Yahoo Finance The government says smartphones are too expensive
It's no secret that premium smartphones are selling for fatter and fatter stacks of cash these days. Now, the government is saying that's a problem — but not for the reason you might think.
The Federal Trade Commission brought an antitrust suit against chip-maker Qualcomm in 2017, and it's just now playing out in court. Per CNET, the suit alleges that Qualcomm took advantage of a non-competitive marketplace to overcharge Apple and other smartphone makers for use of its chips, technology, and intellectual property.
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So while yes, the latest iPhones carry a premium price because Apple keeps tricking them out with more premium features and ever crazier cameras, there are other reasons smartphones have hit hard-to-swallow new pricing plateaus. Across the entire market, smartphones might be more affordable if Qualcomm hadn't demanded such a sizable cut of manufacturer revenue as a royalty for using its tech.
Court findings may show that Qualcomm took advantage of its exclusivity for a time — a Qualcomm executive reportedly strong-armed an Apple exec into paying its prices by saying "I'm your only choice, and I know Apple can afford to pay it.”
But that was back in 2013, and Apple hasn't been exclusive with Qualcomm for some time. All iPhones came with Qualcomm chips until 2016, when some iPhone 7 and 7 Plus models started to come with Intel chips. iPhone X models came with both Qualcomm and Intel chips. And the most recent line of 2018 iPhones came exclusively with Intel chips.
iPhones didn't pass the $1,000 price tag until the iPhone X models, when Qualcomm was no longer the exclusive supplier. Apple was also said to be pursuing a strategy of a high-end premium product to increase revenue. But Qualcomm wasn't its exclusive partner at that point either.
Apple's strategy has already inspired a backlash. Thanks to decreased iPhone sales, specifically in China, Apple recently had to revise its revenue projections, causing a pause in stock trading and a resulting drop in stock prices. Some saw this as proof that iPhones are too dang expensive.
Is Qualcomm entirely to blame for the premium cost of smartphones? As the situation with Apple proves, the story is likely more complicated than that. We'll just have to wait and see what the justice system thinks.
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