I've said it's a significant part only to be told by certain Apple users no, it's not. Without it, you don't have a PHONE.... it's that simple.
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New Article Delves Into Origins of Ongoing Legal Feud Between Apple and Qualcomm
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Yes sir, you are working under a very common misunderstanding. Silicon != software.
I think the fact that Qualcomm not only creates and sells IP, but also makes and sells chips that use that IP, is what confuses people. They're not the same product.
No modem chip... no matter who makes it, even Qualcomm... comes with a full 3G or 4G license. (In fact, they can't - see below). In this way, their modem chips fairly compete on chip price alone with other chip makers.
Instead, Qualcomm charges phone makers separately for their 2G/3G/4G IP that runs on the chips.
AND SO DOES EVERY OTHER 2G/3G/4G PATENT HOLDER, EVEN THOSE WHO DO NOT MAKE CHIPS.
Remember, phone makers are not just paying Qualcomm for the IP to be able to use a modem chip. They're also paying Nokia, Sony-Ericsson, Motorola, LG, Samsung and many others... all of whom list default royalties charged by percentage of phone price.
THAT IS WHY THE IP IS CHARGED SEPARATELY FROM THE PURE SILICON CHIP COST.
With some exceptions, chip and IP payments are not normally related for cellular. Just as buying a CPU does not come with an iOS or Windows license. That IP is negotiated separately.
Qualcomm could stop making chips tomorrow and their IP royalty would stay the same... just as it did before they happened to also make chips.
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Sounds to me that percentage of profits vs flat tax isn't really the issue here, but rather the actual % rate.
At the very least, it seems other companies in the electronics industry also consider Qualcomm's % of profits from patents to be too high, since they've joined with Apple in the suit.
How much value do said patent(s) lend to the final product, and what % of profits should that value command? As it relates to modems, does the patent's value change related to the overall product over time? I think these questions lay at the heart of the dispute.
At the very least, it seems other companies in the electronics industry also consider Qualcomm's % of profits from patents to be too high, since they've joined with Apple in the suit.
How much value do said patent(s) lend to the final product, and what % of profits should that value command? As it relates to modems, does the patent's value change related to the overall product over time? I think these questions lay at the heart of the dispute.
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Let’s see if I get this straight:
- Qualcomm has to pay over $975 million in China over antitrust violations regarding licensing practices.
- Qualcomm has to pay over $873 million in South Korea over issues with, again, licensing.
- Qualcomm lost arbitration and has to pay Blackberry $815 million over patent royalties.
- The FTC is currently investigating Qualcomm.
- Apple is fighting Qualcomm over patent licensing practices.
- Samsung even filed in support of the FTC against Qualcomm.
Yet despite all of this, people are STILL defending Qualcomm? I guess hatred of Apple trumps all logic.
- Qualcomm has to pay over $975 million in China over antitrust violations regarding licensing practices.
- Qualcomm has to pay over $873 million in South Korea over issues with, again, licensing.
- Qualcomm lost arbitration and has to pay Blackberry $815 million over patent royalties.
- The FTC is currently investigating Qualcomm.
- Apple is fighting Qualcomm over patent licensing practices.
- Samsung even filed in support of the FTC against Qualcomm.
Yet despite all of this, people are STILL defending Qualcomm? I guess hatred of Apple trumps all logic.
No, this is not how it works. Read up on FRAND and other related legal and industry issues. The summary of the article leaves out the major issues. There is a reason that Qualcomm is under investigation in multiple countries and has had preliminary findings against it in multiple countries regarding illegal pricing practices.
When you buy server software, you also have to pay license fee, usually based on number of CPUs or number of user connections.
Remember the netbook? MS charged dell,HP, etc based on screen size. The OS cost less for lower sized screens
Let use your points to provide counterpoints:
- On specialized apps: Specialized is an abstraction only quantifiable by the purchaser. The app either matches requirements or it does not; you either buy or you do not.
- On licensing fees: MS certainly charges licensing fees strategically -- they do not price based on retail price since they could care less about the OEM's end-user pricing, but they do price by volume, and by breadth: home vis pro; server vis desktop.
Again, free market-place at work.
Yes, exactly. When every phone maker was making a fat profit, they didn't care as much.
Now they're under pressure, and looking for ways to cut costs.
The problem is, they could also kill the goose that lays the golden eggs. Without high profits, R&D based companies like Qualcomm would have far less incentive to push wireless standards forward.
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Someone brought up anti-trust suits. What those were mostly about, was Qualcomm charging a single price that included all their IP, even if you didn't need all of it. (Which is again, not uncommon, and was an accepted cellular licensing practice for decades. Qualcomm's licensing hasn't changed; only the effectiveness of government lobbying has.)
But notice something even so: The Korean FTC did not change the royalty scheme. China's own regulatory office, who can do anything they want, also did not change the royalty scheme. In fact, they ended up setting the same end per-device rates that Apple has complained about.
tl;dr - The option to charge by device price is legal and not uncommon, especially with cellular patents, as much as Apple would dearly love to make it otherwise. (But who can blame them? They want more profit.)
