Feud Between Apple and Qualcomm Continues as Apple Stops Paying iPhone Royalties Completely [Updated]

Discussion in 'MacRumors.com News Discussion' started by MacRumors, Apr 28, 2017.

  1. MacRumors macrumors bot


    Apr 12, 2001

    About two weeks ago, Qualcomm reported that Apple suppliers were underpaying royalties in the second fiscal quarter of 2017, as a way for Apple to regain the unpaid royalties owed to the company by Qualcomm. At the time, Qualcomm wasn't sure whether or not Apple would continue to pay royalties at all, and today the manufacturer -- which provides LTE modems for iPhones -- has said that Apple will not pay its iPhone suppliers for royalties related to sales in Q1 2017.

    Furthermore, Qualcomm stated that Apple has "indicated it will continue this behavior until its dispute with Qualcomm is resolved." The royalty cut-off hurts Qualcomm because the manufacturer's licensing deals are directly with iPhone suppliers.


    The total loss of royalty revenue is estimated by Qualcomm to be about $500 million, which is expected to hit the company hard in terms of share prices and investors watching the dispute between the two companies. In its report adjusting the financial guidance for the third quarter of 2017, Qualcomm's previous estimate of $5.3 billion - $6.1 billion in revenue has been marked down to $4.8 billion - $5.6 billion, amid the ongoing suing and counter-suing actions taking place between Qualcomm and Apple.

    In a statement, Qualcomm general counsel Don Rosenberg said that the company will continue to "vigorously" defend its business model as the legal dispute continues.
    The legal dispute between the two companies follows a complaint filed by the Federal Trade Commission, stating that Qualcomm used anticompetitive tactics to remain on top of the LTE modem supply chain for smartphones. Another contributing factor to the bad blood between the companies centers around Apple's decision to start using modem chips from Intel in some of the iPhone 7 devices launched last year, instead of tapping Qualcomm exclusively like it usually does.

    Apple claimed that Qualcomm was charging unfair royalties "for technologies they have nothing to do with," since the manufacturer provides only one part of the whole of the iPhone. "Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined," the Cupertino company stated in its lawsuit.

    Update: In a statement to Axios, Apple confirmed that it will not make further royalty payments to Qualcomm until a court steps in to figure out how much is owed.
    Article Link: Feud Between Apple and Qualcomm Continues as Apple Stops Paying iPhone Royalties Completely [Updated]
  2. newyorksole macrumors 68040

    Apr 2, 2008
    New York.
    Messy... Messy messy messy.

    Apple needs to resolve this ASAP.
  3. Rob_2811 macrumors 68000

    Mar 18, 2016
    United Kingdom
  4. justperry macrumors G3


    Aug 10, 2007
    In the core of a black hole.
    Or Qualcomm.
  5. GrumpyMom macrumors 604


    Sep 11, 2014
    I don't quite follow this subject very well. The legalese is beyond my ability to comprehend this morning so I don't know who is playing the role of the bad guy in this one. I just know that we went out of our way to get iPhones with the Qualcomm modems for our at&t accounts and not the At&t iPhones with the Intel modems, based on warnings from fellow forum members. So I hope Apple gets this feud resolved.
  6. Rob_2811 macrumors 68000

    Mar 18, 2016
    United Kingdom
    Neither is covering themselves in glory.
  7. avanpelt macrumors 68030

    Jun 2, 2010
    Well, I'm sure this will get resolved after many months or years of litigation. There's no way Apple can switch to using Intel for all iPhone modems right now unless Intel has a CDMA modem we don't know about.
  8. 69Mustang macrumors 604


    Jan 7, 2014
    In between a rock and a hard place
    This is a big boy fight. Gives me that Mad Max vibe.
    "Remember where you are. This is Thunderdome. Death is listening, and will take the first man that screams."
    -Aunty Entity

    "Two men enter, one man leaves... two men enter, one man leaves."
    -MacRumors forum
  9. Gasu E. macrumors 601

    Gasu E.

    Mar 20, 2004
    Not far from Boston, MA.
    There is no good or bad "guy" in this. It's an inconsistency over interpretations of terms and definitions, and resulting money, between two legal entities. There's no morality involved.

