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That seemed to be the implication of the Qualcomm release last week where they had filed with the ITC, (International Trade Commission) for a limited ban on iPhone 8 sales.  While Qualcomm is apparently working hard not to piss off the millions of iPhone users in the US the ITC is a regulatory agency and doesn’t work for either Qualcomm or Apple and could, all on their own, decide to block sales of the iPhone 8 and all other infringing Apple products (pretty much all the iPhones) if they determine Qualcomm is correct and that Apple is basically stealing Qualcomm’s intellectual property.

I’m struggling with Apple’s strategy here because they appear to be betting that they can get a very short term competitive advantage from the courts but the risk of failure could exceed half of their valuation.  This would be like betting your house against the chance of paying sales tax on your groceries for a month.  The effort seems so brain dead stupid I’m struggling with why Apple attacked Qualcomm in the first place.  Given their cash reserves, their inability to figure out what to do with them, and the current Trump administrations pro-business stance a far less risky path would have likely been to just try and buy Qualcomm.

Let me explain.

The Dispute In A Nutshell

Qualcomm controls most of the patents that surround the Smartphone, in fact were in not for Qualcomm, we’d likely be still using flip phones (which for a lot of folks who appear to have attention issues and tend to walk or drive into things while staring lovingly at their Smartphone might be a good thing).   To get access to these patents Qualcomm requires a licensing fee which covers the cost of their development and provides a relatively modest profit given Qualcomm’s level of control.   Apple doesn’t want to pay the Qualcomm price even though their margins are the strongest in the industry and their related valuation has often been higher than any other company in any industry.  In effect, Apple is rolling in money but instead of focusing on building better products has flipped to a strategy of pounding on suppliers.  (Tim Cook’s background is in supply chain, not creating products, so he is doing what he knows which shouldn’t surprise anyone).

What they are doing reminds me of the old joke, and it is old because my Grandfather told it to me over 40 years ago).  The Joke goes like this:  A drunk seemingly well to do guy is in a restaurant famous for both a beautiful parrot in the window and giving the customer anything they wanted.  The waiter askes the drunk what he would like and he says he wants that famous parrot deep fried and on his plate.   The Waiter is aghast and says, but sir, that parrot is our symbol and it would cost $25K to provide it so surely he’d want something else.  He says no, points to the restaurant’s policy, and the waiter sadly agrees.