It’s been a while since we have discussed the Qualcomm anti-trust battle with the FTC, but some recent events make it worth exploring again.
Several interesting things are afoot with the US FTC anti-trust battle with Qualcomm. Since I last wrote about it, Qualcomm was granted a stay in the ruling as it is reviewed by a council. Qualcomm has made the point that, among other issues with the ruling, there would be issues of national security should the ruling hold up, and certain Chinese competitors get a leg up in the US market. Since then, Intel has also come out in support of the FTC ruling and used their exiting of the modem business as evidence. The Intel blog post and the submitted brief are worth reading for those of interest, but the crux of it is in this paragraph.
Intel agrees with the District Court’s findings. Intel suffered the brunt of Qualcomm’s anticompetitive behavior, was denied opportunities in the modem market, was prevented from making sales to customers, and was forced to sell at prices artificially skewed by Qualcomm.
I could pick apart the bulk of Intel’s argument in-depth, as theirs is not the testimony I think held the most weight against Qualcomm. The biggest issue I have with Intel’s argument is that they never created a competitive part, and it was not Qualcomm’s practices that were the issue for their lack of competitiveness.
In fact, in a totally unrelated observation, since it was about media content, I found this tweet from Matthew Ball poignant.
The fact of the matter, when it comes to competition in wireless, is that wireless is exceptionally hard. Qualcomm undisputedly makes really great modems, and others, even those who license IP fairly, can’t compete in the premium modem segment. Most companies do not have the same focus on modems or pour as much R&D into modems and wireless as Qualcomm. Qualcomm continues to attract the best wireless engineers. You get the point.
In reality, the only company built to compete with Qualcomm is Qualcomm. However, one of the more interesting companies to watch is going to be Mediatek. I recently attended Mediatek’s analyst day and learned quite a bit about their upcoming products and strategy. Besides, having a 5G SoC right at the beginning of the cycle, which is a first for Mediatek since they are usually late with an integrated product, Intel announced Mediatek would be their partner for 5G in PCs. Note, this does not preclude an OEM from using a Qualcomm modem and an Intel CPU/GPU but that an Intel + Mediatek solution may yield better optimization and tuned performance due to the collaboration.
Mediatek’s presence in the market with a competitive modem is good for the market and competition in general. Mediatek is better positioned than any time in the last decade to jump onto a G cycle with a competitive product that includes an integrated SoC. The other interesting thing about Mediatek is many consumers have products using a Mediatek products, and they probably don’t know it. The vast majority of Amazon Alexa smart speakers have Mediatek inside, as does a number of other smart home products and many smart TVs ship with a Mediatek processor. In fact, MediaTek has quietly amassed the largest market share of US smart home/IoT products.
The point about Mediatek is interesting because they have quietly been growing their competitive force. Going back to the FTC V. Qualcomm trial, the FTC was only arguing that Qualcomm was anticompetitive during a span of a few years, and they knew they had no case about anti-competitiveness in the last few years. Taking into account that the other two licensees, Huawei, and Samsung, both decided to focus their modem work for their own brands and not sell them to competing companies which, had they chosen to sell to other companies, would have broken the FTCs argument.
I still find this entire case odd and the remedies unwarranted. There is competition again, and the remedies seemed to be based on the logic that if they are not implemented, then there would be no competition. When it came to Intel, they simply didn’t invest enough, nor did they have the talent. Apple did a great deal of engineering work for them to make their modem passable in iPhones, but it was “benchmarkably” worse than Qualcomm modems.
Again, wireless is really hard, and Qualcomm’s entire company is built for wireless competition, and no other companies are organized this way by people, processes, and products.
One could argue that if Qualcomm is truly great at making wireless products, then the remedies should not matter too much if implemented. To the degree that is true on the modem side, but the impact would come in the usage and investment in the wide range of other patents, non-standard essential, which similarly helps companies get off the ground and compete. Just look at the global smartphone space with companies like Oppo, Vivo, Xiaomi, and OnePlus. Many of those companies would not be where they are today, nor competition to the degree they are today without access to Qualcomm standard and non-standard essential patents.
On paper, it looks like the remedies would allow competition in wireless modems. However, no new entrants are going to enter the space, so nothing would change. The ruling could have adverse implications on competition; however if it impacted new entrants from leveraging Qualcomm’s broader portfolio of patents and starting new companies creating new categories and devices. That is where my broader concern continues to be.
2020 could be a defining year for this, and the overall definition of a monopoly the US can use as they look to regulate more of big-tech and the range of negativing implications that can come with them attempting to do the right thing the wrong way.