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Apple and Qualcomm's feud appears to be escalating further heading into the fourth quarter, as a new report by The Wall Street Journal this evening indicates Apple is designing iPhones and iPads that would not include Qualcomm's components.
Instead, Apple may opt to work with Intel and possibly MediaTek for its modem chips, according to the report. This would be another significant shot between the two companies, which have been running an extended legal battle regarding payments for Qualcomm's technology. Apple filed a $1 billion lawsuit with Qualcomm in January and the situation has seemingly just escalated from there. Qualcomm also reportedly filed a lawsuit against Apple in China, looking to block manufacturing and sale of the iPhone in China earlier this month.
Qualcomm is a major chip producer but now finds itself locked in an ongoing battle with one of the largest mobile device makers in the world. The Wall Street Journal report also says Qualcomm withheld software for testing its chips in iPhone and iPad prototypes, likely continuing to escalate the tension between the two companies. The report also indicates that plans could change, which isn't surprising as a deal this scale may be in the probing stages and could have significant ramifications for the future of both companies.
This comes at a critical time for Qualcomm, which will report its third-quarter financial results this week and continue to face questions as to what it's business may look like in a future without Apple. On the year, Qualcomm's shares have declined more than 15%, though its chips continue to show up in other devices like Google's new Pixel phone.
Apple, meanwhile, is looking to make its case that it will be able to become a $1 trillion company. It's not clear if a change at the hardware level like this would affect its production of new iPhones, or if it would have to rethink the way its next-generation phones work. Still, Apple's pitch - and path - has to be essentially flawless if it's going to make that next big jump and continue to build its success story with Wall Street.
"The reason that we're pursuing this is that Qualcomm's trying to charge Apple a percentage of the total iPhone value, and they do some really great work around standards-essential patents, but it's one small part of what an iPhone is," Apple CEO Tim Cook said regarding the legal battle on the company's second-quarter earnings call earlier this year. "It's not - it has nothing to do with the display or the Touch ID or a gazillion other innovations that Apple has done. And so we don't think that's right. And so we're taking a principled stand on it, and we strongly believe we're in the right. And I'm sure they believe that they are, and that's what courts are for.
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