Just wait until they develop its new modem and they drop Qualcomm.... the lawsuits will rain again for patents infringement, supposedly. Chapter 2
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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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After Apple figures out AirPower which is at most a 2 on a scale of 10 relative to the complexity of 5G.
$5 billion ain’t that much considering... Apple is $1000+ billion company.
Small change, they will get it back
Small change, they will get it back
yes, apple calculated that it is better to pay this little amount of money to settle it rather than larger after the jury...
I'm not sure what you mean by the Bell reference, but the invention of the telephone was fraught with litigation, patent fights, and evidence of corruption:
https://en.wikipedia.org/wiki/Invention_of_the_telephone
https://en.wikipedia.org/wiki/Alexander_Graham_Bell#The_race_to_the_patent_office
Yes, they’re definitely going to single source 5G modems, but Qualcomm would collect royalties on the 200+ million devices no matter whose chip they use—Intel, Samsung or Qualcomm themselves. And it’s not just 2007; the rate was $7.50 through 2011, and even under the 2013 agreement when iPhone quantities were at 150 million and even 230 million, the royalty was still under $10.
To be clear, I’m talking about the royalty rate. A huge win for Qualcomm would have been the $17-18 that Jeff Williams said Apple was facing after the expiration of the 2013 agreement, and which Apple and Qualcomm weren’t able to come to terms on until a couple days ago. (The 5% on a max of $400 that Qualcomm charges for multimode devices.) Instead, Qualcomm settles for about 2%—a rate that doesn’t even keep up with inflation, and they throw in 4G and 5G patents for free—when Qualcomm spends $5 billion a year on R&D. Does that sound like a huge win for Qualcomm?
My point is simple. To everyone who’s claiming this settlement is some kind of a big win for Qualcomm: Is Qualcomm submitting to Apple’s 2007 price point—possibly even less than the 2013 agreement, which we only know was sub-$10; and throwing in 4G/5G patents without charging any higher royalty rate, evidence that Qualcomm rolled Apple? Because to me it seems like Apple beat Qualcomm to a bloody pulp on the per-device royalty rate.
Similarly, Apple paying $5-6 billion when the back royalties were $7-8 billion according to Qualcomm doesn’t seem like a big win for Qualcomm either. It seems like Qualcomm had to eat a couple billion dollars to get Apple to agree to drop this lawsuit.
Keep in mind, Apple wanted to dual source the 2018 iPhones, but Qualcomm wouldn’t support them—no license, no chips. But suddenly two weeks ago, Qualcomm signals they’re ready to make a deal: Qualcomm President Cristiano Amon, when asked (in an interview with Axios) whether or not Qualcomm would work with Apple despite their legal battle, said, “We’re still in San Diego, they have our phone number. If they call, we’ll support them.” That doesn’t indicate Apple’s the one that’s desperate for a settlement.
So Apple gets their price on the royalty rates, gets a discount on the back royalties, gets a direct license that will allow them to build their own baseband chip, gets a guaranteed supply of Qualcomm’s excellent 5G modems at a price acceptable to them, and somehow this is Apple caving because they’re desperate for 5G in 2020? Yeah I don’t see it.
Sure thats possible, if you ignore all the patents held by Qualcomm.
Apple has to pay royalties no matter whose baseband chip they use. They don’t have to buy Qualcomm’s chip though. They’re in the process of designing their own, but they’ll buy from Qualcomm until theirs is ready.
lol...really it doesn't take much to see that Apple settled for and ends up paying more than when they brought the suit. Remember this was Apple suing Qualcomm. Then they settled after only 2 days into a suit them brought on for MORE money than they complained about in their suit.
To me and the majority of people on this forum and around the internet.....Qualcomm won big time.
Bad settlement equals won the case...otherwise why settle at all?
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Then to counter point....
IF Apple had Qualcomm in such a bad position why not see it through and get the patents invalidated? That would have weakened Qualcomm even more. That would have led to an ridiculously beneficial judgement and royalty fee payments.
Apple settled after only 2 days into a suit they brought on QUalcomm. If as you say they stood to gain more to go through witht he suit then....why settle at all for more than what they sued for to begin with? Apple has been know to go through with suits in the past that took year and years to fruition....why not now then?
