The iPhone 8 is scheduled to be released later this year, a date not yet announced but breathlessly anticipated by every stripe of gadget-geek and tech aficionado across the planet. Somewhere, there is probably even a line already forming to buy it.
With more than 700 million iPhones currently in use around the world, it’s no secret that the loyalty among Apple’s fans is the stuff of dreams for every marketing department across the globe. Projected sales of the new phone have analysts speculating that Apple will become the world’s first trillion dollar company. Currently their valuation sits at a meager $820 billion, or about 38% above the entire GDP of Chicago, America’s 3rd largest city.
Certainly Apple deserves credit for building an empire that a mere 20 years ago was teetering on survival, and yet is now set to surpass the entire economy of Los Angeles as well. The Cupertino-based giant is also no slouch when it comes to the PR game, heralding its investments in costly but “responsible” projects such as energy sustainability and creating devices for the blind, with current CEO Tim Cook publicly saying he doesn’t care about return on investment, adding just the right note of corporate social conscience.
Despite its carefully honed image and legion of devoted customers, Apple is not without its critics. They are still in the process of cleaning-up what many have tagged as oppressive conditions for their Asian workers, and are blasted regularly for holding 90% of its cash overseas. There is the further issue of Apple’s recalcitrant attitude toward creating jobs in America, having rebuffed overtures from both Presidents Obama and Trump to spread some of their cash around back home. Apple did announce a $1 billion investment to create advanced-manufacturing jobs in the U.S., but that’s been exposed as more PR window dressing that will do little to put Americans to work.
What is far more concerning are the strong-arm tactics Apple is using against the American company that created the very technology that has allowed them to thrive, Qualcomm, based in San Diego. Qualcomm holds the patents on much of the technology that makes iPhones work and connect to a wireless network. Late last month Apple instructed its Asian manufacturers to stop paying Qualcomm the royalties due for the use of its technology, escalating a long-standing feud between the two companies over licensing payments.
Apple claims that they’re being unfairly gouged, paying way more for the use of the technology than reasonable. Qualcomm, as one might guess, disagrees. In the end, the people who gobble up Apple’s products will care little or not at all about this heavyweight bout, but in starker terms, we all should.
First, it should be remembered that the patents that Apple exploits, and the licensing deals that govern them, were in effect before Apple even entered the cell phone market. The technology they peddle was built on investment, and as Bloomberg notes, Qualcomm ploughs significant resources into research to maintain its technological advantage in the marketplace, the very technology that moves consumers to unburden themselves of a week’s pay for the latest gadget. When Apple takes a dominant position in the mobile industry, then decides to withhold its patent royalties, that significantly impacts an American company’s ability to propel technological innovation.
Apple’s tactic of withholding owed royalties to Qualcomm will cost the tech innovator hundreds of millions of dollars in lost revenue. Apple is gambling they can saw off the branch on which they sit and be just fine. That might be the case, but if Qualcomm stumbles in the tech race, just how do we benefit when America has to look to China or Taiwan for the most advanced technology?
Secondly, coming off the era of “too big to fail” we’re getting dangerously close to entering the realm of “too big to care.” If the world’s largest company can succeed in ignoring legally binding licenses and interfering with contractual obligations then all bets are off. It’s only natural to expect other tech manufacturers to follow Apple’s lead and employ a Don Corleone posture toward innovators.
Today more and more products are embedded with the latest chip and wifi technology, from cars, to home security systems to coffee makers. Technology is still rapidly expanding, and advances don’t come cheap. Without assurances that companies will play by the rules and honor the rights of tech innovators, the very lifeblood of technological advancement could end up on life support.
While Qualcomm is no start-up cowering under the foot of a competitive goliath, it doesn’t change the fact that Apple remains staunchly committed to unilaterally dictating the terms of already existing licensing deals. Apple is building an empire on technology created on the ingenuity of others, and is expecting to prevail based on their sheer size and loyal customer base. While their customers may be all smiles as they plunk down their cash for the iPhone 8, if Apple’s strong-arm tactics against Qualcomm prove successful, there will be far less to smile about in the future.
Gerard D. Scimeca is Vice-President for CASE, Consumer Action for a Strong Economy, a non-partisan, free-market oriented consumer advocacy group.