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I agree that Qualcomm may be violating FRAND- I don't know the details of the case. My arguments are mostly directed toward those who believe the practice of varying price of a component based on profits earned is "wrong." Whether the price is too high (in sense of violating FRAND and monopoly laws) is another discussion.
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I am defending Qualcomm's ability to price as they wish (notwithstanding monopoly or frand issues). Many are acting like it's wrong to price based on profits: this is not wrong. Now if the price is too high and provides a monopolistic advantage, then we have a separate discussion.
Indeed. Plus Apple itself is no stranger to the idea of charging by percentage of product price, or wanting high royalties:
- Apple is quite happy to charge app developers 30% based upon the app price, instead of a flat hosting fee.
- Apple is really happy to charge banks based upon the amount of each Apple Pay purchase (for doing nothing during the transaction), instead of a flat fee at most.
- Apple demanded in court, a percentage of the full profit of every phone that Samsung sold, for a few minor patents.
- Apple's own initial royalty rate for MFi (Made for iPod/iPhone/iPad) devices was 10% of their retail price, with a $10 minimum.
- Qualcomm's ~3% of wholesale (with a maximum cap) for high speed comms sounds like a bargain in comparison to the above.
And that's okay, btw. Every company wants more profit. What's not okay is pretending it's about anything else, especially when you do such pricing yourself.
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I don't know patent law at all, but I have read where 'experts' expect Qualcomm to eventually lose this case, after a very long and drawn out battle. Apple has also sued Qualcomm based upon a Supreme Court ruling earlier this year that also has the FTC suing Qualcomm
If I go to the store and buy a 1 pound steak at $20 and throw it on the grill, it’s a $20 steak.
If I go to a restaurant and order that same steak it’s $80 yet costs the chef $20.
Does the distributor or slaughterhouse get an up on that steak served in the restaurant? Nope. (Well actually they get a discount for volume buying but you get the point)
If I go to a restaurant and order that same steak it’s $80 yet costs the chef $20.
Does the distributor or slaughterhouse get an up on that steak served in the restaurant? Nope. (Well actually they get a discount for volume buying but you get the point)
They very well could. Although previous judges have held time and again that cellular patent pricing was fair, and have said that Apple needed to stop trying to use the courts to negotiate a lower rate, some judges now favor forcing all royalties to meet a different set of legal requirements.
Qualcomm and other IP holders have not changed the way they have charged for decades. What changed, is the political climate and corporate influence.
One of the three FTC Chairmen at the time wrote a dissent against that FTC lawsuit, calling it baseless. She's now the FTC head, and the other two have been replaced by the new administration.
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This is a FRAND issue, and "fair" is at the heart of the issue. If you take that away, you're arguing a hypothetical case that has nothing to do with the Qualcomm/Apple dispute. If this wasn't essential technology to a standard and if Qualcomm had not agreed to FRAND, then Qualcomm could price as they wish and you'd find much less disagreement. But that's an alternate reality that doesn't exist here.
I agree with your analysis of the situation, but if you read this thread, FRAND is not what most have issue with here. I'm "arguing" with specific users on this thread who believe profit-based pricing is wrong.
They have issue with Qualcomm's ability to price according to profits. Actual pricing (the actual numerical cost to license) being fair or not is one issue- that's up to the courts to decide.
Ability to structure pricing that is not a "flat tax" is another thing that many people on this thread think is "wrong." Just look at the multitude of examples in this thread from Microsoft to Toshiba to Apps on the App Store. Many believe a profit-based pricing is wrong (FRAND issues aside).
Wow. So much analysis and outrage based on a written agreement none of us has seen. It depends on what the contract says. That's where it starts.
Apple could be wanting to change the terms using the heft of its purchasing volume, and maybe Qualcomm feels it's missing out on significant retail price increases in the phone market it is supplying and it wants more money. That's OK, neither party is right nor wrong, it's legal and fair business strategy. This "renegotiation" could even be built into the agreement. Again, we huddled masses have not seen the contract so we have no informed position.
If you want to avoid these kinds of problems, write a better contract that protects your current and future interests. It won't end conflicts, but it gives you leverage.
Apple could be wanting to change the terms using the heft of its purchasing volume, and maybe Qualcomm feels it's missing out on significant retail price increases in the phone market it is supplying and it wants more money. That's OK, neither party is right nor wrong, it's legal and fair business strategy. This "renegotiation" could even be built into the agreement. Again, we huddled masses have not seen the contract so we have no informed position.
If you want to avoid these kinds of problems, write a better contract that protects your current and future interests. It won't end conflicts, but it gives you leverage.
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I am about to order the iPhone X on Verizon even though I have an ATT account to get the Qualcomm modem and now I read your post and see that what I thought was true, may not be.
IMHO Qualcomm makes a superior modem. I have had the Intel on Iphone 7 Plus and have had bluetooth connectivity problems as well as some connection problems on cellular. Now I'm frustrated.
We know a fair amount from court filings.
For one thing, we know that Apple itself does not have a Qualcomm license. They never did. Foxconn and the other factories are the ones who have licenses, as they act as the manufacturer of all kinds and brands of devices, not just iPhones.
