Apple draws level with Qualcomm after Germany win

A German court has dismissed Qualcomm’s efforts to block iPhone sales in the country as ‘groundless’ as Apple hit back in the on-going global patent dispute.

According to Reuters, the regional court in the city of Mannheim threw out the case stating the patent in question was not violated by Apple’s installation of Qualcomm chips in its smartphones. Qualcomm has already said it will appeal the decision, as the pair trade blows in various courts throughout across the world.

This case focuses on the use of Intel-chips in certain Apple devices, with Qualcomm suggesting one of its patents had been infringed. The patent in question relates to power management.

Back in September, Qualcomm effectively accused Apple of corporate espionage, questioning how the gulf in performance when measuring its own chips against Intel’s could have been bridged so quickly. However, this argument clearly wasn’t enough to convince the Mannheim judge of wrong-doing.

Having already secured an order to block the sale of certain iPhones through a ruling in Munich, as well as a similar decision in China, Apple needed a win to halt the Qualcomm momentum. The pair have been trading blows over patents and royalties for years now, though the on-going case in the US could prove to be the most significant battle of the dispute.

The chipmaker is currently facing a FTC antitrust investigation, which has escalated to trial, currently being heard in the US District Court in San Jose, California. As you can imagine, Apple, Intel and various others have been playing the part of very proactive cheerleaders, urging on the FTC from the side-lines.

This trial has now concluded for the sixth day, with the FTC calling various witnesses from tech companies such as Apple, Samsung and Ericsson, as well as IP experts from consultancies and universities. The aim is to prove Qualcomm is effectively a monopoly, abusing this prominent position through excessive royalty payments and unreasonable licensing agreements for years.

With the FTC now taking a seat, the next couple of days will see the Qualcomm lawyers preach their case. Here, the team will aim to prove the royalty payments are justified, such is leadership position Qualcomm has worked up in the segment, and the licensing arrangement is the most beneficial and simplistic way to do business. The Qualcomm lawyers are certainly well practised in the art of arguing against antitrust accusations, so it will be interesting to see which way this trial heads.

While the win in Germany is certainly a positive for Apple, which has been on the losing side of a few of the recent skirmishes, the FTC trial is the big one for both parties.

iChief’s Samsung tie up is long overdue

The first (proper) week in January always promises a deluge of stories from CES and one opening gambit is a content-based partnership between Samsung and Apple, which should probably have happened much sooner.

Beginning in the Spring, new Samsung Smart TV models will offer iTunes Movies & TV Shows and Apple AirPlay 2 support for Apple customers, while 2018 models will also be made compatible via firmware update. iCultists with Samsung TVs can access their existing iTunes library and browse the iTunes Store to buy or rent new content, while Apple content will also work with Samsung’s Smart TV Services, such as Universal Guide, Bixby and Search.

The iTunes Movies & TV Shows app will feature on Samsung Smart TVs in more than 100 countries, while AirPlay 2 support will be available on Samsung Smart TVs in 190 countries.

On the surface this could be a very positive partnership for Apple and Samsung, both of whom have struggled to make a significant impact when searching for diversified revenues.

“Fascinating move as both companies have struggled to make strides in services,” said independent tech and telco analyst Paolo Pescatore. “Arguably it is a smart strategic move for both companies which underlines the need for companies to work more closely together. Samsung has made numerous failed moved in video services while Apple is still seeking to crack the TV landscape.”

Looking at Apple to begin with, this is a move which should have perhaps happened a while back. Stagnation trends in the devices and hardware segments will not have surprised anyone in the Apple business, this is the reason why CEO Tim Cook has been emphasising gains in the software and services business units so proudly, but it is now abundantly clear the ‘us versus everyone else’ mentality which made Apple great will not work outside its traditional stomping ground.

Apple has seemingly long-defied trends in the technology world by swimming against the ‘open’ euphoria. This mentality dates back to its stubborn but brilliant founder Steve Jobs, who constantly resisted the idea of openness, instead tightly integrated Apple within Apple, creating a closed ecosystem which forces iLifers to buy more Apple products. Back during a 2010 earnings call, Jobs stated “open systems don’t always win”.

When Apple was creating wonderful products, with each new release offering a brilliant new feature, this was enough to ensure the loyalty of customers despite the closed nature of the Apple business. However, innovation in the hardware segment has stalled and the closed mentality does not work in the software and services world. What some proof? Have a look at the profit warning last week.

