A deal with Huawei could undermine Qualcomm’s advantage, and that’s a problem

Huawei is in a pickle. It can not do business in the US because it was placed on a list of dangerous foreign companies, and it can not do business with one company doing business in the states. That list is a terrible place for any business to find themselves.

You will not find Huawei phones in the Verizon store, but the company sells many phones outside the US

Huawei was never a brand that sold large numbers in the US, but do not think that means too much in the overall scale of things. Huawei is a big name in the rest of the world and sells as many phones as Samsung. Well, it was once – to be on the list of entities changed that and Huawei has dropped a notch like two. The company makes really great phones, and a lot of people want to buy them.

The last problem for the company is that it can not contract manufacturing plants to make its Kirin processors, because it is on the list, of course. Manufacturing plants want to do business in the US, and they also want to do business with companies that do business in the US. It’s a bit of a domino effect for which there is no easy solution.

A deal between the two companies is great for business until Qualcomm decides to take advantage of its market position.

Since Huawei will stop running in the process of processors, it is trying to reach a deal where Qualcomm can supply it with mobile chipsets so that it can continue to build phones for the rest of the world. This is not a given – Qualcomm would need special permission from the US government, and the current administration will not just approve it without convincing the executive branch. One thinks that there needs to be some sort of beech in the form of jobs or something else that sounds good in a campaign speech for the US to change its tone.

Let’s say a deal happens between Huawei and Qualcomm. That’s great for Huawei and Qualcomm; the products flow, and that means the money flows as well. But it’s not a great idea to give Qualcomm that kind of power based on its own actions from the past.

If Huawei uses Qualcomm Snapdragon chips in its high-end product lines, it means that all of the current companies selling high-end phones in any significant number depend on Qualcomm to supply the chipset. Samsung, LG, Motorola, OnePlus and Google all use Qualcomm chips. So do companies you may not be so familiar with, such as Xiaomi and Oppo.

This is not because of those companies want to to use only the best and most expensive SOCs. Samsung, for example, uses its own Exynos chips in phones sold outside of North America. This happens because Qualcomm holds so many patents and charges so much for its license that it is ultimately easier and cheaper to just use a Snapdragon. Using another chip with a Qualcomm wireless tech package is possible, but besides being expensive, it is very difficult to optimize it all for a good battery life. Qualcomm has these companies through the short term.

Qualcomm has already proven that it will do anything to increase its own bottom line.

We have already seen how Qualcomm is not afraid to abuse its market position. Recently, we saw Apple refuse to pay Qualcomm because its licensing fees were so high. While a court ruled that Apple had to pay what it owed, it also ruled that Qualcomm needed to reconsider its pricing structure.

This is capitalism at its finest. Qualcomm will try its best to make more money, and if somewhere a court rules that it does not play by the rules, it’s willing to pay a fine and look for new ways to make even more money. . All companies do this, not just Qualcomm. Apple abused its market presence by failing to pay Qualcomm and forcing it to sue. Google was ready to ship Android, knowing it could be infringing on Oracle patents for Java. You make money whenever and wherever you can and know that any potential penalty will be less than your profit.

At this point, Huawei is just out of options.

Huawei could find another way. Companies like MediaTek would love to see Huawei beat, and chips like the Dimensity 1000 show performance similar to the high-end Snapdragon. All Huawei has to do is buy chips from MediaTek and then pay Qualcomm license fees for LTE and 5G so that their phones can work anywhere and then find ways to optimize everything for good battery life and thermal management. Or it could say “scrub” and just try to get a deal with Qualcomm.

Regardless of what you think about Huawei and its placement on the entity list, this deal will hurt the entire industry by giving Qualcomm even more market power than it already has. We know that Qualcomm will use that power as best it can, even if the things it does are not very kosher. No one would want that, but Huawei would just be out of options.