Apple and Qualcomm Reach Settlement, Agree to Drop All Litigation

[BvizioN]

So Apple agreed to pay for the patents like they should have from the beginning? Maybe Qualcomm gave them a slight discount?

It does say that the settlement includes a payment from Apple to Qualcomm but it does not say how much or what sort of payment. For what we know it could be far less than what Qualcomm was trying to rip off Apple. Because, why not? Apple does have a lot of money, right?
So one way to look at it is that maybe these Qualcomm greedy cons did come to their senses.

What this comes down to is Apple really wanted those Qualcomm 5G wireless chips and Qualcomm really wanted Apple's $

Or maybe what it comes down to is that Qualcomm is not completely daft to say no to Apple's money. and it loves Apple money too much. It would be like a suicide mission to say no to that kind of money. But of course, you have a different view on this, quite clearly based on your comment above.

And rest assured, the years of this "partnership" between these tows will be numbered. Apple will eventually make its own modem chipsets.

 

[HacKage]

Now where are all the folk saying Qualcomm were patent trolls, or the ones that wanted Apple to boycott them, or the ones that wanted Qualcomm to disappear?!

 

[chatin]

A victory for both companies and for the legacy of Alexander Graham Bell. The man was a true genius into philanthropy and even advanced building design.

 

[Michvuee]

Wow so Apple finally pays Qualcomm back. I bet Qualcomm only had to offer them a discount for them to pay back all the stuff they had to pay initially and Apple immediately agreed. Now if Apple can go back to Qualcomm chips it would be nice as it’s far superior than Intels. I’m glad I made a few grand from Qualcomm stocks and AMD is next with their next products.

 

[digthewell]

Qualcomm modems in the future iPhone? When exactly as my 7+ can not survive much longer...

I'm curious as to why you feel the 7+ won't last you longer? Do you use resource intensive apps? I am currently using the 6S and I face zero issues with the apps that I use (social networking, some productivity apps, etc.), no games though.

Just curious.

 

[bobob]

Via Ars Technica:

> Qualcomm demands that companies license its patent portfolio before they can buy the company's chips. It's an unusual arrangement, and critics argue it is an abuse of Qualcomm's dominant position in the wireless chip market.​

> Apple filed suit in January 2017, accusing Qualcomm of "extortion." The Federal Trade Commission filed its own lawsuit against Qualcomm the same month.​

Any update on the FTC suit? This does seem like an abuse of Qualcomm's monopoly power to a non-lawyer like me.​

 

[Abazigal]

Now where are all the folk saying Qualcomm were patent trolls, or the ones that wanted Apple to boycott them, or the ones that wanted Qualcomm to disappear?!

Here. Just finished dinner after a long day at work.

I maintain that Apple was in the right, but such lawsuits are never about who is in the right or wrong.

It is what it is. Qualcomm’s business model lives on to die another day, the iPhone is still on track to support 5g in 2020, and we know that Apple will continue working on developing its own models for use in the future. The sun continues to rise in the east and set in the west, and life goes on.

 

[PickUrPoison]

Via Ars Technica:

> Qualcomm demands that companies license its patent portfolio before they can buy the company's chips. It's an unusual arrangement, and critics argue it is an abuse of Qualcomm's dominant position in the wireless chip market.​

> Apple filed suit in January 2017, accusing Qualcomm of "extortion." The Federal Trade Commission filed its own lawsuit against Qualcomm the same month.​

Any update on the FTC suit? This does seem like an abuse of Qualcomm's monopoly power to a non-lawyer like me.​

The FTC suit finished up a couple months ago and the parties are awaiting Judge Koh’s decision.

 

[Jimmdean]

Pretty sure this doesn’t get Qualcomm out of trouble. The ftc would still be after them. Caving right now allows them to already have some business in place before any negative outcomes in that area. Plus they can tout the (presumed) fairness of the new deal with Apple.

