Apple Paid an Estimated $5-$6 Billion to Settle Qualcomm Dispute, Plus $8-$9 Per iPhone in Royalty Fees

[JPack]

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.

MediaTek is far behind Intel. Just look at MWC2019.

Qualcomm and Huawei were showing real demos. Intel showed nothing, not even a non-working chip. Samsung was quiet. MediaTek was non-existent.

 

[JetTester]

The merits of the lawsuits never really mattered except as leverage, for either party. Apple had no choice but to settle because they weren't going to get 5G modems from anybody but Qualcomm in time for 2020 iPhones. So, they paid what they owed, took the PR hit, signed the agreement, and now they are all BFFs. Apple makes money, Qualcomm makes money, we get good products, all's right with the world. Just takes a little hubris sometimes.

 

[az431]

Fully expect to see a hit to Apple’s stock here.

You were wrong, and all of us are truly shocked.
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Wow, you don’t read that on this site! Maybe I guess they had used evidence, shame it didn’t go through however surely Qualcomm would have continued with the case if they felt they had this evidence and could win?

Although my pure guess work here is, Apple DID steal Qualcomm’s patented designs and DID pass them into Intel, and told them to use them to make a 5G modem, ergo it nearly got to court and Qualcomm shoved those emails under Apples lawyers noses and tells them we will bring your entire reputation down..
Apple has no choice but to pay way over what it was to protect its brand and reputation, and Intel has to suddenly cancel all 5G modem technology so it too avoids being taken to court for stealing patents and have its own brand and reputation rubbished.

But as said pure utter guess work.

On the bright side, you meet the minimum qualifications to be a MR staff writer.

 

[kennyt72]

The case didn't even last 2 days and Qualcomm caved in.

Man alive you love Apple, even Stevie Wonder can see Apple lost this one.

 

[az431]

No reason there would be. Apple’s been accruing the estimated expense and setting aside money to pay for it. There’s nothing unexpected here to cause a hit to the stock.

If you continue to demonstrate logic and critical thinking you will be booted from this forum.

 

[kennyt72]

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!

I'm glad someone else saw the similarities here in the way Apple also tried to screw over Ericsson and also settled surprisingly early

 

[bruinsrme]

my guess is with Apple paying $1 to $2 more in royalties with translate to a retail increase of $30 t0 $50 a phone.

 

[jamezr]

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.

I agree with some of your points......
Except this one below.... Every indication (since Apple does not report iPhone units sold and is being sued for it) points to iPhone sales slowing. Still the best selling phone in the world though.
But Qualcomm is the only company making 5G modems right now. If Apple wants to sell a 5G capable iPhone in say 2020 they will have to buy them from Qualcomm. Failing to do so will affect Apple's bottom line greatly as most of their revenue is from iPhones. Not having a 5G phone in 2020 will be a huge failure for Apple.

this matters very little to Apple's bottom line. It matters GREATLY to Qualcomm's

 

[Baymowe335]

Fully expect to see a hit to Apple’s stock here.

You're kidding, right?

Anyway, you're wrong as it would have already hit and AAPL finished up today. Market doesn't care and/or doesn't believe it.

Several factors here:

1) Pure Speculation by this "analyst"
2) Apple has $6B under the couch cushions at 1 Infinite Loop.
3) The settlement gives clarity that the future iPhones will be more advanced and more enticing to buy, giving Apple a sales boost.
4) This is positive for both companies, objectively..regardless if this is true or not.

 

[name99]

So, it backfired for Apple and they're now worse off for trying to throw another partner under the bus.

Not at all.
(a) Apple now has what it didn't have before, a guaranteed IP agreement with QC. This clears the way for Apple to build their own modems.

(b) What was Apple paying before?
https://www.eetimes.com/document.asp?doc_id=1334184#
Interim agreement had Apple paying $7.5 per phone. QC wanted $18/phone (and as a fraction of the cost of the phone, so would rise as iPhones got more expensive, or if Apple put modems in other devices. Wonder why laptops with built-in cellular are so rare...)

So Apple pays slightly more per phone than they were paying before this all started, a LOT less than QC wanted, and has the possibility of escaping from QC altogether in three or four years if they can do the engineering necessary.

Meanwhile the lump sum covers mostly back royalties with some of it as a cost for use of QC IP (ie patents) going forward.

