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Apple and Qualcomm Reach Settlement, Agree to Drop All Litigation
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Apple is definitely making their own baseband chip. Not sure why you’re mentioning TSMC, Foxconn or Japan Display since Apple isn’t going to take in-house the currently outsourced chip fab, device assembly or the manufacture of display panels.
re: the stock buybacks, the fact that the best return on invested capital is purchasing AAPL only demonstrates that Apple believes their share price is undervalued. So far it’s been a good use of their cash hoard, and there’s still plenty available to invest as they see fit.
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Apple throws yet another partner, Intel, under the bus. Consumers want fair competition and not forced competition. Tim Cook's collusion with Intel to force Intel baseband radio and remove Qualcomm, which is seen as superior, as an option could mean PR nail in the coffin for Intel baseband modem future efforts. Everything backfired and worse for the industry and consumers due to #1 domestic terrorist Tim Cook.
Well, you seem to have hit the nail on the head there.
https://www.macrumors.com/2019/04/16/intel-exits-5g-smartphone-modem-business/
I’m sure the decision to cancel their 5G program was made some time ago. Apple would have supplied its demand forecast to Intel and when it fell off a cliff in 2021-2023, because of Apple’s own baseband chip program, the decision was likely made (for them) then. Apple reportedly told them last summer 2020 and beyond was in jeopardy.
If Apple had intended to continue buying 150+ million baseband chips per year from Intel, Intel would be only too happy to have continued development. Intel said their 5G product would ship on time—as doubtful as that might have seemed—but that was the company line until today. In any event 2020 vs. 2021 wouldn’t have mattered much to Apple, despite what some posters here think about how urgently Apple needs to rollout 5G support.
Apple no doubt exercised termination of the existing supply agreement today and that notice to Intel is what triggered Intel’s announcement. Once Intel received that term notice, Apple’s existing plan (which was already known by Intel) to discontinue purchase of future Intel chips went from quite likely to definitive, necessitating Intel’s announcement and of course their filing of an 8-K with the SEC.
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There are reasons Apple doesn't have a fab or assembles products itself or makes it's own displays, and these reasons apply to modems. Why spend the resources to build a new company for a inexpensive low margin part unless you had something unique, and also something that will be a drain on management's attention. It's smarter just to buy it from a leading supplier and for a good price. Apple's making ARM processors can be justified as the most important part of the smartphone but it's also true that ARM encourages it and makes it easy. Apple has the market power and is clever enough to come up with ways to have a lot of input while still outsourcing risk. All the glued together parts in iphones make repairs expensive but they also make assembly cheaper while at the same time reducing errors, which is why despite all the complaints about Apple quality problems in assembly are never mentioned.
Well I think Apple knew that they would eventually win most of the cases, but I think Apple decided to work out a settlement for a couple of reasons. First that they knew it might ultimately mean the end for Qualcomm, and would eliminate a major supplier. Not only for Apple, but the entire industry. And second, because Intel currently isn't a good option and were dragging their feet, and Apple's own designs aren't quite ready. So it really was in not only Apple's, but the whole industry's best interests to work something out and keep them in business. The situation wasn't about one side or the other caving. It would have been a bad situation all around if this had continued, possibly even putting supplies to other companies in jeopardy as well.
Apple also had to deal with the lawsuit regarding giving Intel confidential information from qualcomm. Im sure apple is glad that lawsuit is dropped now.
It doesn’t matter how much Apple will account Qualcomm’s income sheet. Point is Qualcomm can survive without Apple being part of the equation. Even if Apple stop using Qualcomm’s chip, Apple would still need pay of the loyality. Remember Apple still makes iPhone which still use Qualcomm’s chip.
Now with Intel not making 5G chips for cellphone, who do you think are more worried? Qualcomm or Apple? It is unlikely Apple can come up with a 5G chip within 2 years frame.
The business are not been greatly disrupted. Like or not, Qualcomm has lots of 3G, 4G and 5G patents. Apple would still need pay loyalty to Qualcomm that is given.
Likewise, settlement is good for both parties. It is not like Qualcomm is bugging Apple, to me it is more like Apple is more desperate than Qualcomm is.
So, after a lengthy blood-bath, these two companies are buddies again ? Jesus... What's the world coming to.
Sweeten the deal by offering a "SIX year agreement"
One minute your at someone's throat, the next. your happy as a clam. I don't get it. It's not like Qualcomm is the ONLY one to get chips from, is it?
Sweeten the deal by offering a "SIX year agreement"
One minute your at someone's throat, the next. your happy as a clam. I don't get it. It's not like Qualcomm is the ONLY one to get chips from, is it?
1) A baseband chip is a low margin part? Even if that were true, when you need 200+ million of them, even a $5 difference is a billion dollars a year.
2) Apple wants to design their own modem for the much the same reason they’re going to design their own chips to replace Intel on the Mac—to remove supplier risk and have their destiny in their own hands instead of being at the mercy of a supplier. They’ll have better control over schedule, cost and quality.