EDIT - just read the post above. they probably expect his decision to go poorly. better to get what they can now as opposed to less afterwards...

 

[jlc1978]

Wrong. Stock does not jump 20% because nothing bad will happen. It jumped because their earnings adjustment was upward significant due to the influx of that apple settlement cash.

Stock prices reflect expectations fo future growth, and a one time cash influx is unlikely to cause such a jump since it is a one time event and not likely to occur every quarter. Another poster said Qualcomm expects to add $2 earnings per share; with about 1.5 billion shares outstanding that's about $3B, far less than the stock price jump.

More likely is settling removed uncertainty about future earnings and investors responded by buying Qualcomm; accounting for most of the price jump.

 

[DEMinSoCAL]

Here. Just finished dinner after a long day at work.

I maintain that Apple was in the right, but such lawsuits are never about who is in the right or wrong.

It is what it is. Qualcomm’s business model lives on to die another day, the iPhone is still on track to support 5g in 2020, and we know that Apple will continue working on developing its own models for use in the future. The sun continues to rise in the east and set in the west, and life goes on.

So, basically, you're saying that Apple thinks they can't exist without Qualcomm (at least for the next 6 years) and that their 5G chips are priceless to Apple's continued profits? And. that like 5G, their 4G chips were also like gold to Apple?

So maybe Qualcomm was right?

 

[djphat2000]

This is laughable. Apple had to pay what they agreed to. There was no extortion here other than Apple with their same old crap. Apple paid up and blinked and added $2 a share to Qualcomm's earning. That is pure settlement money and it was big.

The extortion was that Qualcomm wanted to make money on every device Apple sold. If Apple charges $1000 this year, Qualcomm gets say $13. If Apple wanted to charge $1200 next year, Qualcomm gets $14 (lets say, just as an example). That's BS! You already sold me the chip to use as I please. Since Apple "PAID" for it already. Qualcomm wanted additional fee's (license and or royalties). In the form of a % (percentage) of what Apple's devices sold for. So, buy my chip, thanks. Now, pay me again for selling your device, and base that extra fee on how much you sell your device for. F.all the way off!

 

[Abazigal]

So, basically, you're saying that Apple thinks they can't exist without Qualcomm (at least for the next 6 years) and that their 5G chips are priceless to Apple's continued profits? And. that like 5G, their 4G chips were also like gold to Apple?

So maybe Qualcomm was right?

Qualcomm was right in that Apple stood to have more to lose in this fight, and Apple basically blinked first in this high-stakes game of bluff.

Apple betted on Intel’s modems, and Intel simply could not deliver. By all records, intel’s 4g modems were inferior, and Apple felt they just could not afford to lose out to the competition when it came to offering 5g. Especially when iPhones are marketed as being the best. My understanding is that 5g is still nowhere near ready for mass adoption in the US, so Apple can probably still get away with not offering it this year, but definitely not next year.

While Apple is no doubt working on their own modems (I expect them to make a bid for Intel’s IP in this area), I don’t think it will be ready for another couple of years. This deal basically buys Apple another few years.

What’s done is done. Though I would have liked to see the new world order that might have been ushered in by the collapse of Qualcomm’s business model.

 

[cmaier]

"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 is better at intel when it comes to designing CPUs. Why wouldn’t they be better at designing baseband chips?

 

[springsup]

This is disappointing - Qualcomm are a bunch of blood-sucking vampires. It seems that Intel wasn't able to build a 5G chip quickly enough, so Apple was essentially forced to source from them again.

The good thing is that this isn't the biggest threat to Qualcomm. Apple is a commercial company and can be coerced to deal with bad actors by market demands (like the need to ship a 5G phone, and Intel's inability to do so), similar to how property developers in NYC were coerced in to paying off the mob. It does not mean that Qualcomm's business practices are not monopolistic or illegal.

That will be decided by the FTC suit. No settlement with Apple can change that. That trial included absolutely devastating testimony from all of Qualcomm's licensees, and we're just waiting for the judge's ruling.