Hard for me to see why this is a loss for Apple, or a bad strategy...

 

[JPack]

Man alive you love Apple, even Stevie Wonder can see Apple lost this one.

Some people will point at the sun and tell you it's dark. Some great examples in this thread.

 

[kennyt72]

Some people will point at the sun and tell you it's dark. Some great examples in this thread.

I agree, it's always the usual suspects as well.

 

[BuffaloTF]

Hold on... a company that charged $20 per phone for licensing patents before selling them a $30 modem somehow wins in this scenario where they're only getting 8 or 9 bucks? They just lost 50% of their revenues... they won? Really? These numbers were made up to paint a certain picture here... and even that didn't work and you guys are eating it up like its a dessert.

 

[Carnegie]

Not at all.
(a) Apple now has what it didn't have before, a guaranteed IP agreement with QC. This clears the way for Apple to build their own modems.

(b) What was Apple paying before?
https://www.eetimes.com/document.asp?doc_id=1334184#
Interim agreement had Apple paying $7.5 per phone. QC wanted $18/phone (and as a fraction of the cost of the phone, so would rise as iPhones got more expensive, or if Apple put modems in other devices. Wonder why laptops with built-in cellular are so rare...)

So Apple pays slightly more per phone than they were paying before this all started, a LOT less than QC wanted, and has the possibility of escaping from QC altogether in three or four years if they can do the engineering necessary.

Meanwhile the lump sum covers mostly back royalties with some of it as a cost for use of QC IP (ie patents) going forward.

Hard for me to see why this is a loss for Apple, or a bad strategy...

If Apple is only going to be paying $8-9 per device, then it isn't going to be paying more per device than before this started. And that's despite the reality that it will be selling more expensive iPhones which incorporate newer cell technology. And it's likely not having to agree to the onerous terms which it had to agree to before.

That $7.50 was (originally) from 2011. In the fourth calendar quarter of 2016, when Apple first started to withhold payments meant to cover Qualcomm royalties, Apple's contract manufacturers would have owed Qualcomm more than $1 billion (and likely closer to $1.5 billion, though we don't have enough information to precisely calculate the number) in royalties for Apple products. That would have been for a calendar quarter in which Apple sold 70-75 million iPhones and, maybe, a few million cellular iPads.

 

[realtuner]

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 trying to portray Apple as the soul manufacture or any 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 and the US market? Ignoring everyone else, which is pointless when talking about a supplier to the ‘worldwide’ mobile market and ALL manufacturers.

WOW.

You're trying to argue Ford makes more cars than Ferrari therefore they have a higher market share than Ferrari when the only thing you can compare between the two companies is how many Ford GTs get sold vs Ferrari (the only car Ford makes that's in the SAME market).

Then again, this doesn't surprise me. Android fans always like to trot out the market share argument while ignoring market segments (apples to apples, oranges to oranges). Apple doesn't make $50-100 phones. Most Android phones sold worldwide are sub $100 junk phones.

 

[raghu8912]

So, a completely made up number with no basis in fact whatsoever.

I don't think Qualcomm will release these numbers publicly, because if Apple is paying less then all other customers would ask for same deal, generally pricing is confidential information.

 

[realtuner]

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....

Waiting for you to provide the details of the settlement to back your claim.

Some people will point at the sun and tell you it's dark. Some great examples in this thread.

Time to repost what I said the other day:

• In April 2017 Qualcomm and Blackberry had a binding arbitration case. Qualcomm lost and now owes $940 million to Blackberry. Since it didn't go to court, details are limited. What we do know is it was related to royalty rebates due to Blackberry over the number of devices sold. Which sounds eerily similar to what Apple is complaining about (with Apple winning a preliminary $1 billion against Qualcomm just recently).
  
