Devices

US tech giant could forge unlikely partnership with Huawei

US technology giant Apple is reportedly mulling over the prospect of entering into an unlikely partnership with Chinese vendor Huawei in an effort to address issues with the modem technology in its flagship iPhones.

Apple’s traditional chipset and modem provider was Qualcomm but both have been embroiled in a bitter, lengthy and protracted legal battle over patents and costs.

Apple have disputed Qualcomm’s legal right to charge heightened royalties for use of its technology, whilst Qualcomm is trying to uphold its requirement that Apple pay them a percentage of iPhone revenue in return for use of their patents.

There is widespread speculation that Apple is unhappy with its current partner Engadget and this unrest may open the door to a potential partnership with Huawei who are believed to be open to the idea of selling its 5G modem technology to the US smartphone manufacturer.

Huawei has been subjected to intense scrutiny in the United States and the Trump administration is reportedly set to issue an executive order that will formally ban both Huawei and ZTE from the 5G buildout in the US claiming both represent a threat to domestic security.

Huawei’s willingness to sell to Apple would be an unusual move for Huawei as it has previously used its silicon technology internally as a differentiator to rival companies. However, the fact one of the biggest technology companies in the United States is potentially looking to partner with Huawei would be seen as a huge victory for the Chinese vendor, especially amidst all the allegations it has had to endure over the last number of months.

The wider issue is Apple’s 5G plans are currently surrounded by speculation notably that silicon partner Intel may not be able to supply modem technology for the iPhone to support the timing of Apple’s launch plans. In terms of alternative suppliers, it is not clear if MediaTek would be able to deliver on time, or if Samsung could meet demand beyond its own 5G smartphone business.

Huawei is in an interesting market position: its 5G modem technology is already powering home routers and with commercial smartphones likely to follow in the near future, it is at the front of the pack. Supplying Apple would also be something of a magnanimous gesture for the company, which is experiencing strong growth while rivals struggle with a shrinking market.

From Apple’s perspective, there are two issues: doing a deal with a fierce competitor, and the wider political situation.

The bigger problem is Huawei is currently persona non grata in the US and, should Apple look to source technology from the company in preference to Intel, a deal would likely be hampered by politics. There is an option for Apple to use a split supplier strategy, with Huawei technology in overseas markets and Intel at home, although this would still be likely to cause some ire in the face of the ongoing US-China trade spat between Washington and Beijing.