The profit warning was the first one released by Apple in 15 years, and despite progress being made in the software and services segment, the gains could not compensate for the downturn. Although Cook pointed the finger of blame at a slowing Chinese economy, the team could not convince enough consumers to buy the ludicrously priced flagship devices in other territories either. This is a wider trend in the hardware segment, consumers are extending the lifecycle of current devices, while some are leaning towards second-hand models, but the software and services unit could not fill the $5 billion hole created.

To make the content business work, Apple will have to become a more open company, adopting the culture which it has resisted for so many years, and in Samsung it has an interesting partner.

In Samsung, Apple has found something which its own smart TVs cannot deliver; scale. According to market research firm NPD, Samsung is the leader in the US premium smart TV market (August report), holding 34% market share. Considering just over 43% of Apple’s revenue comes from the Americas, this is potential a very positive catapult to secure additional services revenues from customers. And this is before we’ve even started talking about the other territories.

Samsung is another business which has struggled to make headway with alternative revenue streams, though its prominent position in the premium home electronics space offers an excellent opportunity for the aggregator business model. When looking for new money each business has to decide where it can add value to the ecosystem; sometimes it is offering new products in parallel segments, but occasionally it means helping other businesses achieve their ambitions. Embracing openness could be an excellent move here.

If Apple wants to make any meaningful impact on the software and services industry, it will have to move away from the closed mentality which brought it success in the Jobs era and embrace the idea of collaboration. It will certainly be difficult to redirect such a massive supertanker, but one thing is clear; the faltering hardware segment, as it currently stands, will not support Apple’s indulgent ambitions.

Qualcomm pays $1.5bn to ban some iPhone sales in Germany

Qualcomm has elected to post $1.5 billion as a security bond to enable the enforcement of remedies ordered by the Munich District Court blocking the sale of iPhone 7 and iPhone 8 models in Germany.

The ban comes as the latest chapter of the long-running Qualcomm-Apple legal saga, with the chipmaker finding success in its copyright infringement claim in Germany. On December 20 the District Court of Munich decided Apple had in fact infringed Qualcomm’s technology for power savings in the older models and ordered the company to halt all sales in Germany.

Although the ruling was make a couple of weeks ago, the bond itself makes the ban official, allowing the court to pay Apple for any damages incurred should it be able to successfully appeal against the ruling. Apple has already stated it will appeal the ban and will also stop selling the devices at its 15 retail locations across the country.

But this doesn’t seem to be good enough for Qualcomm.

“Apple was ordered to cease the sale, offer for sale and importation for sale of all infringing iPhones in Germany,” Qualcomm said in a statement. “The Court also ordered Apple to recall infringing iPhones from third party resellers in Germany.”

This is one of the elements of interpretation in the case. Apple will continue to ship devices to third-parties to sell, only ceasing sales at its own retail locations. Qualcomm lawyers read the ruling differently however, suggesting this is a blanket ban on all iPhone 7 and iPhone 8 devices across the country, third-party retailers included.

For Apple, this is just a bad end to a bad week. Having just reduced its guidance for what traditionally is its strongest quarter in the year, a sales ban in a large, developed market is not ideal. Some suggest it has nothing to worry about considering these are older models, though cash conscious consumers are more alert to bargains than ever before and the iLeader seemingly pushed the pricing boat too far with the ridiculously priced iPhone X.

For Qualcomm, assuming it can fight to have the ruling upheld, this is a massive win. Precedent is a very powerful concept in the legal world and this might well be an order which it can use as evidence for additional ruling in other markets. The legal battle between the two has certainly been a long one, but this ruling has handed the Qualcomm team a bit of additional incentive.

Looking at the wider patent dispute, a similar case has been heard in China, were Apple has been told to stop importing the infringing models while Qualcomm is also pushing the case in the US. Qualcomm has the better of the early exchanges, though it will be the US ruling which will dictate the winner of this battle ultimately.

Apple points finger at China for financial woes

It seems the anti-China sentiment is pretty infectious as Apple pins the blame for the company’s shrinking bank account on the misery consumers hiding behind the Great Wall.

For years it seemed Apple was able to defy industry trends. Despite the fact global smartphone shipments were slowing, irrelevant to the fact there was little innovation emerging from the handset segment and in spite of charging a small fortune for the devices, Apple was still able to bleed the iCultists dry. However, now tt appears Apple’s immunity to the plague of normality is starting to wane.

Apple has revised its guidance for the first quarter of 2019, and there’s quite a bit missing. CEO Tim Cook explained the iLeader would only be bringing in roughly $84 billion across the three months which ended December 29, compared to the previous estimated range of $89-93 billion.

