What happened? Apple and modem chip supplier Qualcomm have been locked head-to-head in a bitter battle with tens of billions of dollars in licensing at stake. Minutes into the first big trial they announced a settlement.
What happened? For now, only executives at Qualcomm and Apple know the true details, but I have a perspective that can be summed up on a single word. Pragmatism. There are times when the stakes become so high that neither party can afford to lose. So, who won?
Fold ’em vs. Hold ’em
Qualcomm needed money and stability in the marketplace; competitors for 5G modem chipsets are growing in number. Apple needed 5G modems to remain competitive as the wireless world moves to another standard.
From The Gambler:
If you’re gonna play the game, boy,
You gotta learn to play it right.
Qualcomm and Apple settled. Apple pays money to Qualcomm and gets the needed modem chips to move into the 5G era.
Who blinked first?
You got to know when to hold ’em,
Know when to fold ’em…
Some say Apple chose to settle because Intel decided to get out of the 5G chipset business (announced shortly after Qualcomm and Apple agreed to settle). Others think Intel decided to abandon 5G because Apple settled.
Know when to walk away,
And know when to run.
Apparently, 5G modems from Huawei, Samsung, or others were not a viable option for Apple.
Apple has another problem that weighed into the decision. Volume. Apple’s newest iPhones likely sell over 100-million units each year (not including iPhone 8 and 8 Plus, iPhone 7 and 7 Plus which use older modem chipsets) so the company needs a supplier with sufficient capacity. Qualcomm has the capacity. Intel had the capacity for 4G LTE modem chipsets, but if Intel decided to exit the business entirely, Apple had little choice but to settle with Qualcomm.
I don’t think that happened.
You never count your money
When you’re sittin’ at the table.
At that level, two corporate giants battling to save their company’s many tens of billions of dollars, in the end, it’s pragmatism that rules.
Qualcomm absolutely positively could not afford to lose such a case against Apple as the ripples would have interfered would have had a negative impact for years. Worse, the company needed the payments from Apple and other suppliers to continue development because competition from Samsung, Huawei, and other Chinese manufacturers continues to grow.
There’ll be time enough for countin’
When the dealing’s done.
On the other side of that coin, Apple needed a very large supply of 5G modem chipsets and– win or lose– could not afford to have a case with Qualcomm drag out in courts for the next five years.
Every gambler knows
That the secret to survivin’
Is knowin’ what to throw away
And knowin’ what to keep.
Consider it fact that Apple is working on its own modem chips for the future, but 5G is coming soon and the iPhone maker could not be left behind without a valid supplier. Huawei? Given the company’s bad reputation in the West, the Chinese company probably never made the short list.
My perspective tells me that both companies jockeyed themselves into a position of strength, but the stakes were so high at this late date that neither Apple nor Qualcomm could afford to lose at trial.
‘Cause every hand’s a winner,
And every hand’s a loser,
And the best that you can hope for
Is to die in your sleep.
Pragmatism rules. They settled and will work together for a few more years. Intel knew Apple was the company’s only hope for a valid 5G modem business and decided to fold its cards.