They knew if this went through to a verdict and they lost they stood to lose so much more in payments to Qualcomm
They also would not have been able to contract with Qualcomm for more modems and chips going forward.
Then with 5G right around the corner.....Qualcomm is the only supplier for 5G chips worth a damn.
Apple could see the longer this trial went the more likely they would not have a supplier for 5G modems for the 2020 iPhones. They saw that a unfavorable verdict would have cost them even more in the long run.
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But they can they design and builds a chip without using some existing technology? Are they building it with all NEW technology? I don't think they can design a 5G modem and or chipset and not use some existing technology that someone holds a patent on. They will pay for the use of those patents no matter if they make their own modem or not.....
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I have a solution for Apple. Just sell their devices exclusively through AT&T, who already have this thing called 5Ge. Their loyal customers won't care if it's not real 5G. This should give them time to "invent" the real 5G modem on their own and hope it won't go the way of their wireless charging pad.
My guess is there came a time when one has to know when to hold and fold. A protracted trail would, IMO, have been disadvantageous to both parties. Apple wouldn’t haven’t gotten chips and Qualcomm wouldn’t have gotten apple’s billions and would have been further embroiled in legal proceedings for the next several years further draining their resources. Seems like a win-win to settle.
We will never know...Apple capitulated. But I think this was more about future supply chains and 5G modems.
A protracted legal battle with the only quality supplier of 5G modems was not in Apple's best interest.
We don’t know the behind the scenes, but Apple isn’t stupid and played this like a chess game. It wasn’t in Qualcomm’s best interest for a lengthy legal battle either. So my guess is both capitulated or compromised; except it cost Apple money.
I'd ask... Have you followed this case (i.e. the one which had just gone to trial and which you are referring to) to understand what's happened in it, and what it is and isn't about? Because, some of the things you've said don't make sense. They suggest that you haven't followed the case enough to know what it was about.
For one thing, this was a consolidated case. It represented Apple suing Qualcomm AND Qualcomm suing Apple and its contract manufacturers. Qualcomm was, effectively, suing Apple for far more than Apple was suing Qualcomm for. There was very little doubt that, as a result of these cases and other issues, Apple would end up owing Qualcomm a large amount of money. Yes, Apple was asking for claw back of some royalties which had been paid to Qualcomm. But Qualcomm was also asking for claw back of some rebates which had been paid to Apple. And Apple was asking for the contract manufacturers' existing contracts to be enforced, which would effectively mean Apple owing Qualcomm more than 2 years worth of back royalties.
Even putting other considerations aside, Qualcomm had indicated 2 quarters ago that it was owed $7 billion in back royalties. Accounting for the last 2 quarters, that amount would increase to $9-10 billion. That's part of what Qualcomm was, effectively, suing Apple for. Just as Apple, as you suggested, settled "2 days into a suit [sic]" which it brought, Qualcomm also settled "2 days into a suit [sic]" which it brought. And, likely, for considerably less than it was effectively asking for.
For another thing, you ask why Apple didn't "see it through and get the patents invalidated?" That wasn't an option. Apple had asked to have the court decide whether certain patents were invalid (and whether they were exhausted and whether they were infringed). Qualcomm avoided having the court decide by agreeing to never sue Apple (or the contract manufacturers) for infringing those patents. That made the consideration of their validity moot. It was a legal maneuver to avoid having the court decide things which Qualcomm didn't want to have decided. Apple challenged certain patents and Qualcomm responded by, essentially, giving up its patent rights (in so far as Apple was concerned) so that those patents couldn't be challenged - at least not in this case. The point is, even if Apple had pushed this case to a final decision, it wasn't going to get a decision that certain patents were invalid. That was no longer a consideration in the case.
One thing that Apple was asking for in this case, and which it in theory could have gotten if it saw the case through, was a declaration that the licensing agreements which Qualcomm had with the contract manufacturers were unenforceable. But with the settlement, what it got was - for its purposes - the functional equivalent. It now has a direct licensing deal with Qualcomm. So the licensing agreements which Apple was challenging no longer matter when it comes to the products the contract manufacturers make for Apple. The royalties owed on those products will be based on Apple's new agreement with Qualcomm. For all intents and purposes, Apple got what it wanted on that issue with the settlement.