3) Even though it’s built on top of standards, that doesn’t mean that there isn’t plenty of room to innovate in the baseband space. It will also give Apple more leverage in negotiating rates for non-FRAND patents they might wish to use. If a patent holder wants too much money, Apple has motivation to design around it and unlike Intel, Apple doesn’t have to care about the requirements of other customers.
4) The baseband chip is just as essential in a smartphone as the CPU. I’m not sure what you mean by “ARM encourages it and makes it easy. Apple has the market power and is clever enough to come up with ways to have a lot of input while still outsourcing risk.” With this statement, you seem to be implying that Apple isn’t the sole designer of their ARM CPU; they are, and thus have 100% input wrt its design. The only risk being outsourced is to TMSC for the semiconductor fab portion, and I don’t expect Apple will ever open their own foundry.
5) Glue isn’t relevant to Apple’s plans for a baseband chip.
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Qualcomm has lost my respect. Wouldn't it be fantastic if this was a stunt by Apple because they are very close to releasing their own in-house 5G chip? Sign a licensing agreement suggesting a big buy, but then not actually buy any chips? Please, let's hope that Apple doesn't have to use Qualcomm for the next 6-8 years.
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Who said it was "what they wanted"? That was not said. Yes, Apple paid _something_, but more likely a fairer price than before this all started. Remember, it was Qualcomm making unreasonable demands in the beginning, not Apple.
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Who said it was "what they wanted"? That was not said. Yes, Apple paid _something_, but more likely a fairer price than before this all started. Remember, it was Qualcomm making unreasonable demands in the beginning, not Apple.
Apple already owes Qualcomm past/future royalties no matter whose chip they use, whether it’s the Qualcomm, Intel, Mediatek, Samsung or their own chip. These costs are already bundled into the selling price. The difference is the rates under this agreement are acceptable to Apple.I wonder if that 6 year licensing fee will be passed on to consumers
Before today’s agreement, Apple considered Qualcomm's rates unfair and unreasonable, due to the additional license fee Qualcomm required. Apple was unwilling to agree to Qualcomm’s “no license, no chips” sales terms and filed the suit that was settled today to let a jury decide what the correct fees should be, given Qualcomm’s FRAND obligations, as well as past/recent Supreme Court decisions wrt patent exhaustion. Qualcomm wanted to avoid that at all costs, and you can be sure it cost them dearly.
As to whether the savings will be passed on to customers, I wouldn’t expect to see prices drop by $20 or whatever as a result. However, it does give Apple a little extra room in the BOM budget to potentially add/improve features without raising prices.
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Apple was on loosing side. They knew that without 5G Phones there will much less sale next year. Why someone will will buy a phone with no future proofing. The most damaging market would have been China. 5G already deployed on test basis in many cities and with a 4G iPhone, sales would have been abysmal. Apple saw this and decided to settle. Win Win for 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."
It’s hard to say how long Apple will (need to) purchase Qualcomm chips. Depending on when Apple began their baseband chip program in earnest—and whether they started/are starting from scratch—it could actually take 5+ years before their own chip is ready.
I do wonder whether Apple might purchase certain assets from Intel; setting aside 5G, there is a ton of work involved in supporting necessary 2G/3G/4G standards. The performance of Intel’s chip was very similar to Qualcomm’s (despite the rantings of a few dozen MR forum posters/parrots), and it could no doubt be improved upon. Conceivably this could make a 2021 Apple baseband chip a reality.
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I have a feeling that the 2019 iPhones will use both Qualcomm and Intel chips, like they did with the iPhone 7's. The 2020 iPhones on the other hand might be all Qualcomm...let's hope!
"They’ll have better control over schedule, cost and quality."
Apple would start from further behind than Intel did. Why would they better at this than Intel the world class chip company? Apple magic?
"Apple doesn’t have to care about the requirements of other customers."
How is this a benefit other than being able to do what's convenient, onerous (less complaints from internal workers), or quirky? As has been evident recently technology and standards will advance with or without Apple.
"With this statement, you seem to be implying that Apple isn’t the sole designer of their ARM CPU."
It's still ARM with modifications and Apple's own graphics processor. ARM sells it's design and helps other companies to modify it for their use.
"Glue isn’t relevant to Apple’s plans for a baseband chip."
All the benefits that you've pointed to can mostly be made by encouraging it's suppliers to comply. Worry about the marginal changes and let someone else do the rest. Offloading risk shouldn't be minimized. When iphone sales dropped recently Apple didn't take the hit by itself. The suppliers that it encouraged to build capacity not only faced lower sales but also have to continue to bear the cost of investment, keep factories open, and to pay workers. Japan display is constantly on the brink of bankruptcy and seems inevitable once iphone is all OLED. Apple's margins aren't so high just because iphone prices are high but also because they lowball suppliers. Another benefit of outsourcing is not having to directly answer for public relations headaches like environmental damage from factories.