    BTW, I would doubt Qualcomm would stop selling the actual chips to Apple. That additional revenue loss, on top of the loss of royalties mentioned, would destroy their business.
  10. Kajje macrumors 6502a


    Dec 6, 2012
    Don't mess with your big customers. And never, ever raise them pants or turn face forward. Sad but true
  11. meaning-matters macrumors 6502


    Dec 13, 2013
    Why? Some things get better when you let them rot.
  12. Koodauw macrumors 68040


    Nov 17, 2003
  13. bladerunner2000 macrumors 68020


    Jun 12, 2015
    Like the Mac Pro?
  14. hybroid macrumors regular


    Aug 12, 2010
    Genius. Wonder if Apple think the same. Maybe you should tell them.
  15. Rob_2811 macrumors 68000

    Mar 18, 2016
    United Kingdom
    Beat me to it .. :D
  16. thisisnotmyname macrumors 68000


    Oct 22, 2014
    known but velocity indeterminate
    not really. Apple can play hardball, this just puts more pressure on Qualcomm to wrap this up as soon as possible.
  17. GrumpyMom macrumors 604


    Sep 11, 2014
    Yeah. I guess I just don't understand...they've had this working relationship for years. Why a dustup now? And recently there was that ugly breakup with Imagination Technologies. And their epic lawsuit with Samsung. Then there's the feuding with Jay Z, the FBI, the EU, to name the ones I recall this moment. If Apple keeps this up they're going to need to ask Taylor Swift to write them a song.

    I swear I read these articles lately and think the only ones Apple is all smiles and sunshine with these days are China and India.
  18. Zirel Suspended


    Jul 24, 2015
    Like most Qualcomm-powered Android devices.

    Qualcomm only releases Linux blobs for the newer chips to force planed obsolescence.

    Qualcomm is the biggest supplier of Android SOCs and thus the main reason less than 1% of Android devices run the latest version.

    Qualcomm surely is a great company, which is pushing hard aptX Bluetooth headphones (they fully own aptX) versus the consortium-licensed AAC headphones. And used FUD against Apple and Intel.

    They need to go down, it's a job for Apple.
  19. benroberts3 macrumors member

    Oct 18, 2012
    Kansas City
    Hope you're all are excited for Intel modems!!
  20. velocityg4, Apr 28, 2017
    Last edited: Apr 28, 2017

    velocityg4 macrumors 601


    Dec 19, 2004
    As I understand it. Qualcomm does not have any chip fabs.

    Other manufacturers are licensed to build the chips. Those manufacturers pay a per unit license fee to Qualcomm for those rights. I don't know the details of these contracts. I assume those manufacturers are allowed to pass that onto the customer as a separate line item. Otherwise they would not be able to say "Apple isn't paying". I don't know why the licensing structure is like this anyway. Instead of the license simply part of the chip price and the fabricator being responsible for paying the license.

    I always thought this part of the licensing system is screwy. Once someone buys the chips they should be able to do with it whatever they please without further license fees. Any license fees should be taken care of by the fab and included in the per unit price. Not as a separate line item.

    Anyways, Apple is just paying for those chips from the manufacturer. Not the licensing fee to Qualcomm. So I assume Qualcomm is making bupkis.

    Edit: On another note. If Apple is legally required to pay license fees and they said they won't but keep getting more chips. Why can't Qualcomm get Tim Cook and other high level executives arrested and charged with grand larceny?
  21. agsystems macrumors 6502a

    Aug 1, 2013
    This little nugget explains everything "Patents controlled by Qualcomm cover the basics of all high-speed data capable mobile phone systems. It charges a percentage of the total selling price of the phone regardless of whether the device uses a Qualcomm chip or not."

    I can't believe Apple went along with this- they will fight this to the end as Steve would say 'go nuclear'

  22. Kaibelf macrumors 68020


    Apr 29, 2009
    Silicon Valley, CA
    The dustup is because Qualcomm didn't pay Apple for a pre-agreed rebate, and owes them about a billion dollars. As for the Imagination Technologies situation, Apple simply let them know they are going to go their own way and let them know very well in advance, and Imagination freaked out and started accusing Apple of some kind of infringement even though nothing has happened yet, so that's their poor management.

    Jay-Z? You mean Tidal, which isn't specific to Apple at all. They just want money and ownership of the content, but their business model is holding them back because, frankly, no one feels bad that these Tidal owners only have $100M in the bank instead of $102M.

    FBI - Apple refused to kowtow to government overreach and provide backdoors in everyone's security just because the FBI were inept in an investigation, and refused to be drafted as an arm of law enforcement.

    EU, god only know what's going on there. They are attacking Apple for a deal with one of their member states that no one complained about for 20 years.

    In other words, running a huge company is complicated, but with Apple, for some reason, these very routine disputed become public spectacles because these other companies always insist on making a scene about it.
  23. mrow macrumors 6502

    Aug 15, 2009
    That is the case for everything but the modem. Qualcomm sells the modems, which are manufactured for Qualcomm by a contract fab, directly to handset manufacturers.
  24. gigapocket1 macrumors 68000

    Mar 15, 2009
    It's crazy how you will stop paying one of your main suppliers... like, how do they feel about continuing to process new orders for chips..

    I think this just means Apple has a in-house solution ready to go for the iPhone 8..
    If I could save 2 billion in payments over the course of the year. I would develop my own as well lol
  25. obiwan macrumors 6502

    Jun 7, 2004
    So it's ok for Apple to charge it's customers 5 times more, yet when a company does the same to Apple they don't like it? Sounds like a case of double standards to me.

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