TAIPEI – Apple is in negotiations to shift the production of older iPhones into an important Taiwanese supplier to avoid billions in sales in China as a result of a long-standing worldwide patent series with Qualcomm from the US
A court in southern China Fuzhou City decided Monday that Apple violated two Qualcomm software patents. She urged the smartphone maker to stop importing and selling certain models like the iPhone 6 series and the iPhone X launched last year.
The smartphones manufactured by Pegatron, however, are Foxconn and Wistron one of the three largest iPhone assembler Apple, according to the Nikkei Asian Review of the ban except.
According to sources close to the matter, the exception was due to Pegatron paying a fee for licensing the software in question on behalf of Apple. Unlike Foxconn and Wistron.
According to one of the sources with direct knowledge of the situation, Apple had first discussions with Pegatron as to whether the Taiwanese company could undertake more iPhone production to offset the impact of the ban. However, no decision has yet been made.
Apple has also announced that it will implement software updates "to address any concerns about compliance with the order," said Reuters. However, it was unclear whether this would be accepted by the Chinese court.
The verdict is the latest in a long-standing dispute that includes dozens of lawsuits around the world. Apple is also suing Qualcomm for unfair licensing practices and has appealed the Chinese verdict.
Qualcomm intensified its attack on Thursday by seeking a court order to extend the ban to Apple's latest series launched less than two months ago. It is expected that Pegatron will continue to be exempt under its license agreements. The reference for a preliminary ruling states that Qualcomm argued that 'the judgment and ruling in this case do not apply to cell products manufactured by Pegatron Corporation in collaboration with Apple Inc.'
The decision comes for Apple at a difficult time already suffering worldwide from disappointing sales of its new iPhone models. The company has struggled in China to address the rise of domestic rival Huawei, who overtook the US company earlier this year and became the world's second-largest smartphone maker. In the meantime, global smartphone sales are expected to decline in 201
China contributed 20% of Apple's total revenue of $ 166.69 billion for the 2018 Olympics for the 2018 fiscal year. For 2018, so far, about 6% of total iPhone sales came from the sale of older phones such as the iPhone 6s and iPhone X in China, said two sources with knowledge of the sale of Apple in China.
Considering a shift of the consumer to newer models, it is estimated that the order of production of older iPhone models by Foxconn is progressing Wistron could increase Apple's revenue in 2018 by about $ 5 billion, or 3% of the total iPhone Sales exceed.
If Pegatron is exempt from tax, it could be halved to about $ 2.5 billion. If Apple later decides to ask Pegatron to increase production, the impact would be even lower, the sources added.
Apple and Qualcomm have been in a fierce litigation over royalties since early 2017. The dispute was triggered when the world's most profitable smartphone company asked its iPhone assembler Foxconn, Pegatron and Wistron to stop the royalties due to Qualcomm. Apple accused Qualcomm of unfair patent licensing practices, while Qualcomm rejected the allegation that the smartphone maker had violated its patents.
Qualcomm signed separate contracts with the three iPhone fitters and approved the royalties. Under previous practices, the iPhone assembler paid the chipmaker on behalf of Apple, which later paid the three suppliers.
"The negotiations of each iPhone assembler with Qualcomm are somewhat different," said a source with direct knowledge of the Nikkei Asian Review issue. "Pegatron's patent application for Qualcomm is more than just Foxconn and Wistron, so it's exempt in this case."
Qualcomm confirmed on Thursday in the Nikkei Asian Review that Pegatron-made iPhones were excluded from the injunction. "Pegatron has a license for both patents", which the Chinese court has ruled against Apple, said Qualcomm. IPad maker Compal Electronics also has a license for one of the two patents, Qualcomm said. Compal does not make iPhones.
The ongoing trade war between the world's two largest economies could further unsettle Apple's prospects and its deep-rooted supply chain in China. Other industry sources claim that the timing of the Chinese ruling is part of Beijing's efforts to show Washington that it can still upset US companies, even though the punishment this time is not severe.
Pegatron Chairman Tung Tzu-hsien said on Thursday that this was the case He had not yet seen the court order and could not confirm whether his company was exempted from the decision.
"However, if we are really excluded from the order, this could be based on our respect for intellectual property rights covering more patents," Tung told reporters at a public appearance in Taipei.
Apple did not respond to a request for comments.
Don Rosenberg, General Counsel and Qualcomm's Executive Vice President, said in a statement by an audience relationship agency of the Nikkei Asian Review at the beginning of Thursday, "If Apple violates the injunctions, Qualcomm will seek enforcement of the orders through enforcement tribunals. that are part of the Chinese court system. "
J Eff Pu, a Hong Kong-based analyst with GF Securities, said the Qualcomm court's victory seemed to be part of the US-China trade and technology showdown.