Qualcomm and Apple agree to drop all litigation

Remigio Civitarese
Aprile 17, 2019

One of the most intense high tech legal battle in the recent has now finally come to an end. New iPhone models released by Apple in 2018 used Intel modem chips instead of Qualcomm chips.

They agreed to dismiss all litigation stemming from the disagreement, with both companies hammering out a six-year licensing agreement and a multiyear supply agreement.

Apple had already lost an earlier battle with Qualcomm last month when a federal court jury in San Diego decided the iPhone maker owed Qualcomm $31 million for infringing on three of its patents.

"All litigation between the two companies worldwide" has been dropped, the firms said in a joint statement. (Qualcomm has posted the same announcement.) "The settlement includes a payment from Apple to Qualcomm".

Qualcomm stock was trading at roughly $58 per share before the news broke, and is now trading at nearly $70 per share. More recently it was reported that Intel was running behind schedule and Apple was considering tapping on the shoulders of other OEMs such as Samsung, Huawei and even MediaTek. The agreement opens up the possibility that Apple could release a 5G iPhone sooner than expected with Qualcomm's modem technology.

Also in early 2017, the US Federal Trade Commission sued Qualcomm for alleged antitrust law violations in the sale of certain components and licenses to smartphone makers, including Apple. Analysts said not using Qualcomm would hinder Apple's ability to create a market-leading 5G iPhone. Apple accused Qualcomm of charging "excessive royalties" and withholding payments in retaliation for Apple cooperating with a South Korean investigation into the chipmaker.

Finally, the U.S. FTC case against Qualcomm that makes numerous same claims of anticompetitive behavior remains unresolved, with a decision expected at any time.

It is possible, of course, that Qualcomm and Apple realized it wasn't in their own mutual best interest to keep fighting each other. The more Apple innovates with unique features such as TouchID, advanced displays, and cameras, to name just a few, the more money Qualcomm collects for no reason and the more expensive it becomes for Apple to fund these innovations. With iPhone X, both Intel and Qualcomm were the suppliers.

Intel's decision leaves Qualcomm as the sole supplier of chips for Apple's iPhones. Apple has famously built its brand around being willing to do what it thought was right rather than kowtowing to market demand, but the company may not be willing to be the only brand not selling a 5G phone at a time when carriers and manufacturers are salivating to provide them.

Neither Apple's stock nor Intel's moved much in response to the news.

In February this year, Intel advised Apple that it would not have 5G modems until 2020. The two companies went back and forth over two years with each winning cases in different countries.

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