Qualcomm Inc. is facing legal and geopolitical challenges to its licensing business that analysts say could negatively impact the United States' standing in the global race to deploy next-generation 5G wireless networks.

Shares of the domestic chipmaker have tumbled since a U.S. federal district judge found that Qualcomm used its dominant market position to charge unreasonably high prices and ordered its licensing contracts be renegotiated. Qualcomm's licensing revenue came to $1.12 billion, comprising 23% of the company's consolidated quarterly revenue for the period ended in March.

Qualcomm became the sole U.S.-based supplier of 5G modem chips after Intel Corp. exited the 5G smartphone business in April. In a sign of the importance of Qualcomm to the U.S.' 5G network plans, the Department of Justice in May weighed in on the Federal Trade Commission's case against Qualcomm, asking Northern California District Court Judge Lucy Koh to hold additional hearings on how to reasonably correct any anticompetitive behavior found on Qualcomm's part without harming market competition.

Koh ultimately ruled against Qualcomm and ordered it to revisit its licensing contracts. The company said it will seek a stay of the district court's judgment and an expedited appeal. Qualcomm's stock lost nearly 11% on May 22, the first trading day after the district court ruling was released, and the shares continued to fall on May 23.

Patrick Moorhead, president and principal analyst at technology-focused research firm Moor Insights & Strategy, said any damage to Qualcomm as a result of the court judgment could give its Chinese competitors an advantage in 5G. Deploying next-generation networks is seen as key to spurring jobs and economic development by governments around the world.

Qualcomm warned in an annual financial filing from November 2018 that any disruption to its licensing segment could be detrimental to the company's entire business. "We derive a significant portion of our consolidated revenues from a small number of customers and licensees, which increasingly includes a small number of Chinese [original equipment manufacturers]," the filing said. "If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected."

Qualcomm, like all domestic entities, is subject to new U.S. government restrictions on doing business with Chinese telecommunication equipment supplier Huawei Technologies Co. Ltd., one of its licensees. Some U.S. legislators have sought to widen the restrictions to more Chinese entities amid concerns about the Chinese government's influence on technology companies in the country.

During fiscal 2018, Qualcomm's licensing revenue dropped 5.5% year over year to $5.33 billion, partly due to the company's long-running licensing dispute with Apple Inc. The legal feud between the two companies began in 2017, when Apple sued Qualcomm for allegedly engaging in an "abusive" patent licensing model that resulted in billions in overcharges, while the chipmaker claimed Apple breached contractual agreements and mischaracterized those agreements. The two tech giants settled their legal disagreements in April 2019.

Qualcomm's licensing revenue also took a hit during fiscal 2017 after the company was required to pay $940 million to resolve arbitration with BlackBerry Ltd. over royalty payments.

Mario Morales, an analyst at market research firm IDC, said Judge Koh's recent ruling will create added complexity to how Qualcomm licenses to customers, which in turn could slow the company's 5G advancements and hobble its current lead in 5G mobile technology development.

"A ruling like this really hinders the ability of the mobile ecosystem to keep scaling and innovating, especially when you kind of shoot one of these big players in the foot," Morales said in an interview. Even so, he noted that the case could continue for years in appeal, meaning the recent stock market reaction to the ruling could be overblown.

Qualcomm has seen significant stock volatility around its legal announcements, including a big gain after the Apple settlement agreement. Qualcomm's stock value was up by nearly 22% for the year to date as of market close on May 22.

Raymond James analyst Chris Caso said in a research note that the Koh ruling has the potential to "upend" Qualcomm's licensing model by requiring the company to renegotiate agreements with existing licensees at much lower rates.

"There's simply no way to quantify the impact of this ruling since one can't be certain about what will stick," Caso wrote. "But it, unfortunately, means the period of calm in Qualcomm's business was short-lived."