More generally, the idea that Qualcomm had the leverage in this dispute and thus Apple took a bad settlement and, effectively, lost is... bullocks. It's contrary to everything that's happened in this dispute over the last couple of years and it's even contrary to this UBS estimate of the effects of settlement terms.
Yes, Qualcomm likely had some leverage based on the 5G modem availability issue. But Apple had a lot of leverage based on a number of other issues. Qualcomm's relative position might have been a little better than it was, say, a couple months ago. But it was still worse than it was, say, a few years ago. Qualcomm is the party which, all along, needed this dispute resolved.
Qualcomm had repeatedly tried to find leverage to force Apple to the negotiating table. It had, with only minor exceptions, failed. It, e.g., failed with the USITC to get a meaningful exclusion order against Apple. Even the tiny win some thought it had in Germany got taken away from it a few days before the settlement with Apple was announced.
In the case we've been discussing, it had a number of important legal decisions go against it. It had asked back in 2017 for a preliminary injunction against the contract manufacturers, to stop them from making Apple products (with the expectation that would result in the resumption of royalty payments). In support of that request, it argued that it was suffering irreparable harm from the ongoing dispute and Apple not making royalty payments. I believe it described the situation as, among things, untenable. It expressed concern that the dispute could drag on many years and argued that the dispute could do great damage to its business and reputation. But it was denied a preliminary injunction. Time and time again its efforts to find leverage against Apple have born no meaningful fruit.
Qualcomm's financial results and stock performance have told the same story. It was paying a significant price for not having been able to get Apple to settle. In the fourth calendar quarter of 2018, when Apple was no longer using Qualcomm modems in its newest models, its equipment revenues dropped 20% YoY. It projected a similar decline for the following quarter. Its results had already been hurt by the ongoing dispute, this just represented an acceleration of the damage. At one point in the case we've been discussing, Qualcomm compared the situation - with Apple not making royalty payments - to a house being on fire.
In the third calendar quarter of 2018 alone, Qualcomm spent about $20 billion - an amount more than a fifth of its market cap - to buy back its own stock. Yet, its stock price was still in the toilet before this deal was announced. Those stock repurchases, and others which came after, were underwater before this settlement. They don't look so bad now, but before the deal they looked ill-advised.
The point is, for myriad reasons, Qualcomm needed to get a deal done. Perhaps Apple was willing to move a bit closer to what Qualcomm was willing to offer because of growing 5G concerns. But it was still Qualcomm that really needed this dispute to end. And Qualcomm, likely, still gave a lot of ground to get a deal done. I think, e.g., there's very little chance Apple had to agree to chip supply exclusivity in this settlement. I also expect that it will have better transparency when it comes to what IP is covered. It will also have more control over the royalty accounting - what gets reported to Qualcomm - now because it has a direct license.
We should keep in mind that Qualcomm says its all inclusive 5G licensing rate is 5%, with a per-device base cap of $400. That would be $20 per device for most iPhones. And Apple was certainly paying (or would have been paying) more than $10, and likely closer to $14, per iPhone before it filed suit. If the agreed on cost will now be $8-9 per device, that would seem pretty reasonable from Apple's perspective.
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Agreed that they both settled...or else the settlement would not have happened....
But I think it was more urgent for Apple to settle than for Qualcomm.
The market apparently saw the situation differently.
And Qualcomm itself, through its legal filings and in-court arguments, portrayed the situation differently.
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We don't know how accurate this estimate is. But I don't have trouble believing it's fairly close; it's in the ballpark of what I would have expected.
That said, if it is accurate I wouldn't say it's something that's bad for Apple. A per-device royalty cost of $8-9 would be below what Apple was effectively paying (or would have been paying) when it started withholding payments. And it would be dramatically below what Qualcomm says it wants for (all inclusive) 5G licensing.
Well according to the article below...one of numerous articles, Qualcomm added 25 to 30 Billion in market value after the settlement. That sounds like a very big win for them...according to the market.
