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ACI Analysis Raises Issues With Blocking iPhone Importation

Says it could represent almost $10 billion hit for consumers; Qualcomm begs to differ

A new report from American Consumer Research said a Qualcomm effort to block the importation of some Apple iPhones and tablets — the ones without Qualcomm’s baseband processor chipsets — could result in almost $10 billion in lost “consumer welfare,” as in higher prices for the remaining, reduced, supply.

Qualcomm has asserted that some functions of smartphones with Intel chips infringe on its patents and it has asked the International Trade Commission to block their importation into the U.S., which ACI said would mean about 30 million smartphones that Apple could not just “snap its fingers” to replace. The ITC is one front in a multifront patent fight between the two tech giants.

ACI said it gets that $9 billion figure from estimating the “increase in prices and repression in quantity demanded.”

It also said a ban on importation of iPhones with Intel chips, but not Qualcomm, will effectively push Intel out to the premium LTE market.

ACI estimated that will result in an average $47 price hike per unit.

Qualcomm filed its complaint with the ITC back in July, claiming that iPhones infringed on six patents, relating to performance and extending battery life — the latter a familiar knock on the otherwise wildly popular phones — and asked the ITC to block importation and bar further sales or marketing.

Qualcomm also filed suit in a California district court.

ACI suggested district court is the better venue for deciding the case since it offers a less binary choice of outcomes.

“The ITC’s remedies differ dramatically from a federal district court. While other courts can potentially tailor any remedy to fit the violation, the ITC cannot,” the report said. “If the ITC finds Apple has infringed on any of Qualcomm’s patents, no matter how negligible, it has only one choice to make — block the importation into the U.S. of Apple smartphones with Intel chips. Such an action will indisputably create a significant and adverse impact on consumer welfare.”

“Qualcomm states that the importation ban would not affect consumers, but our analysis finds a $9.9 billion consumer welfare loss from the resulting shortage and increased prices for smartphones in the U.S.,” said ACI president Steve Pociask. “In a shortage, smartphone prices will go up, but increasing market power is a longer term problem.

Qualcomm said there would be no public interest harm and no shortage if ITC ruled in its favor because: “[T]he accused products do not serve any essential public health or welfare objective; (2) any demand for the products that would be subject to the requested remedial orders could be filled by Apple mobile electronic devices that include Qualcomm brand baseband processor modems; and (3) the U.S. would not face any potential shortage of like or directly competitive products,” it told ITC.

Asked about the timing of the analysis, Pociask said he is not expecting an ITC decision for a couple of months, but said it follows other comments about the potential public interest impact, plus some recent fines against Qualcomm by international regulators, including one last month by Taiwan.