Semiconductor Companies Post-Earnings Review

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Part 7
Semiconductor Companies Post-Earnings Review PART 7 OF 8

How Much Pressure Is Apple Really Putting on Qualcomm?

QCOM’s revenues fell 5.0% YoY

If Qualcomm’s (QCOM) fiscal 4Q17 (September quarter) results are anything to go by, the standoff with Apple (AAPL) appears to be causing a material adverse impact on the company’s financial performance.

Qualcomm reported fiscal 4Q17 revenues of $5.9 billion on GAAP (generally accepted accounting principles) basis, down 5.0% YoY (year-over-year). This top-line fall was occasioned by a 36% YoY drop in sales from Qualcomm’s Technology Licensing division (also known as QTL).

How Much Pressure Is Apple Really Putting on Qualcomm?

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Qualcomm seeking to ban iPhone sales

It’s through QTL that Qualcomm is embroiled in a bitter dispute with Apple over patent licensing terms. As a result of the dispute, Apple through its contract manufacturers is withholding royalty payments due to Qualcomm.

Seemingly frustrated by Apple’s action of withholding royalties, Qualcomm has sued to block import and sale of iPhones in the US (SPY). The company has also sued to ban manufacturing and sale of iPhones in China (MCHI), one of Apple’s key markets for iPhone. Apple uses overseas contract manufacturers in places like China to assemble iPhones before they are imported for sale in the US and other markets.

Apple seeking $1.0 billion from Qualcomm

Apple too has sued Qualcomm in several jurisdictions, including in the US and the UK (EWU), to challenge Qualcomm’s patent licensing practices that it has described as unfair. In the US, Apple is seeking to recover $1.0 billion from Qualcomm over alleged unfair patent licensing terms.

The standoff with Apple over patent licensing also hit Qualcomm’s bottom line in 4Q17, as you can see from the chart above. The company reported adjusted EPS (earnings per share) of $0.92 in 4Q17, which was 28% lower YoY.


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