• In June 2018 Qualcomm was fined $1.2 billion by the EU for antitrust issues arising from Qualcomm paying Apple money to ensure exclusivity in using Qualcomm modems. Just a week ago Qualcomm lost another part of their antitrust case by trying to prevent the handing over of data to the EU regarding their antitrust case.
• In October 2017 Qualcomm was fined $774 million by Taiwan's Fair Trade Commission for overcharging royalties for their cellular modems and IP. Qualcomm struck a deal with Taiwan and had their fine "reduced" to $93 million in exchange for investing $700 million over 5 years into Taiwan's tech sector. Several companies are still protesting this decision as Qualcomm wasn't forced to change all their licensing practices.
• In December 2016, South Korea fined Qualcomm $854 million for antitrust issues surrounding modem and IP royalty/licensing. Prior to this Qualcomm was fined $243 million way back in 2009 over kickback issues to cell manufacturers to use Qualcomm modems exclusively. This fine was lowered slightly to $200 million just last month.
• In February 2015 Qualcomm accepted a penalty of $975 million in China over violating anti-monopoly laws over - you guessed it, royalties and licensing related to modems and related IP.
• The FTC in the US just wrapped up a trial (now awaiting a decision) accusing Qualcomm of antitrust practices related to their modems and licensing practices.

So you're actually going to tell me Qualcomm is in the right regarding their royalty demands when they've lost EVERY SINGLE CASE? Only the US FTC case is undecided (trial is over, now Koh is making her decision).

 

[raghu8912]

A made up number that just became a “fact”.

"a figure calculated based on guidance numbers that Qualcomm provided following the settlement"
Pricing information will not be made available publicly, pricing is confidential information.
Did Mac Rumors say it is the fact verified bx XYZ ?
Lot of numbers in life are based on educated guess.

 

[firewood]

Apple got what it needed, rights to Qualcomm’s crown jewels, their patent portfolio, paid for with so little cash that Apple’s stock price barely moved. Just as with arm64, Apple may surprise them with a modem chip nobody saw coming.

 

[I7guy]

"a figure calculated based on guidance numbers that Qualcomm provided following the settlement"
Pricing information will not be made available publicly, pricing is confidential information.
Did Mac Rumors say it is the fact verified bx XYZ ?
Lot of numbers in life are based on educated guess.

Right, you can couch the number in any phraseology, the number is not a fact nor how much off the guesstimate is from the real number is not known.

 

[kis]

Seems like Qualcomm had Apple by the 5G-balls.

Also: I have the feeling that this will be accelerating Apple's move to ARM now as Intel's probably screwed them over for the last time.

 

[AdonisSMU]

No, you’ve selected one part of the market, the global market is just a tad different I’m afraid:

http://www.statista.com/statistics/266136/global-market-share-held-by-smartphone-operating-systems/

http://www.idc.com/promo/smartphone-market-share/os

A quick google. Apple only has 11 to 13% I’m afraid.
Qualcomm is still here, fact. Sorry to burst your rather blinkered bubble.

You didn't read the post you're responding to I'm afraid. The post you've quoted doesn't negate the stat you sighted. In fact, both stats can be true and your end conclusion would still be wrong. The market that will have/want 5G chips within the next few years is the high end smartphone market. Apple dominates that market. That's what the post says. It doesn't say anything about overall market share. 5G isn't something that is absolutely needed as Telecoms haven't even fully implemented 5G technology.
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Say what? Apple OWNS the premium smartphone market. That's why:

• The App Store revenues are double that of Google Play, despite having fewer devices.
• The average iPhone users spends 4X as much money as the average Android user.
• In online shopping iOS users spend 5X as much as Android users.
• In enterprise/corporate use Apple commands an 80% market share.

Qualcomm isn't going to be selling 5G modems to those billion or so $50-100 Android phones sold around the world every year. Even Samsung's latest flagship, the S10, only has 5G on the top end model while the other 3 models use 4G. 5G will be a premium-only market for the first couple years.

The last report from Counterpoint Research showed that Apple had 61% of the $600 and up smartphone market and a whopping 79% of the $800 and up market. Don't kid yourself - Apple will be selling more 5G devices than any other vendor for quite some time.

Can you post a link for this?

 

[Kaledatheone]

So, a completely made up number with no basis in fact whatsoever.

They have to have something to write about so making up BS comes naturally!

 

[boccabella]

Enough already with the headlines-as-fact when it clearly isn’t, what are you trying to accomplish by doing this?

 

[Kaledatheone]

The merits of the trial didn't matter Apple had nowhere else to go if they want to sell phones in 2020. I am not saying that Qualcomm didn't have a gripe or anything like that. I am simply saying it become completely irrelevant.

Too many people assume that Apple settled because they need 5G when widespread 5G deployment is years away. The settlement may possibly be more compromise than whether one or the other than won and in this case both won