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Apple Paid an Estimated $5-$6 Billion to Settle Qualcomm Dispute, Plus $8-$9 Per iPhone in Royalty Fees
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Forgive my ignorance. I keep hearing the line without Intel Apple would have to use Qualcomm modems for 5G. What about Mediatek? Sure Qualcomm is better. If Apple wanted to stick it to 'em. They could have used Mediatek until they had an in house design ready. Even if it hobbled wireless performance. They didn't seem to mind doing this with Intel.
All this fluff was about a $7.50 license on $1,000 phones? Now it's $8 to $9. I guess that means Apple will have to up their prices another $100.
That $7.50 was (originally) from 2011 and wouldn't have covered newer tech.
We don't know exactly what Apple was effectively paying per device before it began withholding royalty payments, but we can be confident (based on other reported information) that it was meaningfully more than $7.50. Was it $10 or $12 or $15? It was likely in that range.
When it comes to all inclusive 5G licensing, Qualcomm says that it wants about $20 for smartphones with a wholesale value of $400 or more.
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You seem to be missing the fact that Qualcomm royalties are based on the price of the phone-- they are much higher for a premium iPhone than for a cheap low-end Android. That was at the core of Apple's complaint, remember? So it's not just a matter of being on the largest number of phones-- the price tier of the phones has a big impact on Qualcomm's bottom line.
So how did Apple have the upper hand exactly? They sued Qualcomm and lost big time. They ended up paying MORE than they complained about in the original suit.
Not entirely. Qualcomm were originally asking for quite a lot more. Some reports penned this at double what Apple was previously paying. So it’s a compromise.
This is not really true. Despite many comments here, recent iterations of Intel's LTE modems were actually quite competitive, and they will release another improved refresh (the 7660) later this year. They will also continue to supply LTE modems for Apple's non-5G models for a while.
While this move keeps Apple in the 5G game in the near term, it is well possible it will backfire in the future. Now that Intel is getting out of the smartphone modem business, this will actually bring Qualcomm closer to a monopoly in this market, and Apple has always preferred to have dual suppliers. Unless another player capable and willing to supply these chips at large scale for reasonable prices appears, they may find themselves in a worse situation a few years down the road.
And Apple stopped paying Ericsson too and settled right before they were about to enter the court room, when it comes to Apple and paying its large suppliers royalties, they have a track record of refusing to do so to get a better deal and then all of a sudden agreeing terms right before they go to court... make if that what you will but personally I’ve lost all and any trust in Apple and it’s opinions towards others patents and designs, after it treated Ericsson in such a disgusting way!
Lesson to be learned: Trusting Intel—for chips, modems, etc.—is a bad choice.
I don't disagree with you. I don't particularly like Apple's hardball tactics either, and don't think they are particularly effective. At the end of the day we (the consumers) are the ones who will pay ...
Not sure how this is hard for you to comprehend.
Apple COMPLETELY OWNS the premium smartphone segment. There are countless reports comprising many different metrics to support this. There isn't a single report you can link that disproves this simple basic fact.
5G will be limited to premium smartphones for the first few years in the same way that 4G was limited to premium smartphones when it first launched. Therefore Apple will be the largest purchaser of 5G modems for the first few years after launch since they are the largest seller of premium smartphones.
Do you know what ASP is? Average Selling Price. For Samsung it's around $240. So let's do some basic math:
Samsung sells 4 phones. A $900 Galaxy S10 and 3 Galaxy '?' for $100 each. What's the ASP? $900 + $100 + $100 + $100 = $1,200. Divided by 4 phones and we get an ASP of $300. Oops, still way too high. Let's try again.
Samsung sells 4 phones. A $900 Galaxy S10 and 3 Galaxy Stars for $50 each. $900 + $50 + $50 + $50 = $1,050. Divided by 4 and ASP is $262.50. Still a little high, but getting closer.
Samsung sells 8 phones. A $900 S10, a $300 Galaxy A8, a $200 Galaxy A5 and 5 Galaxy Js at $100 each. $900 + $300 + $200 + $100 + $100 + $100 + $100 + $100 = $1,900. ASP is $237.50, or very close to our $240 target.
It doesn't matter how you "crunch" the numbers. The bottom line is Samsung sells primarily low-end phones and their flagship (premium) smartphones only account for a small percentage of their overall sales. And Samsung is the most profitable Android manufacturer out there. For the rest it's even worse (selling mostly low-end phones and a small number of flagships).