This hat trick has allowed Apple to proxy pay far less in royalties, since the device price for royalties is what Foxconn charges Apple, not the hugely greater price that Apple charges customers.
Now what we don't know is the exact wording of some of the other agreements Apple and Qualcomm had. They each have publicly interpreted their shared history quite differently.
For example, Apple claims Qualcomm bribed them to use 3G instead of WiMAX. Conversely, Qualcomm says Apple threatened to use WiMAX in the US instead of 3G if they weren't paid a bribe. Knowing what the rest of the world had already chosen as a standard, and the way Steve Jobs liked to play hardball, which claim makes more sense?
So it'll be interesting to see what comes out in court.
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Where did it say Apple is trying to insist Qualcomm get nothing? They're willing to pay, they're quibbling about the rates.
A little off-topic but: Now that could be a dream come true for some of us..........No. Gonna buy Sony first.
1. Integration of arguably the best TVs on the market with the Apple ecosystem
2. Improvement of sometimes lacking Sony software resident in their TVs
3. The possibility of a real Apple TV after all, replete with 4K, HDR10, the latest Dolby sound and picture enhancements
4. Acquisition of Sony Entertainment and their talent pool to further Apple's ambitions in the entertainment arena
5. BluRay ceasing to be 'a bag of hurt' and adoption by Apple for media playback and storage/archiving
6. Integration of Sony's PlayStation with AppleTv and the AppStore, for a mind-blowing gaming experience
Yeah, on the whole, that could be a 'net-positive' event.... licks lips, then realizes.. hell not frozen yet
If I recall correctly...
Qualcomm is charging Apple, based on the price- EVEN IF THEY DO NOT EVEN USE THEIR CHIPS!!
So, in the case of the Intel iPhones, Qualcomm wanted the exact same exorbitant amount for an iPhone w/ an Intel chip as one w/ a Qualcomm chip... all because they were one of the 1st builders of CDMA modems like 2 decades ago? Seems flimsy to me!
If, as the article says... Apple pays $5 more in fees on a device that retails for $100 more; sounds like they pay 5% of retail price to use CDMA/LTE on their phones.
If true... then they give out $32.50 to Qualcomm on every $650 phone sold; to have cellular connectivity- imagine if they also had to pay $32.50 on every phone to connect to WiFi, then another $32.50 to connect to Bluetooth, then $32.50 to use NFC, perhaps another $32.50 to use touch screen technology, another $32.50 to use fingerprint scanning technology, etc.
Surely you can see in this example why FRAND was created....
It’s because this method of operation in untenable. If you create a technology that becomes a standard, you MUST allow access to said standard for a Fair, Reasonable, And NonDiscriminatory fee.
I think that Apple has a good case to show Qualcomm’s fees fit none of those descriptors.
We'll see what the courts think....
However, I find it interesting that Apple frenemies Google, Microsoft, Amazon, & FaceBook all have formally backed Apple on this issue.
I would hope that alone would give you pause in thinking that this is as simple as you portray it.
To tweak your analogy- it’s more like saying that even if you didn’t want to buy a Samsung tv for $200, they told you: “fine... but even if you buy a different $200 tv, you have to pay us $10 if you want to use cable... & if it’s a $2000 tv, you can go ahead and pay us $100 for that same ability- to use cable. We are changing your connectivity fee based on the price of your device! Fair & reasonable, yeah?”.
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Well, yeah. So does Nokia, Sony-Ericsson, LG, Samsung, Motorola, and many others whose IP Apple is using and paying for.
Here's the declared starting negotiation rates of some companies:
Of course, no one pays the full starting price. They negotiate it down, often with cross licenses. Nokia, for instance, was infamous for paying almost nothing in royalties due to its massive cross licensing. In the old days, Motorola refused even to take cash. They only licensed if you either fully cross-licensed, or if you bought their chips.
No, it's because they basically invented the CDMA standards that are used by everyone on the planet for 3G.
Any article that says that is wrong. It's about 3% of the factory price Foxconn charges Apple, since Foxconn is the one with the license.
So if Foxconn adds say, $10 of extra Flash memory, they also pay an extra ~32 cents to Qualcomm. Total extra factory boxed cost to Apple: $10.32. Apple, however, charges an extra $100 or more to its retail customers.
(Well, except that Apple is no longer paying Foxconn for the royalties they pay Qualcomm. Which means Foxconn can't pay Qualcomm. Which puts Foxconn in legal crosshairs instead of Apple. Pretty jerk move, really.)
People have weird misconceptions of FRAND. It's a voluntary contract entered into by contributing companies. There's no requirement for any particular pricing method. Only that the same basic rates apply to everyone.
(Obviously not even the same specific rates, since those depend on quantity, credit rating, contract longevity, cross licensing value, etc.)
If, for instance, a group created a working teleportation standard, I bet that they'd feel quite justified charging a FRAND rate of a million dollars per teleport pad
Apple, of course, wants to argue that Fair = whatever Apple feels like paying.
Not on the percentage thing. Almost everyone has patents they license the same way.
That group is backing Apple's desire that the ITC not ban iPhones from the US over violations of Qualcomm patents.
I would hope that I've cleared up some of your (common) misconceptions.
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