Date
18 January 2019
Apple said it will continue to sell all iPhone models in China while it asks the court to reconsider its decision. Photo: Xinhua
Apple said it will continue to sell all iPhone models in China while it asks the court to reconsider its decision. Photo: Xinhua

Apple has bigger problem than China court injunction

A Chinese court has ordered Apple to stop selling some iPhone models in the world’s biggest smartphone market after ruling on a patent infringement case in favor of chipmaker Qualcomm Inc.

Apple, however, said it will continue to sell all iPhone models in China as it has asked the court for reconsideration of its decision. 

The case is but a small part of the global legal battle between the two US companies. 

The ruling by the Fuzhou Intermediate People’s Court also came shortly after a top executive of Huawei Technologies was arrested in Canada upon the request of the US government. 

This has led some Chinese media to speculate that the court ruling was a sort of retaliation for the arrest and detention of Huawei chief financial officer Meng Wanzhou on charges of violation of the US sanctions against Iran. Meng has since been granted bail. 

It also came amid heightened trade tensions between the United States and China, thus fueling rumors that it was part of Beijing’s efforts to pressure the US for a settlement of their tariffs war. 

The ruling, in fact, came just a week after Qualcomm chief executive Steve Mollenkopf said both companies were working to resolve their disputes, adding that his company would like to collaborate with Apple in 5G development. 

As such, Mollenkopf could use the injunctions issued by the Chinese court as a leverage in any negotiations with Apple over their patent dispute. 

Some industry watchers said Qualcomm has used the common industry tactic of seeking court injunctions on products supposedly infringing on its patents to try to force a settlement. 

Apple, however, appears to have no intention of yielding any ground to Qualcomm in their patent dispute.

“Qualcomm’s effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world,” the smartphone maker said in a statement. 

The court ruling, in fact, only bans iPhone models with the iOS 11 operating system. But all of the new iPhones in the market run on the latest iOS 12 operating system, thus allowing Apple to continue selling them in China. 

Investors initially thought that the court ruling was a big blow to Apple, whose shares tumbled more than 2 percent in early Monday trading. 

However, after it became clear that all iPhone models will continue to be sold in China, the share price recovered and closed 1 percent higher. 

China is the second largest market for Apple after the US. Many Chinese consumers said they would boycott Apple products in reaction to the Huawei executive’s arrest in Canada, but their actions prove otherwise.

Apple has partnered with Chinese e-commerce firm JD.com for the Double Twelve shopping holiday, slashing iPhone prices between 300 to 1,000 yuan per unit. An iPhone XR, for example, can be had for only 6,090 yuan (US$884.44), a discount of 400 yuan.

Consumers, as to be expected, could not just let such a bargain pass. As a result, JD.com said the iPhone X (6,2999 yuan) is now the most popular model among all the smartphones it is selling.

According to Counterpoint Research, Apple’s market share in China has been declining from 15 percent in the fourth quarter of 2017 to only 8 percent in the third quarter this year. Much of its lost share was taken by local rivals Vivo and OPPO. 

This trend is seen not just in China. Apple is suffering from weaker than expected sales of its flagship phones around the world, and this has caused its share price to lose more than 20 percent from its peak in early October. 

But its business performance is not so bad, if one considers the November figures released by two of its top suppliers. 

Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry Co. both posted a 5.6 percent rise in November sales as the new iPhone XR hit the market and production of other iPhone models were ramped up for the holiday season. 

Still, industry watchers acknowledge that the outlook for its core iPhone business remains uncertain as its product line-up is no longer as competitive as before. 

In an effort to lure Chinese customers, who are seeking “wow” features and innovative design, Vivo has just unveiled its Nex Dual Display edition in Shanghai.  

Now what has Apple to offer in answer to Vivo’s challenge? 

– Contact us at [email protected] 

CG

EJ Insight writer

EJI Weekly Newsletter

Please click here to unsubscribe