One thing that emerged in the trial was that Qualcomm has been spending a lot of money on internet trolls and 'fake news' to try and shape public perception against the FTC, as well as lobbying the Trump administration to pressure the FTC to drop the suit on 'national security' grounds (lol). So be careful with whatever pro-Qualcomm puff-pieces you read online.
[doublepost=1555510826][/doublepost]

Apple is better at intel when it comes to designing CPUs. Why wouldn’t they be better at designing baseband chips?

Designing a baseband chip is a very large undertaking. Apple didn't start from scratch with their CPUs - they acquired PA Semi, which had lots of experience designing ARM CPUs, and iterated from there. The ARM licensing model itself was also a unique factor that allowed them to very quickly get up-to-speed. There isn't really an equivalent model for baseband chips - there is no small company to acquire IP and engineers from, and the competition is too far along for an iterative approach to be acceptable to customers. Then you need to test the chip in all kinds of network conditions, and keep up to date with emerging network standards (5G and 6G after that, etc).

The most likely thing is that Apple will acquire Intel's baseband division. That will be their 'PA Semi'. They will have to be strictly compartmentalised from the team that works with Qualcomm to avoid allegations of leaking confidential information.

Also, all of that is very expensive. Apple don't sell their chips to 3rd parties, so they would have to recoup the costs (and ongoing development costs) just from their own sales. It might be better for them to create an independent but wholly-owned subsidiary.

 

[Justanotherfanboy]

Did not see this coming.

 

[Baymowe335]

Apple caved.

If Apple really believed Qualcomm's patents were unfair, they would have fought this to the end. Instead, Apple just signed a 6 year licensing deal with Qualcomm, "including a two-year option to extend, and a multiyear chipset supply agreement."

What were the terms, oh wise one?

You don't know. We do know QCOM is up 40% since the announcement, indicative of the HUGE risk of not having Apple has a customer until now.

What are the chances Apple fought 2 years to just drop everything and sign a long term deal with ZERO change to terms?

Logic, guys.

 

[recoil80]

The most likely thing is that Apple will acquire Intel's baseband division. That will be their 'PA Semi'. They will have to be strictly compartmentalised from the team that works with Qualcomm to avoid allegations of leaking confidential information.

Also, all of that is very expensive. Apple don't sell their chips to 3rd parties, so they would have to recoup the costs (and ongoing development costs) just from their own sales. It might be better for them to create an independent but wholly-owned subsidiary.

They will at least hire a bunch of people from Intel as their project got cancelled, but I wonder about the IP. As Intel keeps working on 5G, not for the smartphones, I don't think they'll sell that, unless there is a clear division between teams and their patents portfolio.

I think they'll continue to build their own modem because it is, and will continue to be one of the most important part of their product. Is not only about the iPhone, even Watch, iPad and who knows, maybe even Macbook in the future could have a cellular option. And what about future products like smart glasses?
If they don't rely on a 5G modem they will at least have Bluetooth or Wi-Fi and Apple is already working on custom silicon for the Wx chips on the Watch and H1 chip on the AirPods, so why not having the control of the full networking stack?

I'm sure it costs a lot of money, but as for the CPU and GPU it not about having to pay a supplier, as probably they'd save money by just buying chips instead of making them, is more about controlling the roadmap and have hw and sw teams work closely to maximise performance.

 

[Carnegie]

Here. Just finished dinner after a long day at work.

I maintain that Apple was in the right, but such lawsuits are never about who is in the right or wrong.

It is what it is. Qualcomm’s business model lives on to die another day, the iPhone is still on track to support 5g in 2020, and we know that Apple will continue working on developing its own models for use in the future. The sun continues to rise in the east and set in the west, and life goes on.

