Qualcomm and Apple have been in a deathmatch for some years now, along with Intel, and the litigious path they were on wasn’t good for any of these companies. Just as case between Apple and Qualcomm was beginning in San Diego, the firms recognized it was in their strategic best interest to settle the litigation and the result should leave all three in a much better place. Let’s explore this from each firm’s perspective.
From a tactical standpoint Apple’s attack on Qualcomm looked brilliant. Apple would either gain near exclusive control over Qualcomm’s patents or cripple Qualcomm enough so it could no longer provide a technology uplift to Apple’s competitors. Either would have likely left Apple owning the premium smartphone space and massively reducing the competitiveness of cheaper smartphones that currently dominate the segment. They would have effectively crippled the Android platform without having to directly attack Google, which, given Google’s size and success against Apple in court previously, had been problematic.
However, strategically that success would have put a massive anti-trust spotlight on Apple and likely fast tracked either a punishing consent decree limiting significantly its market power or even potentially broken up the firm. This last would have resulted in combined, likely challenges from China, the EU, and the U.S. In effect, Apple would have lost regardless.
Intel was used as a weapon by Apple which apparently gave the company access to Qualcomm’s technology in order to create barely competitive modem offerings. This wasn’t Intel’s market, the company was really bad at competing in it, and had Apple won, it would have likely (depending on the result) either had its own modems built by other parties or gone back to buying them from Qualcomm at a massive discount that would have forced Intel out of the market.
Apple has been planning to move to custom ARM silicon from X86 for its PCs regardless of the outcome. Short term, Intel was getting Apple’s modem business but that potentially exposed it to IP theft challenges from Qualcomm and this was a huge distraction for a firm that was already dealing with other issues, including the crippling resignation of its prior CEO. Even tactically this looked like a stupid exercise for Intel which, at best was basically going to be used and cast off by Apple.
Qualcomm didn’t start this, but the battle resulted in a massive reduction in the firm’s valuation, enabled a hostile takeover attempt by Broadcom, and became an equally massive and dangerous distraction. The firm continued to execute impressively but Qualcomm’s larger strategic fight is with Huawei and it needed to put all its efforts into fighting that greater threat and bringing 5G to market more rapidly.
Win or lose, Qualcomm would have been weakened significantly, and any price concessions would have likely been passed on to its customers. Even if the firm wasn’t destroyed, and even if it won (which seemed very likely given the failure of the Broadcom hostile takeover), it would have been competitively weakened. This was a fight for Qualcomm’s very existence and it reduced the firm’s ability to drive 5G, recruit new employees (because it put a cloud over the firm’s future), and made it look like it couldn’t adequately defend its IP. The suit even created doubt that Qualcomm’s business model was either legal or viable.
Any monetary award it was likely to get paled, as a result, against the monetary damage that Apple and Intel were doing to the company’s reputation. As a result, it was always eager to discuss a reasonable settlement.
Up until today, Apple wasn’t being reasonable.
This is a showcase of how and why using litigation as a weapon is almost never a good idea. Apple has one of the strongest legal teams on the planet, but courts and regulatory agencies worldwide were unimpressed and represent dual edged swords. As others have found, once you open this door, the regulatory has you on their radar and Apple is now on a lot regulatory agencies’ radar.
This is also a lesson other firms should take to heart because the billions wasted on this ridiculous effort could have been better spent by all parties on creating more competitive offerings. Of the three, Apple has been the most lacking in this area of late.
What vendors need to recognize is that litigation is best used for defense, not attack, given the nature of the courts. And, particularly if you are a massively large company with far higher margins than competitors (both anti-trust red flags) you don’t want regulatory agencies to take notice. This last point may still be a problem for Apple, one of the world’s richest and most profitable companies.