And China was of course to blame.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” said Cook. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

This was not the only reason of course. The launch of the iPhone was too late, putting too much pressure on the channels in the lead up to Christmas. The US dollar was subject to FX swings. Supply could not meet demand. And finally, more people were holding onto their older devices instead of upgrading to new ones. All of these factors combined, plus weak performance in the emerging markets, resulted in a $5-8 billion hole.

It might be easy to blame the external factors here, and they would have almost certainly played a notable role, but perhaps Cook and co should look a bit more inwards to explain the current conundrum; when was the last time Apple did something genuinely innovative?

If you consider what devices are being brought to the market today, there are simply features and gimmicks which are better than what users had before. The age of innovation for the smartphone has temporarily ceased. This has been the case at Apple for some time, though now it appears the brand credit-line has run out. There are still iLifers out there who will upgrade when Cook snaps his fingers, but not as many as there used to be, and it does appear the idea of Apple as a status-symbol in China has died.

Apple has been the master of brand advertising, driving loyalty and asset-bleeding over the years, but this quarter might suggest the power of the Apple brand is beginning to fade due to a lack of innovation and extortionately expensive products. In every segment, Apple of course charges a premium, but it doesn’t necessarily mean the product is actually better. Is the iPhone XS better than the Huawei Mate 20 Pro? Or do the Airpods perform better than Bose? Is the Homepod the best smart speaker out there? Does the product justify the cost? Has the age of holding iLifers to ransom come to an end?

Unfortunately for Apple, at a time when innovation is at a premium a supply-chain expert is in charge of the business. The company might be the smoothest running machine around, but innovation has certainly lacked without Steve Jobs at the top, though the big question is whether the great mind of Jobs could squeeze out any new ideas in these meagre times.

After Cook announced the firm would stop detailing shipment numbers in the financial reports we should have all seen this coming, but what we have learned here is that not even Apple is immune to global trends. It can’t charge more an offer no added values in exchange. Its customers are just as cash conscious as others. New products require innovation to work.

China issues injunctions against most Apple iPhone models – that was quick

The week after the US arranged the arrest of a Huawei exec China has granted Qualcomm an injunction prohibiting the sales of most Apple smartphones in the country. Coincidence?

Qualcomm and Apple have been at war for months over what the former charges the latter to use its technology in its devices. Apple wants to pay less and Qualcomm would rather it didn’t. A proxy war has ensued in which various regulators suddenly got hold of a bunch of dirt on Qualcomm and Apple has found itself accused of playing fast and loose with intellectual property.

They have both landed telling blows but the most recent round went to Qualcomm, with the Fuzhou Intermediate People’s Court in China granting its request for two preliminary injunctions against four Chinese subsidiaries of Apple to stop them selling importing and selling the following iPhone models: 6S, 6S Plus, 7, 7 Plus, 8, 8 Plus and X. In other words all of them bar the most recent ones, which apparently don’t use the offending patents.

“We deeply value our relationships with customers, rarely resorting to the courts for assistance, but we also have an abiding belief in the need to protect intellectual property rights,” said Don Rosenberg, Qualcomm General Counsel. “Apple continues to benefit from our intellectual property while refusing to compensate us. These Court orders are further confirmation of the strength of Qualcomm’s vast patent portfolio.”

The patents themselves seem relatively trivial and concern the user interface rather than core Qualcomm stuff like modems. They ‘enable consumers to adjust and reformat the size and appearance of photographs, and to manage applications using a touch screen when viewing, navigating and dismissing applications on their phones.’

Patent disputes are rarely about the significance of patents themselves, which are usually used as pawns in a greater battle of wills. You do have to wonder, however, since Apple seems to be able to cope just fine without them and UI software is a core strength, why it didn’t just develop its own way of doing that stuff in-house.

Apple will, of course, appeal, and the WSJ was the lucky recipient of a generic quote from one of its spokespeople. “Qualcomm’s effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world,” it went.

What is not known is how much encouragement the Chinese state gave to the Fuzhou Intermediate People’s Court to find against one of the US’s greatest business champions. It was generally assumed that the arrest of Huawei’s CFO would result in repercussions and the timing of this decision is intriguing.

It’s especially ironic that Qualcomm has been used as a vector for the latest offensive in the great Sino-American trade war since it’s widely suspected that China blocked Qualcomm’s acquisition of NXP in retaliation for the US intervening on the proposed acquisition of Qualcomm by Broadcom. It could all just be a coincidence, of course, but anything involving the US and China seems likely to be at the very least tainted by politics.