Why do you think Qualcomm's business model lives on? It certainly does not. For various reasons - to include the decisions of regulatory bodies around the world, the decisions of courts here in the U.S., and Qualcomm's loss of various points of leverage - it can't continue to do things the way it used to. This dispute was never about Qualcomm being able, or not being able, to continue with business as usual. It was always about how much of its old model it would have to give up and how much less in licensing fees it would be able to extract.

As for the idea which has been expressed that Apple had more to lose than Qualcomm did: (1) That doesn't track with everything that's gone on in this dispute over the last couple of years and (2) it's pretty clearly contrary to what equity markets believed. It was QCOM that responded dramatically and immediately to the upside on the news that the dispute had been settled. If the market thought it was Apple that desperately needed to get the dispute settled - that Apple had more to lose by the dispute continuing - then it would have been AAPL that responded dramatically and immediately to the upside on the news that a settlement had been reached.
[doublepost=1555515332][/doublepost]

Stock prices reflect expectations fo future growth, and a one time cash influx is unlikely to cause such a jump since it is a one time event and not likely to occur every quarter. Another poster said Qualcomm expects to add $2 earnings per share; with about 1.5 billion shares outstanding that's about $3B, far less than the stock price jump.

More likely is settling removed uncertainty about future earnings and investors responded by buying Qualcomm; accounting for most of the price jump.

Yeah, the estimated change in earnings which Qualcomm provided yesterday wasn't about the one time payment that Apple will, pursuant to the deal, make to Qualcomm. It was about the incremental increase in ongoing income which Qualcomm expects to see as a result of getting Apple back as a customer and as an (effective) licensee. Qualcomm's earnings had previously been significantly harmed by the loss of Apple as a customer and (effective) licensee.
[doublepost=1555516101][/doublepost]For those who think Apple was in a desperate position because it didn't have an alternative to Qualcomm for 5G, and thus had to submit to Qualcomm's terms: Think about what that means for minute.

Even assuming that Qualcomm had leverage based on Apple's need for 5G modems... Do you really think that Qualcomm would have used that leverage in much the same way it had previously used similar leverage, i.e. in much the same way that it has gotten in regulatory trouble for? A large part of the reason that Qualcomm has been in regulatory hot water in recent years is because it used an effective monopoly with regard to certain kinds of modems to force would-be licensees to agree to unilateral (and improper) terms. That's part of what the FTC case which Judge Koh is now deciding is about. That's part of what, e.g., the KFTC told Qualcomm to stop doing.

If that's the gist of what happened here (there's lots of reason to think it is not, but for the sake of argument), then Qualcomm likely only exacerbated the anti-trust problems that it already has.

 

[falainber]

What were the terms, oh wise one?

You don't know. We do know QCOM is up 40% since the announcement, indicative of the HUGE risk of not having Apple has a customer until now.

What are the chances Apple fought 2 years to just drop everything and sign a long term deal with ZERO change to terms?

Logic, guys.

Just read the commentaries like this one (from CNBC):

Apple buckled against Qualcomm’s business model, but in the end it had to give in
Apple had four terrible options to get the iPhone to 5G, so it went with the least of all evils

The risk for Qualcomm was not in losing Apple as a customer. Apple is not that big of a customer, they don't even buy Qualcomm's processors, just the modems. The risk was in courts defeating their business model. This has not happened.

 

[jlc1978]

The most likely thing is that Apple will acquire Intel's baseband division. That will be their 'PA Semi'. They will have to be strictly compartmentalised from the team that works with Qualcomm to avoid allegations of leaking confidential information.

I was thinking that as well. It makes sense if Intel wants to eliminate the entire division and Apple could probably get it cheap unless someone else wants it as well. It also gives them the ability to furtehr integrate the modem with the CPU and other chipsets.

Also, all of that is very expensive. Apple don't sell their chips to 3rd parties, so they would have to recoup the costs (and ongoing development costs) just from their own sales. It might be better for them to create an independent but wholly-owned subsidiary.

