The Risks of Giving Apple the Keys To 5G: American Innovation
It’s no secret that Apple and Qualcomm have been feuding for some time. So far, it would appear that the principal beneficiaries of the fierce dispute might be lawyers. One could argue that neither Apple nor Qualcomm have particularly benefited from the exercise: Apple, presumably in an attempt to cut cost out of its supply chain, has all but shot itself in the foot by turning against one of its most critical innovation partners precisely when fundamental advances in mobile technologies were about to take a giant leap forward. Not only have iPhones fallen behind Qualcomm-powered Android devices with regard to critical features like modem performance, power consumption, and 5G integration, Apple has also seen some of its IP-infringing iPhones banned in major markets like China and Germany, with litigation pending in the United States. Qualcomm, for its part, has found itself having to defend its patent licensing model everywhere Apple challenged it, assert its rights as a patent holder, and do so while Apple and its contract manufacturers froze billions of dollars in owed royalties, pending the resolution of their dispute. (Those payments are being accrued as a potential liability and until the court rulings shake out.)
Despite what you may have overheard, all of this posturing and legal action isn’t just about $7.50 worth of IP that goes into $1,000 phones. It can’t be. When a company like Apple cries poor over a few dollars of cost in an already highly profitable and popular device (iPhones hog 90 percent of mobile device industry profits), it can’t just be about the margin. Not really. And if it isn’t really about greed, it can only be about one thing: power.
It occurs to me that Apple, already fond of developing its own technology stack – or “walled garden” – has probably been plotting and strategically executing a worldwide plan to undermine Qualcomm’s leadership in the mobile innovation ecosystem. Why? Because the folks at Apple it knows, that by weakening Qualcomm, Apple might have a chance to catch up to the Android ecosystem – or at least slow Android innovation down enough to claw its way back to the front of the pack. That this campaign against Qualcomm happens to coincide with the start of the commercialization of 5G probably isn’t a coincidence. Qualcomm, as you well know, is one of two world leaders in 5G, particularly in the foundational, standard-setting layer of the 5G ecosystem, but also with regard to silicon and RFFE (without which smartphones are essentially useless), and all of the functionality that comes with that leadership. Qualcomm’s leadership in 5G amounts to power, and for a company like Apple, power is something you don’t necessarily like not to have. If it cannot be taken, at least it can be broken. Take your wins wherever and however you can. And so here we are.
What made me think of this today is the growing rumor that Apple may be trying to sell itself in some power circles in Washington DC as a potential leader in 5G (or “6G” – thanks, Donald). Translation: as a possible replacement for Qualcomm. If this is true, I need to address that particular sales pitch, if only to highlight how absurd it is.
For starters, Apple contributes nothing whatsoever to the 5G standard. Neither does it contribute to 3GPP, the body that creates the standard. Apple has no track record whatsoever of leadership in 5G, and in fact has pretty much stayed away from 5G altogether thus far.
Second, Apple isn’t even an implementer of 5G in any of its devices, and unless it goes crawling back to Qualcomm, Apple is unlikely to be coming to market with a 5G iPhone anytime soon. (Meanwhile, Apple’s Android competitors are already announcing the release of 5G phones this year.)
In a recent MarketWatch column, we explored the companies actually leading in 5G. We looked to this year’s Mobile World Congress, where 5G was front and center, and we identified the 7 companies that we believe have shown material leadership in key 5G categories. Those categories include modems, devices, infrastructure chips , service providers and OEMs. Apple didn’t figure on that list, and wasn’t a contender in a single category. Companies that were on the list, however, include Intel, Qualcomm, Dell, HPE, Cisco, Samsung and Nokia. Other notable 5G contributors also include Ericsson and Huawei, even if they didn’t quite make our list. But even if we wanted to consider Apple, there would have been nowhere to put it, unless we were open to creating an alternate “vaporware” category just to address the possible devices that Apple bloggers claim might be in the pipeline for next year (it’s always “next year”). We weren’t prepared to do that for a company that not only hasn’t lifted a finger to contribute to the development of 5G, but has at times even tried to downplay its value.
