14 Jul

Why Apple Won’t Destroy Qualcomm

WRITTEN BY Rachel Gunter FEATURED IN Company News, Insights, & Analysis

Royalties withheld

Qualcomm (QCOM) and Apple (AAPL) are locked in a bitter legal tussle where both have sued each other and Apple has gone as far as withholding royalties from Qualcomm. The withholding of royalties, which are estimated at $1.0 billion, recently prompted Qualcomm to sue four Apple suppliers. Qualcomm receives royalties on Apple products through Apple suppliers and contract manufacturers in overseas markets such as China (MCHI).

The dispute centers on claims by Apple that Qualcomm is overcharging it for the use of its technology. Qualcomm has also been sued by a US (SPY) regulatory agency over alleged antitrust practices.

Why Apple Won’t Destroy Qualcomm

Apple needs Qualcomm’s automotive chips

While the Apple dispute poses a risk to Qualcomm and has already prompted the company to lower its performance outlook, it isn’t a matter of life or death. Qualcomm is here to stay—you just have to look at the assets it is buying to see that.

Qualcomm is about to lay its hands on vital automotive technologies through the acquisition of automotive chipmaker NXP Semiconductors (NXPI). If Apple is diversifying into the smart driving market, as has been speculated, then it will need Qualcomm’s automotive chips to stay ahead of the competition. Therefore, it would be in Apple’s best interest to resolve the dispute with Qualcomm.

Autonomous vehicle sales estimates

The Boston Consulting Group sees a huge market for autonomous vehicles in coming decades, estimating that 30.0 million autonomous vehicles will be shipped annually by 2035. The research company predicts that the worldwide autonomous vehicle market will grow from $42.0 billion in 2025 to $77.0 billion by 2035, as shown in the above chart.

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