Qualcomm gains $30 billion in market value after Apple settlement
https://www.nbcnews.com/business/business-news/qualcomm-gains-30-billion-market-value-after-apple-settlement-n995571
I am waiting for the day when iPhone has Apple modem and Apple throttles the speed , so that you are forced to buy a new iPhone.
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You misplaced the decimal point, it should be 119.99$
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I agree on this. With iPhone sales falling, I don't think Apple was ready to take the risk of not having an iPhone with Qualcomm modem.
Also, maybe they looked at the whole scenario and realized that Qualcomm holds the base patents which means they will still pay Qualcomm even if they make the modem in-house.
Yes, that's right. QCOM moved dramatically to the upside as soon as the news of a settlement broke. That's without the market knowing what the terms were. (We still don't know with much precision.) It was the mere fact that a deal had been agreed to which moved QCOM. The market previously (correctly) saw great risks for QCOM in there not being a deal, in the dispute dragging on for a while. So, with that great risk removed, the market valued QCOM much more highly than it previously had - and it did so immediately. Again, that was without regard to what the terms were.
If the market had seen great risk for Apple in not having a deal done and the dispute dragging on for a while, then AAPL would have moved significantly to the upside when the news broke. The great threat to Apple's business would have been removed.
Getting a deal done was absolutely a win for Qualcomm. It was a win for both parties, but it was a bigger win for Qualcomm because Qualcomm needed the dispute settled more than Apple did.
But that's a different thing than saying the agreed on terms were more favorable for Qualcomm than for Apple, or that Apple caved more so than Qualcomm. To the contrary, the reality that a deal getting done, in itself, represented a bigger win for Qualcomm than for Apple would suggest that the agreed on terms were more favorable for Apple. And, if the USB estimates are fairly accurate, that - in combination with what else we know about the deal and what we can otherwise be confident in - is the case. Apple is in a much better position with regard to its relationship with Qualcomm than it was when it started withholding royalty payments and filed suit. Could it have come out better? No doubt it could have. Its maximum point of relative leverage may have come a few months ago. But, likely, it still faired quite well.
Please add the followings to your list:
* Japan's antitrust regulator recently reversed ruling against QCOM (https://www.sandiegouniontribune.co...-fi-qualcomm-japan-ruling-20190318-story.html) exonerating QCOM in entirety.
* China's NDRC ruled against Qualcomm in 2015; it however agreed to Qualcomm's royalty basis and rates (albeit at 30% lower rate for domestic mobile device makers only) (https://www.winston.com/en/thought-...c-decision-in-the-qualcomm-investigation.html)
* South Korea's Supreme court partially reverses QCOM's fine (https://www.reuters.com/article/us-...m-after-decade-old-legal-battle-idUSKCN1R203V)
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More than the settlement amounts it supports Qualcomm's business model. There's also the FTC lawsuit accusing Qualcomm of anticompetitive practices, the lawsuit Apple maneuvered the FTC to make. Apple had to make this settlement with Qualcomm now because it could not source modems from other suppliers in time for 2020 which shows Qualcomm making competition instead of impeding it and helping Apple not harming it. This is reinforced by Intel announcing it was leaving the smartphone modem market because of low margins and since Apple was Intel's only customer that means Apple wasn't paying enough for them to continue to continue to invest in 5G.
Apple knew all along, without question, that regardless of how it sourced modems going forward it would have to pay Qualcomm significant amounts (for the foreseeable future) for its IP. It also knew it would have to pay Qualcomm in arrears for having used its IP. Those aren't things which Apple realized along the way.
The questions were, how much was it going to have to pay and what other terms was it going to have to agree to. Apple had long wanted a direct licensing deal with Qualcomm. Qualcomm had long wanted one as well, as long as Apple was willing to agree to certain terms. If Apple wasn't, Qualcomm was content to fall back on the existing agreements it had with Apple's contract manufacturers. They weren't inclined to balk at Qualcomm's terms.
Over time and for various reasons - e.g., regulatory actions, market conditions, other points of leverage - Qualcomm lost the ability to impose the terms it wanted. So, now Apple and Qualcomm have a long-term direct licensing deal. That, I think, is a good thing.