Apple Surprises With Qualcomm Settlement

Apple has surprised many with the news that all litigation between it and Qualcomm has been dropped with immediate effect.

Apple and Qualcomm said in a joint statement that “Qualcomm and Apple today announced an agreement to dismiss all litigation between the two companies worldwide.”

And the settlement seems like a major victory for Qualcomm, after Apple also agreed to make an undisclosed payment to Qualcomm, and will use its chips going forward.

Lawsuit settlement

“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,” the two firms said.

On Monday this week Apple and Qualcomm had begun to face off in federal court in San Diego, as Apple sought to tackle the business model that drives the vast majority of Qualcomm’s profits.

Apple had sued Qualcomm in early 2017, alleging the chip maker’s licensing practices abuse its dominant position in the market for mobile device modems.

Apple had sought $27 billion (£21bn) in damages.

That trial in the US was the main legal action, despite Qualcomm hurting Apple with a number of counter lawsuits around the world, which sought bans on iPhone sales for alleged patent violations in various countries.

In Germany and China for example, Qualcomm managed to obtain partial iPhone bans, which made life difficult for Apple.

Royalty issues

Right from the start Apple had argued that Qualcomm’s licensing practices, which require companies to agree to pay patent royalties before it will sell them its chips, impose an unfair burden on smartphone makers, one that has gone unchallenged because of Qualcomm’s industry dominance.

It should be remembered that Apple was not alone in challenging Qualcomm’s sway in the industry, with US regulators making similar allegations in a January court hearing.

Regulators in South Korea, Taiwan, the EU and China have also imposed fines on Qualcomm for its business practices.

Qualcomm meanwhile had always argued that Apple was merely using its financial clout to seek a better deal, and it asked for up to $15bn in lost royalty payments.

5G arrival

The trial between the two giants had arrived at a critical juncture for the whole smartphone industry, as networks prepare for the shift to 5G networks.

The consensus is that Apple had been left with few options, as it expects to release its first 5G compatible iPhone in 2020, supposedly boasting Intel modem chips.

Apple has been using Intel chips for a while now, but earlier this month it was reported that Apple was losing confidence in Intel’s ability to hit its deadline for the 5G modems.

Apple is reportedly bolstering its in-house engineering team to between 1,000 and 2,000 engineers to work on its own 5G modem chip.

The iPad maker had been using Qualcomm’s modems in 2011 with the iPhone 4. That deal reportedly saw Qualcomm agree to refund a proportion of Apple’s royalty payments – but only if Apple agreed to exclusively use Qualcomm’s modems.

That deal between the two companies continued until 2016, when Qualcomm withheld as much as $1bn in royalty payments.

Apple argued Qualcomm did this because Apple testified against Qualcomm to the Korea Fair Trade Commission.

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