Qualcomm files suits in China to stop production, sales of iPhone

Qualcomm Inc has filed lawsuits in China seeking to halt the manufacture and sale of Apple Inc's iPhones in the country, Bloomberg reported on Friday. This is the chipmaker's biggest shot at Apple so far in a sprawling and bitter legal fight.

The San Diego-based Qualcomm filed the suits in a Beijing intellectual property court claiming patent infringement, and is seeking injunctive relief, Bloomberg said, citing Qualcomm spokeswoman Christine Trimble.

Apple is waging a global legal battle on Qualcomm's long-held practice of charging a percentage of the total price of iPhones and other Apple devices as a licensing fee for its patents.

Apple and Qualcomm did not immediately respond to requests for comment from Reuters.

According to the Bloomberg report, Qualcomm is aiming to inflict pain on Apple in the world's largest market for smartphones and cut off production in a country where most iPhones are made. The product provides almost two-thirds of Apple's revenue.

"Apple employs technologies invented by Qualcomm without paying for them," Trimble said.

The two companies are months into a legal dispute that centres on Qualcomm's technology licensing business. While Qualcomm gets the bulk of its sales from making phone chips, it pulls in most of its profit from charging fees for patents that cover the fundamentals of all modern phone systems.

The latest suits come at a crucial time for Apple. It just introduced iPhone 8 and X models aimed at reasserting leadership in a market that's steeped in competition from fast-growing Chinese makers. Suppliers and assemblers in China are rushing to churn out as many new iPhones as possible ahead of the key holiday season, so any disruptions would likely be costly, Bloomberg points out. The Greater China region accounted for 22.5 per cent of Apple's $215.6 billion sales in its most recent financial year.

The legal battle started earlier this year when Apple filed an antitrust suit against Qualcomm arguing that the chipmaker's licensing practices are unfair, and that it abused its position as the biggest supplier of chips in phones. Qualcomm charges a percentage of the price of each handset regardless of whether it includes a chip from the company, and Apple has become averse to paying those fees.

Qualcomm has countered with a patent suit and argued that Cupertino, California-based Apple encouraged regulators from South Korea to the US to take action against it based on false testimony. Earlier this week, Qualcomm was fined a record NT$23.4 billion ($773 million) by Taiwan's Fair Trade Commission, a ruling the company is appealing. Qualcomm is also asking US authorities to ban the import of some versions of the iPhone, arguing they infringe on its patents.

Soon after its first legal salvo, Apple cut off licensing payments to Qualcomm. That's about $2 billion a year in highly profitable revenue, according to analyst estimates, and the chipmaker was forced to lower earnings forecasts.

Qualcomm stock is down 19 per cent this year compared with a 35 per cent gain by the benchmark Philadelphia Stock Exchange Semiconductor Index. Apple shares are up 36 per cent this year.