The sad irony here is that the world actually needs more 5G leadership, not less, and as the U.S. seeks to remain one of the world’s leading technology innovators, a company like Apple could have chosen to take a leadership role alongside Qualcomm if it had wanted to. But it didn’t. Why? Because helping develop innovation for the entire tech ecosystem isn’t Apple’s game. Apple is only interested in its own technology stack, its own walled garden, its own closed ecosystem. It doesn’t want to help the Android ecosystem (which is still much bigger than the iOS ecosystem) to improve, and adopt new foundational technologies like 5G, and perhaps someday “6G.” And anyone who believes that, in the absence of Qualcomm’s leadership in this role, Apple would (or could) step into those shoes simply doesn’t understand the first thing about the mobile space. Not only does Apple have zero incentive to take over for Qualcomm in 5G, it couldn’t take on that task if it did. It isn’t set up to do it. It doesn’t have the right teams, the structure, the brain trust, the skillsets, the decades of finely-honed technology instincts or even the culture to pull this off. Apple could potentially develop a Qualcomm-like business, but it would take a decade or more to build it, and by then, the world will already have moved on to 6G. The notion that a company that has contributed nothing to 5G standards and is still a year or two from releasing its first generation 5G phone might magically become a 5G leader is ludicrous.
Any hope that Apple is prepared to take the reins from Qualcomm, or even capable of doing so, is completely unfounded. Moreover, Apple’s global campaign to undermine Qualcomm’s technology licensing practices further underscores the extent to which Apple appears to be attempting to slow down fundamental mobile technology R&D rather than accelerate or contribute to it. Perhaps the most egregious potential outcome of Apple’s efforts to harm Qualcomm is that, should it succeed in reducing Qualcomm’s leadership role in technology R&D and its contribution to technology standards, Huawei and China – not Apple – would be the true beneficiaries of that power shift. From where I sit, Apple’s self-serving anti-Qualcomm strategy could ultimately undermine not only the entire US technology ecosystem, but US national security as well. Make no mistake about it: the reason Apple keeps going after Qualcomm’s technology licensing business, either directly or through proxies, is a triple-outcome game:
- Undermine Qualcomm’s technology licensing model to reduce Qualcomm’s ability to generate revenue from its R&D investments.
- Undermine the value of individual Qualcomm patents to reduce Qualcomm’s ability to generate revenue from its R&D investments.
- Undermine the value of Qualcomm’s patent portfolio to reduce Qualcomm’s ability to generate revenue from its R&D investments.
Putting Qualcomm in a financial chokehold is presumably also why Apple and its contract manufacturers have been withholding billions of dollars in payments to Qualcomm for roughly two years now. The calculus seems to be this: Choking down Qualcomm’s revenue will result in less funding going into R&D. Less funding going into R&D will result in Qualcomm pursuing fewer patents and contributing less to 5G standards. Qualcomm cutting back on R&D and 5G leadership will slow down the pace of innovation in the mobile space, allowing Apple to perhaps start catching up again.
It doesn’t take a genius to do the math. And yet, this is the company some may be led to believe could become the next leader in 5G? If you still believe that, I have a bridge to sell you.
Apple does a lot of things very well – though perhaps less so now than a few years ago. It is an enormously successful company whose halls are filled with award-winning products and extremely profitable business units. But Apple isn’t capable of taking on 5G (or 6G) leadership any more than it is capable of taking on the colonization of Mars. Building devices, operating systems, and services is like building cool space helmets and user-friendly habitats for Mars colonists. But without the massive trove of mathematical, engineering, and scientific knowledge to actually send people to Mars, and keep them alive once they get there, those helmets and habitats are all but useless. And that’s the problem with expecting Apple to take on foundational technology as complex and massive as 5G: It’s just too big, too complex, too advanced, too layered. Anyone who claims that they can become leaders in it overnight is either lying or completely delusional. You can be the best space helmet designer in the world, in great part thanks to technology licensing from companies like Qualcomm, but that doesn’t mean you’re capable of building an entire space program out of scratch. Those are not the same skills. Apple trying to become a leader in 5G would be just as absurd as Apple trying to replace NASA inside of five years. We would do well to help our technology companies stay in their lanes and stick to doing what they do best.
Daniel Newman is the principal analyst at Futurum Research. Follow him on Twitter @danielnewmanuv. Futurum Research, like all research and analyst firms, provides or has provided research, analysis, advising, and/or consulting to many high-tech companies in the tech and digital industries. The firm doesn’t hold any equity positions with any companies cited.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.
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