halt sales and manufacture of iPhone in the country, per a Bloomberg report. In a lawsuit filed in Beijing intellectual property court, the largest mobile chipset manufacturer using baseband technology globally, claimed that Apple infringed Qualcomm’s patent and uses technologies invented by it without paying for them.

Qualcomm’s arguments are based on three non-standard essential patents covering power management and Fore Touch touch-screen technology, which Apple uses in its latest iPhones. Qualcomm generates majority of its revenues from mobile chipset manufacturing. However, major part of its profit comes from patent licensing that cover the fundamentals of next-generation mobile phone systems.

On the other hand, iPhone accounts for more than two-third of Apple’s revenues. Importantly, China is the largest smatphone market of the world and a major country for production of these devices. Therefore, any negative court verdict in China could hurt Apple significantly.

Legal tussle between Qualcomm and Apple is not new. In Jan 2017, Qualcomm was slapped with a $1 billion lawsuit related to licensing royalty payments by the tech giant. In the suit filed in the U.S. District Court for the Southern District of California, Apple accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates. This lawsuit continues to get bitter, which is badly affecting Qualcomm’s margins.

In May 2017, Qualcomm settled a licensing dispute with BlackBerry Limited (NASDAQ:BBRY) by paying $940 million. Moreover, just a few days ago, the company has been fined around $23.4 billion Taiwan dollars (approximately U.S. $773 million) by the Taiwan Fair Trade Commission on grounds of anti-trust violations of its chip technology.

On the other hand, Qualcomm recently revised its proposed deal to take over NXP Semiconductors N.V. (NASDAQ:NXPI) in order to get the nod from the European Commission (EC), which is the regulatory authority of European Union. Notably, Qualcomm’s proposed acquisition of NXP Semiconductors is facing a few problems.

Price Performance of Qualcomm

Qualcomm’s shares have decreased 6.45% compared with the industry’s decline of 2.72% in the last three months. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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