Today, Apple indicated that they will stop selling iPhone 7 and 8 in Germany due to an injunction issued as part of a long battle between Apple and Qualcomm. As of now, both iPhone 7 and 8 are still available for sale in Germany. There is a lot more at play here than what meets the eye, including Qualcomm’s high-stakes bet that these iPhone injunctions will not be successfully appealed.
Impact on Apple Is Insignificant
Most important to note, the impact to Apple’s business from the Germany injunction would be insignificant. Based on rough math, we believe the injunction would affect about 0.2% of Apple’s revenue.
- We estimate Germany represents ~4% of Apple’s business.
- iPhone represents ~60% of total revenue.
- iPhone 7 and 8 combine for ~41% of iPhone revenue.
- Further, the injunction only bans sales in Apple retail stores, so the devices are still available through carriers and resellers which we think represent ~80% of iPhone sales. Putting it all together, the Germany injunction affects 0.2%, or an insignificant amount, of Apple’s revenue.
Qualcomm also won a similar injunction in China that affects more models (iPhones 6s through X), but the scope of the ban is much narrower, as an update to iOS 12 will void Qualcomm’s claims. As of now, all iPhone models are available in China.
Our Bottom Line: We don’t think either of these injunctions will have a measurable impact on Apple, but it may be over a year before we know what the ultimate impact will be, as the litigious battle between these companies has been ongoing.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio.