In my opinion, the genesis of the spat between Apple and Qualcomm over LTE modems can be traced to Apple's desire to not be reliant on any supplier. That desire led to Apple's use of modem chips for the iPhone 7 to be shared between Intel and Qualcomm. Furthermore, Apple wanted to reduce the royalty paid to Qualcomm for use of its intellectual property (IP) on the cost/price of the entire smartphone. Apple further influenced the Federal Trade Commission (FTC) to file suit against Qualcomm because of its dominance against other semiconductor suppliers for modem chips.

Suits and counter-suits have followed, which have led to overall product strategy changes that potentially hurt both companies and, in turn, the customer. First, let's take Apple.

By using dual suppliers for the iPhone 7's LTE modem, Apple had to throttle down the performance of the Qualcomm modem to a level equal to that of the Intel modem. This led to two sets of iPhone products, depending on the carrier; e.g., Verizon versus AT&T. This has largely been hidden from the general public. Now, the speculation is that this thinking will continue on Apple's part for the future iPhone 8, slated for release later in 2017.

Then there's Qualcomm, the only supplier for the LTE modem capable of supporting peak download speeds of up to 1Gbps. Intel is hard at work to duplicate this capability with speculation that the company will not be able to supply such a modem speed at the time of the new Apple iPhone entry.

Apple enthusiasts counter that use of the 1Gbps is not widely available by carriers for users. Even if that's true, carriers want to be able to show off their highest possible download speeds.

The spat continues

Qualcomm stock price is being hurt—down by some 25% from January 2017. In turn, the company has counter-sued Apple through direct suits on the manufacturing supplier network. Qualcomm's stock price is important as a basis for the company's efforts to acquire NXP. U.S. approval has been granted, but European regulators must decide whether this impending merger meets their competition goals. The next month should bring a resolution to the acquisition issue. To add further confusion, stock market activist Elliott Management is pushing for a higher price from Qualcomm to support the pending acquisition.

Let’s try to summarise this crazy dilemma for both companies:

  • Apple’s next iPhone could have a reduced wireless modem speed, bringing into question their competitiveness against entries such as the recently announced Samsung Galaxy S8.
  • Qualcomm is battling a reduced stock price, which makes it difficult to finance their impending NXP acquisition.

If there's no resolution to these customer-versus-supplier disputes, everybody loses: Apple, Qualcomm and the customer.

First published by EE Times U.S.