Patent protectionism could impede innovation globally

Outlook

Huawei spent 19.2% of its 2016/17 revenue on innovation against Apple’s 4.7%, according to the World Intellectual Property report. It overtook Apple’s worldwide sales this year -- and is now gunning for more.

The Fuzhou intermediate people’s court has banned sales of some Apple iPhones in China after ruling that the models infringe designs patented by US firm Qualcomm, which in July was prevented from buying Dutch chipmaker NPL by China’s non-regulatory approval. The Court’s ban will legally be difficult to enforce. Moreover, Apple could settle privately as around one-fifth of its sales are to China.

US-China tech tensions could escalate, dragging investment and innovation lower globally in 2019.

Impacts

• Estimates suggest the older iPhone models that could be banned make up 40% of sales in China, worth at least 10 billion dollars.
• The ruling followed the arrest of Huawei’s chief financial officer in Canada; more US-China tech tit-for-tat will impede 2019 global growth.
• Prospects are low of any more than modest mutual US-China concessions -- further trade and investment limits are likely.
• Having fallen 27.3% since October 3, Apple shares are still 48.8% higher year-on-year; US policy will support a soft stock market landing.