The stakes are important for Qualcomm and Apple as part of the licensing process

What is at stake?

The lawsuit against Apple-Qualcomm's license (AAPL) (QCOM), which lasted two years, was finally tried, the two parties are not ready to settle. The result of this action will have a significant impact on both companies.

If Apple wins the case, Qualcomm's licensing activity will be at stake. The chip vendor will have to refund the license fees claimed by Apple. Such a decision could encourage other licensed customers to require Qualcomm to adopt component-level licenses rather than device-level licenses. Given that Qualcomm derives 64% of its operating profit from the license, the lawsuit could significantly affect its profits. However, licenses would be cheaper for the entire smartphone industry.

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If Qualcomm wins the lawsuit, Apple will have to pay all its outstanding royalties. Its bargaining power with suppliers will weaken, which will increase the cost of making iPhones, helping Apple's chip vendors claim higher prices for their components and increase their profits.

The negative impact of the ongoing Qualcomm-Apple battle

The ongoing dispute between Qualcomm and Apple, which began in January 2017 and has spread around the world in the form of patent lawsuits, has already cost companies a lot in the last two years.

Apple

Apple has stopped using Qualcomm modems during the conflict, which has forced the iPhone maker to depend on Intel modems (INTC). Production delays in Intel's 5G modems could delay Apple's 5G iPhones beyond 2020, putting it behind China and Samsung (SSNLF) in terms of technology.

Qualcomm has also obtained temporary injunctions on older iPhone models in Germany and China alleging infringement of its patents. In March, a US court said that Apple had infringed three of Qualcomm's patents.

Qualcomm

The ongoing lawsuit with Apple has triggered investigations of Qualcomm's licensing model by regulators in other countries. As a result, Qualcomm has paid heavy fines in South Korea, Taiwan and Europe. The company has appealed these fines.

Apple's unpaid royalty payments also significantly reduced Qualcomm's earnings and free cash flow. Qualcomm's shareholders lobbied the company's management to generate returns. These headwinds also encouraged Broadcom (AVGO) to attempt a hostile takeover last year.

Investors must watch the trial closely, as the move will put pressure on the weaker party to settle it, which will likely result in a higher share price for the winning party.