Apple and Qualcomm bury the hatchet in royalties battle

Apple and Qualcomm bury the hatchet in royalties battle

FPJ Web DeskUpdated: Wednesday, May 29, 2019, 12:14 AM IST
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Apple and American microchip manufacturer Qualcomm said on Tuesday they have agreed to “dismiss all litigation” against each other worldwide in what had been a sprawling battle over royalty payments.

The last-minute settlement cut short a courtroom clash between the tech giants just as it was getting underway in California.

For two years, the companies had fought a multi-front brawl that could have required Qualcomm to pay billions. The news sent Qualcomm’s stock price soaring more than 23 percent on Wall Street, its best one-day performance in nearly 20 years.

The deal includes a six-year license agreement with the option to extend for two years, and a payment to Qualcomm from Apple, the companies said.

At the heart of the battle were the royalties Qualcomm charges for its patented chips, which enable smartphones to connect to mobile networks.

Apple accused Qualcomm, which holds the most patents for chips, of taking advantage of its dominant position to charge exorbitant amounts for its chips or access to its patents. Qualcomm denied the allegations and accused Apple of abusing its position and of taking legal action to negotiate prices down.

“I believe both Apple and Qualcomm got deeper into this than they wanted to,” analyst Patrick Moorhead of Moor Insights & Strategy said in a statement. “This settlement should be good for the wireless industry as companies should feel free to invest in research, get paid a fair price for those inventions, and consumers take advantage of those innovations at a very rapid pace.”

Meanwhile, Intel has decided to leave the 5G mobile modem market to focus its efforts more on 4G and 5G modems for PCs and smart home devices, as well as its broader 5G infrastructure business. The announcement was no surprise after Apple and Qualcomm struck a settlement in towards ongoing patent infringement and royalties dispute related to Apple’s use of Qualcomm modems in the iPhone.

Either way, smart-phone manufacturers like Apple will need to look for their 5G infra elsewhere now and with the announcement, Intel just ceded its mobile modem business to Qualcomm.

“We are very excited about the opportunity in 5G and the ‘cloudification’ of the network, but in the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns,” Intel CEO Bob Swan said in a statement.

One may think about a deep concern behind Apple’s settlement. Considering the dragging battle with Qualcomm and the situation getting more complex involving multiple lawsuits around the globe, the decision may be the right step. Also, another operational concern for Apple may be Intel’s inability to supply next year’s iPhone models with 5G modems after it became sole supplier of smartphone modems last year.

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