Apple finds the water is warming up in App Store legal battle

Apple has found itself in court once again, but Qualcomm is no-where to be seen. Instead, a few of its loyal iLifers are challenging the firm over whether the App Store is an illegal monopoly.

The case itself dates back to 2012 and will aim to understand whether Apple is operating an unjustified monopoly through the App Store. Right now the case is in front of the Supreme Court, where the nine judges will decide whether or not to allow the antitrust case to be heard by a District Court. The permission from five of the nine judges are needed for the case to proceed, and currently, it looks like only Chief Justice John Roberts is siding with the iGiant.

For Apple, this case could be a disaster. Permission to take the case to one of the District Courts, likely to be in one of the thirty states where the Attorney General is backing the iPhone users’ antitrust claims, and the door could be opened. Essentially anyone who has purchased an app from the App Store could claim grievances against Apple.

The case itself is relatively simple on the surface. As the App Store is the only place to download apps without breaking rules, should the 30% commission charged by Apple be viewed as the company unjustly profiting from a monopoly? One could argue prices are inflated due to the commission received by Apple, though its own counter-argument is based on legal precedent which dictates only those who have a direct billing relationship with a company can sue the firm.

In the Supreme Court’s 1977 decision in Illinois Brick Co. v. Illinois, the court stated only consumers who are direct purchasers of a product can bring a lawsuit seeking damages available for violations of federal antitrust laws. As customer purchase apps from developers, who in turn pay Apple the commission, Apple has argued there is no legal basis for iPhone users to sue the company, with the developers being the only ones who could make such claims. Chief Justice Roberts believes this argument, though spectators of the case have stated five of the judges are leaning the other direction. This could well develop into a very serious headache before too long.

On the other side of the aisle, the iPhone users, led by chief plaintiff Robert Pepper, argue prices would be lower if there were greater choices of app stores. This is a perfectly logical conclusion, though the developers might not like it. As it stands they have a captive audience with all iPhone users in one marketplace. Yes, they do have to pay Apple a premium, but this might well be a pill worth swallowing compared to the complications of working with multiple partners and a disaggregated audience.

As with many lawsuits in the digital economy, this is the first time such arguments are being considered by the courts. Precedent will be set which is what makes this case particularly interesting. Should the courts side with the iPhone users, the doors could be opened for lawsuits against other eCommerce giants such as Amazon or Facebook. Anyone who takes a commission based on a percentage could be viewed as falsely inflating prices in the pursuit of profit, or so the argument would be.

Apple has argued opening this door could stifle the growth of the burgeoning eCommerce sector, which is a negative consequence of course, but not an adequate reason for the case to be dismissed. Just because there is significant consequence does not mean unjust activities should be allowed to continue.

The App Store has started to generate some considerable income for Apple. On the financial side of things, over the last three months the services division, which include the App Store, produced revenues of $9.9 billion, up 17% year-on-year. With smartphone growth slowing globally, and the iPhone not proving the success some might have hoped in emerging markets, the services segment will become ever more important to the iChief.

A decision on whether the case can be heard by one of the District Courts will be made in the near future, though there will be quite a few eye balls on this one. The splash could be quite considerable for Apple, though the ripples through the rest of the digital ecosystem will be just as concerning.

Apple is said to offer discount on iPhone in Japan

The Wall Street Journal has reported Apple is subsidising operators in Japan to offer discounts on its phones because they’re not shifting as quickly as it would like.

After claiming that the new iPhone models are moving slower than planned through its supplier and manufacturer checks, WSJ reported again that Apple is going to offer discount to its XR model in Japan, which is said to be falling short of plan the most. Due to channel price protection, it needs to compensate the mobile operators to do so.

The fact that XR, the cheapest of the three new iPhone models, was the worst performer may come as a surprise, though it is to do with Apple’s positioning. One could only speculate that those going for the premium would rather buy the more expensive models (the XS and XS Max). While those who are not after the newest would go for the older models.

Since last year’s premium model the iPhone X was stopped when the new models were launched in September, to avoid cannibalisation of the new XR, some consumers went back to the older models, the iPhone 8 series. The WSJ reported that Apple may resume the X both to move consumers to more premium (therefore higher margin) model and to fulfil its OLED display commitment to Samsung. The X is said to be cheaper to make than the XS and XS Max, said the WSJ.

