TAIPEI -- Analysts and industry sources say that Qualcomm's disputes with Apple and its assemblers over royalty payments are not likely to have an immediate impact on the production and shipments of the upcoming iPhone 8 ranges.
Late Wednesday, Qualcomm filed a complaint in the U.S. against four Apple assemblers, claiming they refused to pay for the use of its technologies in iPhones and iPads.
Qualcomm's licensing deals for parts in iPhones and iPads are not directly with Apple itself. Apple requires its contract manufacturers that produce devices to sign these agreements with Qualcomm first. It then pays the royalties based on the terms through these assemblers.
The relationship between Qualcomm and Apple has deteriorated due to squabbles over the amount of royalties the U.S. baseband chip-maker should charge.
Baseband chips are essential for a device's communications functions, and allow users to make calls on their phones and tablets.
"It would not be that easy for both sides to suddenly terminate the old contracts," said Jeff Pu, an analyst at Taipei-based Yuanta Investment Consulting.
Pu said the worst-case scenario would be that Qualcomm stopped selling chips to Apple this year, although he said the likelihood of that happening was low.
That could have an impact on Apple's ability to sell iPhones and iPads in Japan, China and to Verizon and Sprint as these markets and U.S. operators still require devices to adopt Qualcomm technologies to connect to their networks, according to Pu.
Pu said that even if Apple tries to procure more baseband chips from Intel this year, it would still need to depend on Qualcomm for some 45% of all baseband chips that will go into iPhone's 10th anniversary range.
According to Yuanta's calculations, Apple needs to pay around $2.4 billion in annual licensing fees to Qualcomm under current terms. Qualcomm's rate for royalties is around 3.5% of the average $350 ex-factory price of iPhones and iPads, Yuanta estimates. Almost every handset-maker in the world including Samsung Electronics and Huawei is required to pay Qualcomm similar licensing fees.
Sean Kao, an analyst at IDC, said that Qualcomm was pressuring Apple to act by threatening to sue its suppliers. "We don't think there would be any immediate impacts on these suppliers' financial statements as they could ask Apple to pay these fees if they lose the lawsuits," said Kao.
Shares of the three iPhone assemblers embroiled in the disputes fell Thursday. Shares in Hon Hai Precision Industry, or Foxconn Technology Group, lost 0.97% to close at 102 New Taiwan dollars ($3.37). Pegatron Corp fell 2.05% to NT$90.7, and Wistron lost 0.73% to NT$27.3.
But shares of iPad supplier Compal Electronics, also sued by Qualcomm, defied the trend and closed 0.73% higher at NT$20.7.
Industry sources said they were not worried that Qualcomm's actions would affect shipments of the upcoming iPhones later this year.
"In the long run, the disputes between Apple and Qualcomm may turn out to be a boon for iPhone assemblers," a supply chain source said. "The worst-case scenario is that we will still pay the same amount of money to Qualcomm, but if Apple wins, then we could all be paying less."
Qualcomm is under investigation in Taiwan for alleged unfair licensing practices. Taiwan's Fair Trade Commission said on Thursday that its probe into whether Qualcomm breached any anti-trust laws has been ongoing for more than two years.
But a spokesperson declined to comment on whether Qualcomm's lawsuits against Taiwanese companies will have any impact on the investigation.
Foxconn and Wistron said they had not received formal communications about the lawsuit and could not comment further, while Pegatron and Compal declined to comment.
The war between two tech giants began in January when Apple sued Qualcomm for $1 billion in the U.S., accusing the chipmaker of charging unreasonable royalties. Apple also filed complaints against Qualcomm in China and the U.K.
Qualcomm filed a counter-lawsuit against Apple's claims in the U.S. in mid-April.
For many years, Qualcomm has generated revenues from selling chips to mobile device makers around the world and charging these companies additional royalties for using its technologies. However, its licensing practices have come under scrutiny in recent years.
The chip titan has been fined hundreds of millions by South Korean and Chinese authorities, and it is also being investigated in the E.U., Taiwan and the U.S.