In a surprise move this week, Apple and Qualcomm settled their dispute which places the technology giant in a prime place to take advantage of 5G phones. Apple had been complaining for years and eventually brought forward a suit in Federal court saying that Qualcomm was charging its customers double. Apple needed to make a sacrifice. Either it would go with another choice or settle its dispute with Qualcomm. In the wake of the announcement, Qualcomm stock price soared 20%, and it appears that Apple is also gaining traction.
Apple is Getting a 5G iPhone
Apple will be getting a 5G iPhone to customers faster than expected. The downside is that it settled with a company it views as having unfair practices. Qualcomm charges its customers a licensing fee to allow them to purchase chips and then charges them for the chips it licenses. Getting the iPhone to 5G means Apple was put in a catch 22, where it had to weigh other options to make it all a reality. From Apple’s perspective, it went for the company that was the lesser of two evils. Apple believes that the Qualcomm’s business mode is detrimental to the industry and it does not like the way it dominates competitors as they try to make it in the chip business.
Part of the problem is that Intel, who makes the chips that Apple uses in its computers is far behind Qualcomm when it comes to perfecting the 5G semiconductors. Intel announced that it would abandon its plans to make 5G modems since it was running far behind Qualcomm. Apple had been using Intel 4G chips exclusively in its latest iPhones as their issues with Qualcomm raged on. If Apple continued to let its issue with Qualcomm perpetuate, they would not have a 5G iPhone in the near future.
Huawei was another alternative, and the company appeared open to speaking with Apple. Unfortunately, this partnership given the recent arrest of the Huawei CFO and security concerns around the company would be bad for optics.
Apple Could Have Made Their Own Chip
Apple could make its own 5G semiconductor. Apple is thought to be working on its own modems and attempting to bulk up an internal division. But it would likely take Apple several years to develop. None of those options were ideal for Apple. Apple shares which you can trade online as well as on a trading demo account appear to be breaking out.
Tuesday, the world found out the decision Apple made, which will lead to a 5G phone this fall when Apple releases its next iPhone. Qualcomm, not only gets to take a victory lap, it’s stock price showed how investors felt about the outcome. A robust 23% gain on Tuesday followed by several upgrades to the stock on Wednesday has shown the company that it was worthwhile to go to the mat with Apple, despite its business practices.