I agree but this is more than iPhone modems. 5G and its successor is about bypassing wired connections to deliver internet access. This would fit in with their long term plans to be a media provider and potentially an ISP as well.
[doublepost=1555519013][/doublepost]

They will at least hire a bunch of people from Intel as their project got cancelled, but I wonder about the IP. As Intel keeps working on 5G, not for the smartphones, I don't think they'll sell that, unless there is a clear division between teams and their patents portfolio.

I'm guessing a purchase would involve some source of licensing / sale of IP beteween Intel and Apple. What would make sense is cross licensing developments so both can benefit from each others work.

 

[apolloa]

Have you missed the posts above where Qualcomm has lost EVERY SINGLE antitrust case over modem licensing around the world? And been fined literally billions (so far, the FTC case is still awaiting a final verdict)? Do you actually think a company that's lost every case so far is in a position to dictate terms to Apple?

Think of the reverse. If Qualcomm had such a strong case then why did they settle? Both sides have to agree to a settlement, but that doesn't mean that they both have equal standing (in terms of what would have happened in court).

Qualcomm was about to have yet ANOTHER huge court loss. They already lost $1 billion to Apple last month over this issue.

There's no way Qualcomm had the upper hand in this settlement.

So you claim they’ve been fined ‘billions’, and lost a ‘billion’ to apple for this very same case? And yet you have no plausible explanation for why Apple dropped its case... bar Intel dropping modems.
Sorry but if it really was that easy and opens and shut case Apple would have gone to court.
Nope, just Apples MO of how it does business with suppliers.

 

[lazard]

Apple caved because Intel couldn't make a competent 5G modem.

 

[Baymowe335]

Just read the commentaries like this one (from CNBC):

Apple buckled against Qualcomm’s business model, but in the end it had to give in
Apple had four terrible options to get the iPhone to 5G, so it went with the least of all evils

The risk for Qualcomm was not in losing Apple as a customer. Apple is not that big of a customer, they don't even buy Qualcomm's processors, just the modems. The risk was in courts defeating their business model. This has not happened.

It’s implausible to think Apple would go down this road only to “cave in” for zero change in terms. Apple has known about 5G for 5 years and obviously knew they’d have to deliver a 5G phone potentially without QCOM.

I’m not saying Apple got everything, but zero? HIGHLY doubt it.

CNBC is constantly wrong and full of idiots.

 

[Carnegie]

Just read the commentaries like this one (from CNBC):

Apple buckled against Qualcomm’s business model, but in the end it had to give in
Apple had four terrible options to get the iPhone to 5G, so it went with the least of all evils

The risk for Qualcomm was not in losing Apple as a customer. Apple is not that big of a customer, they don't even buy Qualcomm's processors, just the modems. The risk was in courts defeating their business model. This has not happened.

Qualcomm faced risks from both - losing Apple as a customer (and, for a protracted period of time, as an effective licensee) and having its business model further dismantled by court decisions.

Apple certainly was a big customer for Qualcomm. Qualcomm’s filings make that clear in multiple ways. QTC’s revenues (i.e., meaningfully, Qualcomm’s equipment revenues) were down 20% YoY for the 2018 holiday quarter, and it indicated that was primarily due to Apple. Its MSM integrated circuits units were down 22% for that same quarter.

Regardless of the nature of the risks it faced, the point is that Qualcomm faced great risks from not getting a deal done. When those risks were lifted, QCOM moved immediately and substantially to the upside. That was without the market knowing the terms of the settlement. Whatever the terms, so long as they meant the litigation would stop and Apple and Qualcomm would play nice going forward, a settlement was good - and much needed - news for Qualcomm.

On the other hand, while Apple certainly faced some risks from not reaching an agreement with Qualcomm, the market apparently didn’t see those risks as being nearly as grave as the risks faced by Qualcomm. If it did, AAPL would have been up significantly on the news that those risks were removed. Instead, the market reacted with a collective... meh... when it comes to AAPL.