Japan was one of the harder to crack markets for Apple when the iPhone was first launched. The country was dominated by DoCoMo’s internet-enabled iMode phones. It took Apple a couple of years before it could convince the Japanese users of the advantage of smartphones and app stores. It looks that Apple is once again having a difficult ride in Japan again.

Apple iPhone sales are reportedly flagging

Gadget giant Apple has apparently cut its orders with suppliers in response to lower-than-expected demand for its latest iPhones.

The scoop comes from the WSJ, which spoke to the usual, shady people close to the matter in the Apple supply chain. They’re apparently bent out of shape because they have planned according to a previous, more bullish Apple forecast and are now faced with over-capacity problems.

Of the new models it seems that the cheaper XR is the one that is most undershooting initial expectations, with the WSJ suggesting orders may have been cut by a third. This has apparently all come as a nasty shock, although if those suppliers had been tracking Apple’s recent earnings announcements, in which it down-graded its forecast,  they might have been better prepared.

The piece cites a bunch of circumstantial evidence, such as overtime being cut at Foxconn, as further evidence and it’s interesting to speculate about the reasons. It’s unlikely to be price, with the X having sold plenty and the cheaper model heaviest hit, so this is probably a cyclical thing. The global smartphone market has been in recession all year and people are probably waiting longer to replace their phones, especially the most expensive ones.

Intel brings forward launch of 5G modem in bid to silence doubters

Apple’s decision to go all-in on Intel modems comes with a lot of pressure, so Intel is desperate to convince us it’s up to the task.

A week ago reports appeared to confirm that Apple’s first 5G phones will come in 2020 and will exclusively use Intel modems. Telecoms.com was among the commentators asking whether or not this would turn out to be a rash decision by Apple, with rival Qualcomm expected to be ahead in the 5G modem race.

Intel seems to have taken this scepticism as a personal challenge and has consequently announced it will now be launching it more than half a year sooner than previously thought. The Intel XM 8160 5G modem will now be released into the wild in the second half of 2019, although there’s nothing in the announcement to indicate it will power an iPhone that soon, with the September 2020 models still the likely recipients.

In fact Intel says the earliest you will see it in devices is in the first half of 2020, which does beg the question of whether this ‘bringing forward’ of the launch is purely cosmetic. Could Intel have merely tweaked the definition of ‘launch’ to allow for some kind of meaningless soft-launch six months earlier. Maybe Qualcomm will retaliate with a similar move.

“Intel’s new XMM 8160 5G modem provides the ideal solution to support large volumes for scaling across multiple device categories to coincide with broad 5G deployments” said Cormac Conroy, GM of Intel’s Communication and Devices Group. “We are seeing great demand for the advanced feature set of the XMM 8160, such that we made a strategic decision to pull in the launch of this modem by half a year to deliver a leading 5G solution.”

The fact that the XMM 8160 is ‘multimode’, supporting 5G NR in SA and NSA modes across multiple frequencies, as well as legacy wireless standards is something Intel is keen to flag up. So much so it did a special diagram.

The Intel XMM 8160 5G modem will offer very clear improvements in power, size and scalability in a package that will be smaller than a U.S. penny. It will be released in the second half of 2019, and it will support the new standard for 5G New Radio (NR) standalone (SA) and non-standalone (NSA) modes as well as 4G, 3G and 2G legacy radios in a single chipset. (Credit: Intel Corporation)

Qualcomm shares fall on concerns about its dispute with Apple

Mobile chip giant Qualcomm delivered fairly solid quarterly numbers but it lowered its outlook thanks mainly to Apple.

A slight year-on-year fall in revenue was still better than expected, as were its earnings per share. But guidance for the next quarter was reduced by around 20% for both chip shipments and licensing revenues. Apple seems to be to blame for both, with the gadget giant switching to Intel for its modems and the ongoing dispute over licensing terms resulting in a bunch of payments being withheld.

Qualcomm Q3 outlook

“We delivered a strong quarter, with Non-GAAP earnings per share above the high end of our prior expectations, on greater than expected chipset demand in QCT and lower operating expenses,” said Steve Mollenkopf, CEO of Qualcomm. “We are executing well on our strategic objectives, including driving the commercialization of 5G globally in 2019 and returning significant capital to our stockholders.”

Despite this Qualcomm’s share price was down 7% at time of writing. Speaking to Reuters, Qualcomm’s CFO George Davis speculated that the chip shipment downgrade might have been greater than many anticipated. On top of that the dispute with Apple is showing no sign of resolution, so investors may be increasingly inclined to price in a negative outcome for Qualcomm.