The entire Android worldwide market is literally comprised of dirt-cheap disposable phones. This is the reality of Android. And none of these phones will be getting 5G for many years to come.
Yeap, but thankfully Apples learnt the hard way it can’t increase pricing the way it has, so with any luck we won’t be paying for it much longer?
Makes sense looking at the past 3-5 years of Mac history. But can't say for sure about the future: past doesn't necessarily predict the future. Don't know what's in the pipeline. But being said that, I am still clutching on to my 2010 MBP. It works perfectly fine every single day, even the battery is in great shape!
I'll make it really simple for you:
- Qualcomm has lost EVERY SINGLE antitrust case around the world (5 so far and over $4 billion in fines). The US FTC case is currently being decided so those fines could go up.
- All those antitrust cases concluded that Qualcomm was abusing their position and charging unfair royalty rates for their modems/IP.
- Apple sued Qualcomm over the EXACT same issue - unfair licensing practices regarding their modems/IP.
I'm curious how anyone could think Qualcomm was going to win this case when they lost ALL their previous cases.
If you like those numbers, guess how much of the $10,000 smartwatch and $750 phone with LCD screen markets Apple commands
I'll make it even simpler for you.....
Qualcomm won this case as Apple settled for MORE than they sued for....
Boom...really simple facts....
So if I read this correctly, Apple is now even on backpayments, plus 50¢ to a $1.50 more per iPhone sold going forward. Even if this is all interpreted as Apple capitulating, it doesn’t seem like much of a loss.
And you don’t seem to be able to comprehend the fact Apple has a tiny market share, Qualcomm has a giant marketplace out there, it does not rely on Apple to survive. You’ve also made up that Android phones won’t get 5G for ‘years to come’ and are just plain flat out wrong on that. It’s like attempting to claim mid range and lower cost Android phones has no LTE for ‘years’ after the iPhone, if that was true they still wouldn’t have it today!
You seem to desperately be trying to portray Apple as the soul manufacture or the only global mobile market that matters... and I’m afraid that simply just isn’t the case.
In fact your argument seems to solely be based on Apple’s market only and only the US market? Ignoring everyone else, which is pointless when talking about a supplier to the ‘worldwide’ mobile market and ALL manufacturers.
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Apple pays now.
But Apple will not forget. >
Oh, so Apple is the victim here? But you are correct that they will not (or should not) forget. This should be a lesson to Apple that they are not above ethical business practices, no matter how cool or invincible they think they are.
Apple's own press release is proof enough they caved.
Look at the language. Absolutely everything in the press release was Qualcomm getting licensing fees, getting a one-time payment, getting a multiyear chip supply contract.
Apple was completely silent because they got nothing and their ass handed to them. Apple can afford it, but it's pretty clear Tim Cook isn't a great strategist. There's only one company that owns 5G that's Qualcomm. That may change in the future, but right now that's a fact.
Look at the language. Absolutely everything in the press release was Qualcomm getting licensing fees, getting a one-time payment, getting a multiyear chip supply contract.
Apple was completely silent because they got nothing and their ass handed to them. Apple can afford it, but it's pretty clear Tim Cook isn't a great strategist. There's only one company that owns 5G that's Qualcomm. That may change in the future, but right now that's a fact.
And Qualcomm is just devastated having to supply modems to such a small town, low key, 2 bit trash company as Apple.
Lol what? They estimated this from the guidance. If you say you're going to make 10$ next quarter, and after this settlement you're now going to make 14$, we can make some pretty serious estimates.
Qualcomm absolutely is one of the winners here as their EPS will be $2.00 higher than it was previously. However, we have absolutely zero clue if Apple is paying more than it was before. This UBS analyst made up these numbers to try and fit into the $2.00 higher EPS announcement by Qualcomm but has no idea how this profit jump will occur. Apple was reportedly holding back $7.5 billion in royalty payments in escrow, and according to this estimate, Apple would be paying them less than what they previously owed if his $5-6 billion estimate is accurate. That means, even if Apple will be paying a higher than $7.50 per device payment, it would still equal less than what Qualcomm claimed Apple owed for several years running. For example: If Apple paid 5 billion in backpayment but then 10 dollars per future device. It would take YEARS of selling phones for Apple to fall behind on the payments kept in escrow under the old agreement. In fact, they'd come out ahead for a few years.
TLDR: We still don't know the numbers, and likely never will. Who will know these numbers? All of Apple's competitors that have a fair nation's clause with Qualcomm and can't legally pay more than Apple. Either way, this matters very little to Apple's bottom line. It matters GREATLY to Qualcomm's.