Qualcomm ruling brings unexpected ray of hope for Huawei

Mary Lennighan
By Mary Lennighan

May 23, 2019

via Flickr © Beth Cortez

via Flickr © Beth Cortez

  • Court decision could force chipmaker to change entire business model
  • Huawei and others will be able to renegotiate deals
  • Decision comes as ARM severs ties with Huawei
  • Qualcomm seeks immediate stay, plans appeal

The US legal system delivered some good news for Huawei on Wednesday. I know, I was surprised too.

US District Court judge Lucy Koh's ruling against Qualcomm in an antitrust case brought by the Federal Trade Commission two years ago is a heavy blow to the chipmaker, which now faces the possibility of having to change its entire business model, but benefits smartphone makers worldwide, which buy chipsets and licence technology from the US firm.

The FTC essentially accused Qualcomm of monopoly practices and excessive licensing fees. The case was heard in January, but the verdict took some time due to its complexity. There are many facets to the judge's ruling – her report comprises well in excess of 200 pages – but key among her findings is the potential damage done by Qualcomm's alleged 'no licence, no chips' practice; that is, it threatens to withhold chips from customers unless they also sign patent licensing deals. Qualcomm holds so many patents, that it's virtually impossible to make a cellular device without using its technology.

Huawei is one of a number of OEMs – Apple and Lenovo also took the stand – to have testified against Qualcomm in this area and who will now have the opportunity to renegotiate various deals with the chipmaker.

Presuming the verdict stands, that is.

Qualcomm said it will immediately seek a stay of the judgement and push forward with an appeal. "We strongly disagree with the judge's conclusions, her interpretation of the facts and her application of the law," said Don Rosenberg, executive vice president and general counsel of Qualcomm, in a statement.

Opinion is divided on Qualcomm's chances of success in an appeal and it's a point for those with greater knowledge of the US legal system than I to debate. However, the prevailing wisdom appears to be that it could well get its stay of judgement.

So, no great cause for celebration for the OEMs yet then. But it's hard not to look at Huawei and its well-documented – some might say overly so – issues in the US and wonder about the logic of the Qualcomm case.

Let's not forget that the case was brought by the FTC, a government agency, not by handset makers or rival chipmakers. This is the US administration seeking to bring down its 5G champion at a time at which its trade war and battle for 5G supremacy against China is peaking. Admittedly, the case was brought in 2017, when none of us could have guessed how far the Trump administration would take its vendetta against Huawei, but that renders the situation only slightly less laughable.

While Trump is desperate to push the US to the forefront of 5G development, the FTC's lawsuit essentially warned that Qualcomm's technology prowess would enable it to unfairly dominate the 5G space by imposing hefty royalties on handset makers.

The Qualcomm verdict comes as Huawei is still digesting the fallout from Trump's latest restrictions on the use of its technology. UK-based chip designer ARM has just halted its relationship with Huawei in order to comply with US regulations, thereby threatening Huawei's ability to make its own chipsets. Interesting timing for the Chinese company.

The only certainty in this market is that uncertainty is going to prevail for some time to come, not just in China and the US, but all over the world. If it stands, the Qualcomm verdict is good news for Huawei, but it will need much more than that to secure its position in both devices and networks in the 5G world.

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