Trade Commission Upholds Qualcomm Chip Ban

After having waited for a jury's verdict last month to withstand judicial review, the International Trade Commission this morning upheld a decision to ban the import of certain goods containing Qualcomm chipsets into the US. The banned devices are mobile handsets whose use of EV-DO and W-CDMA technology was found to have infringed upon three of Broadcom's patents.

The ITC's decision appears to draw to a close one of the largest and costliest intellectual property battles in electronics history, with Broadcom emerging as the victor.

But analysts are saying Broadcom may not have actually achieved that much, other than a jury award of $19.64 million and a restriction on a handful of Qualcomm-based imports. Earlier this month, the ITC decided to limit the scope of what could be banned to handsets and devices that haven't already been widely disseminated in US markets. This meant that some W-CDMA and EV-DO cards and handsets that have already sold here in larger amounts, could continue to be imported.

A report from iSuppli a few weeks ago estimates that about 4.2 million shipments of mobile phones featuring these "3G" broadband technologies would be affected. But that number represents only 4.4% of handsets shipped during the entire second half of 2006. As for future handset imports, iSuppli analyst Tina Teng predicted only 11 new models would be precluded from seeing daylight over US soil for the remainder of this year, which is less than 1% of the number of new models planned for 2007.

Earlier this month, the wireless industry association CTIA went on record as opposing the import ban, saying it "will cause enormous undue harm to tens of millions of American wireless consumers, and urges President Bush to veto the ITC importation ban. The ITC decision unnecessarily decreases competition, and denies millions of consumers access to innovative wireless broadband products. This decision flies in the face of public policy that encourages the availability of broadband services and products, and could have the unintended effect of impairing the wireless industry's efforts to improve communications in areas such as public safety. Consumers should not have to pay the price for a legal debate that could be settled by other means."

But as far as consumer prices are concerned, iSuppli analyst Jagdish Rabello believes they could actually go the other way, stating earlier this month, "The effect of the ban will not be reduced shipments but rather lower Average Selling Prices (ASPs), as wireless carriers are forced to push aging models that have lower price points, rather than more expensive latest-model EV-DO and WCDMA mobile phones."

While some speculated that reduced availability of Qualcomm-based handsets would make the market for Apple's iPhone only more ripe for new customers, when that model premieres one week from today, Qualcomm CEO Paul Jacobs told the Associated Press yesterday that he believes it goes both ways. If more customers sign on to the iPhone, he said, it would only help increase the price brackets for handsets in general, perhaps putting a stop to plummeting prices.

"There's going to be a lot of people in the industry who are going to be very happy if it turns out that people are willing to spend that kind of money," remarked Jacobs.