Significant and dramatic developments involving the wireless industry in China continue to roll over the globe’s business markets. The latest: Per Qualcomm’s request, a Chinese court has agreed to issue injunctions against the sale of some of Apple’s iPhones in the country. And, separately, the Chinese government has issued 5G spectrum licenses to the country’s three main wireless network operators.
Those developments—when combined with the ongoing saga of the arrest of Huawei’s CFO in Canada—help underscore the key role that China plays in the global wireless industry as well as the increase in tensions that the brewing U.S.-China trade war is placing on the global business environment.
Leading the headlines coming out of China is Qualcomm’s request for preliminary injunctions against Apple. According to a Qualcomm press release, a Chinese court ordered Apple to “immediately cease infringing upon two Qualcomm patents” related to a range of iPhones, though not Apple’s newest iPhone XS, XS Max and XR.
“Apple continues to benefit from our intellectual property while refusing to compensate us. These court orders are further confirmation of the strength of Qualcomm’s vast patent portfolio,” Qualcomm’s Don Rosenberg said in a release.
Apple immediately blasted the action, noting that its products will remain on Chinese store shelves.
"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," Apple said in a statement, according to CNBC. "All iPhone models remain available for our customers in China. Qualcomm is asserting three patents they had never raised before, including one which has already been invalidated. We will pursue all our legal options through the courts."
This latest skirmish between the two tech giants—playing out in China—stems from the ongoing patent-licensing dispute between Qualcomm (the world’s largest purveyor of silicon for smartphones) and Apple (one of the world’s largest smartphone vendors). At the core of that battle is Apple’s argument that Qualcomm overcharges for access to its patent portfolio. Likely in response, Apple has recently shifted its silicon purchasing to Qualcomm rival Intel.
But sitting beneath the Apple-Qualcomm noise is a potentially more significant development: The Chinese government’s issuance of mid-band spectrum to China Mobile, China Telecom and China Unicom.
According to MWL, both China Telecom and China Unicom received 100 MHz of 3.5 MHz spectrum (also known as the C-band), while China Mobile scored 260 MHz of spectrum in the 2.6 GHz and 4.8 GHz bands.
That spectrum will allow China’s state-run wireless providers to begin building out what most analysts believe will quickly grow into the world’s biggest 5G network.
Although some analysts had expected the Chinese government to engineer a merger between China Telecom and China Unicom as part of the build-out of 5G, that didn’t happen—at least not yet. The Wall Street analysts at Jefferies said though that such a merger could still be on the table when the Chinese government decides to issue 700 MHz spectrum licenses.
But the analysts also said that the ongoing turmoil around the arrest of Huawei’s CFO could affect the situation.
“While the extradition case could go on for months, we believe the U.S. has serious intentions to put Ms. Meng [Wanzhou] behind bars and sue Huawei as well as impose a U.S. export ban on Huawei. If that happens, it will be a serious setback to China's 5G timeline, and it will also significantly weaken China's bargaining position in the trade negotiations,” the analysts wrote in a report this morning. “China will unlikely want to build 5G without Huawei, and to get Huawei out of any potential U.S. export ban, the U.S. will likely ask for concessions in China's tech subsidy and "Buy China" policy in various industries including telecom. The likely purpose is to cut the scale of Huawei and ZTE (assuming Huawei will already lose substantial business outside of China) and China's supply chain. This could raise the cost of China's effort to build 5G, and may make merging CT and CU even more sensible/urgent than before.”
Canadian officials arrested Huawei CFO Meng Wanzhou—the daughter of the company’s founder—last week as as part of a U.S. investigation into Huawei’s alleged use of the global banking system to evade U.S. sanctions against Iran. Bail hearings on the matter continue today.
The extraordinary situation sits atop ongoing negotiations between the United States and China over trade policies.