In October 2017, I wrote on “Apple’s Troubling Sainthood” as Apple and Qualcomm intensified their legal battles: “Apple thinks that Qualcomm is greedy by asking smartphone companies to pay a percentage of the product value as royalty for using its mobile chipsets. Apple had wanted a fixed price for the chipsets. By asking for a fixed price, it will be possible for Apple to buy a Qualcomm chipset at say $18 and create a luxury product it sells for $1,000. Qualcomm maintains that it wants a percentage and that means if Apple jacks up its price, Qualcomm makes more money since the percentage remains the same.”
I concluded that Apple was not overly fair: it wanted to buy a key component of $18 to power a product of $1,000 (the iPhone) when Qualcomm wanted a percentage of final value, not absolute fixed amount. Qualcomm had to do that because as a “monopoly”, it could not have raised price from that $18 to say $250 without running into regulatory troubles. So, the only option was percentage of final-value pricing.
In the semiconductor industry, what Qualcomm asked was new. Usually, partners pay for fixed prices of components. The prices are usually discounted for bulk buyers. Apple buys many chips from Samsung and pays at fixed prices.
Apple did not like that: so, they wasted money on lawyers for years. Today, they have called a truce, and Apple will send money to Qualcomm. To make this exciting, Apple will be buying more chipsets from Qualcomm to explain the total victory of Qualcomm against the fashionista company.
- Agreement ends all ongoing litigation, including with Apple’s contract manufacturers
- Companies have reached a global patent license agreement and a chipset supply agreementSan Diego and Cupertino, California — Qualcomm and Apple today announced an agreement to dismiss all litigation between the two companies worldwide. The settlement includes a payment from Apple to Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.Qualcomm invents breakthrough technologies that transform how the world connects, computes and communicates. When we connected the phone to the Internet, the mobile revolution was born. Today, our inventions are the foundation for life-changing products, experiences, and industries. As we lead the world to 5G, we envision this next big change in cellular technology spurring a new era of intelligent, connected devices and enabling new opportunities in connected cars, remote delivery of health care services, and the IoT — including smart cities, smart homes, and wearables. Qualcomm Incorporated includes our licensing business, QTL, and the vast majority of our patent portfolio. Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, all of our engineering, research and development functions, and all of our products and services businesses, including, the QCT semiconductor business.
The Promise of 5G
Do not be deceived, Apple would not have settled with Qualcomm if it has any other alternative to get 5G into iPhone effectively. As it stands today, Intel is not ready and Huawei is a no-go area, so only Qualcomm can power Apple’s 5G future. That is why after all the wasted years and making lawyers richer, Apple agreed to pay Qualcomm to close all the legal issues, and then quickly placed orders with six-year licensing agreement.
The praise above is because of iPhone: “Qualcomm invents breakthrough technologies that transform how the world connects, computes and communicates. When we connected the phone to the Internet, …. As we lead the world to 5G, we envision this next big change in cellular technology spurring a new era of intelligent, connected ..”. Simply, there will not be 5G Apple without Qualcomm, and Apple has no future without 5G. So, it settled to allow 5G blossom in Cupertino, USA.