Apple Ordered To Stop Sales Of Some iPhones In China

Qualcomm has just pulled out a big win against Apple in its royalty dispute. A court in China has ordered Apple to stop iPhone sales in the country. The ban affects only certain older iPhone models, but there have been so many bad headlines about Apple recently that the news is enough to send the company’s stock down even more in early trading.

Qualcomm reveals big win over Apple in China

Qualcomm said in a statement today that a Chinese court has issued a preliminary injunction to stop iPhone sales over patent violations. According to the chip maker, the ban affects almost all the models being sold in China. However, Apple disputes the range of the order and claims only iPhones running on an older version of iOS are included.

China’s Fuzhou Intermediate People’s Court ruled that Apple had violated a pair of software patents owned by Qualcomm. The patents cover software used in iOS 11 to resize photos and manage apps on devices with a touch screen. According to Qualcomm, the order to stop iPhone sales in China affect the iPhone 6s through the iPhone X.

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However, Apple has since updated its iPhones to iOS 12, so it said in a statement that all models are still on sale in China. The company describes Qualcomm’s attempts to stop iPhone sales as “another desperate move by a company whose illegal practices are under investigation by regulators around the world.”

Apple versus Qualcomm

Qualcomm said in its own statement that the iPhone maker “continues to benefit from our intellectual property while refusing to compensate us.” The statement also said the Chinese court’s order is “further confirmation of the strength of Qualcomm’s vast patent portfolio.”

The battle between Apple and Qualcomm has been going on for about two years. The iPhone maker sued the chip maker for what it says are unfair patent royalties. Meanwhile, Qualcomm accuses Apple of withholding $7 billion in royalty payments.

The two companies have been duking it out in courts around the world. If the chip maker successfully stops iPhone sales in China, it would be a huge hit to Apple because the massive market presents a huge area of potential growth. It would also suggest the potential of similar rulings in other countries. U.S. regulators have so far refused to order Apple to stop iPhone sales.

Analysts weigh in on order to stop iPhone sales

Analysts are starting to weigh in on this latest round of the dispute. Although Apple has said the order should not disrupt iPhone sales in China, Daniel Ives of Wedbush states that the real impact of the injunction is unclear for now due to “the mixed messages and reports coming out of China this morning.” He estimates that the affected iPhone models account for about 10% to 15% of sales in the country.

Ives continues to rate Apple stock at Outperform, and he feels the order to stop iPhone sales in China will ultimately end up being just noise rather than any “fundamental impact.” However, he also points out that there has been “a string of bad news” regarding iPhone demand, supplier cuts, China tariff concerns and more.