Big news broke last night, as the Wall Street Journal reported that Apple would start designing their products without Qualcomm components moving forward. This is a result of the ongoing legal battle between the two tech companies, where Qualcomm ultimately cut off Apple’s access to the software that is necessary for testing Qualcomm chips. Instead, Apple will begin using components from Taiwan-based company, MediaTek, as well as industry giant Intel for their new iPhones and iPads being developed for 2018.
The two companies are engaged in a lawsuit that was filed by Apple, regarding Qualcomm’s overly expensive royalties that are said to have amounted to what Apple is charged by all their other cellular patent licensors combined. In addition, Apple has reported that Qualcomm has been requiring them to pay a percentage of the iPhone’s revenue in return for the use of Qualcomm patents, which sounds a lot like extortion. As a result of these reported wrongdoings by Qualcomm, Apple filed a $1 billion lawsuit in the United States, a $145 million lawsuit in China, as well as another lawsuit in the United Kingdom. In response to Apple’s legal action, the chip manufacturer unsuccessfully attempted to halt iPhone imports into the United States. Legal experts expect that this court case could drag out for quite some time.
Qualcomm Stock Already Falling
Of course, Apple is one of the most successful companies in the world, so they won’t suffer from any repercussions stemming from this legal battle; however, Qualcomm has already seen backlash since Apple announced that they are going to stop using their chips. Qualcomm stock has dropped nearly 7 percent since the announcement was made last night. In the last 12 months, Qualcomm shares have fallen more than 20 percent, while Apple stock has grown by upwards of 50 percent. Apple decided to stop paying Qualcomm’s excessive royalties at the time the lawsuit was filed, which forced the chipmaker to cut its Quarter 3 revenue outlook for 2017 by nearly half a billion dollars. It’s safe to say that Apple is winning this battle. It remains to be seen how this will affect the fate of Qualcomm moving forward.