Commentary

Qualcomm, Apple Settle Ugly Disputes, Letting The 5G Chips Fall

Apple and chipmaker Qualcomm unexpectedly put an end to their two-year, three-continent, multibillion-dollar squabble over patent royalties yesterday by announcing a six-year license agreement, with possible extensions, and agreeing to dismiss all ongoing litigation worldwide.

The settlement, which includes an unspecified payment from Apple to Qualcomm, came as the parties were making their opening arguments before a nine-person jury in a San Diego federal courtroom.

“Just how much the deal might affect people’s phone prices will not be clear until more financial details of the settlement are disclosed. But the effect on the price of individual handsets is not likely to be large,” Don Clark and Daisuke Wakabayashi write for the New York Times.

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“Qualcomm had claimed Apple was violating its patents by withholding royalties, while Apple argued Qualcomm had been overcharging for those patents for years, abusing its dominant position in the market. At stake was the future of Qualcomm’s licensing model and billions of dollars in royalties that Apple has either paid or kept. Until the settlement was struck, Qualcomm had lost more than $25 billion in market value amid the looming threat,” Tripp Mickle and Asa Fitch write for the Wall Street Journal.

“Qualcomm stock rose more than 20% after the news broke, boosting its market cap by about $14.5 billion to more than $84 billion. It’s Qualcomm’s best day since 1999. Apple was up less than 1%. Intel, a Qualcomm competitor, sharply dipped on the news before recovering,” CNBC’s David Faber reports.

“The fact that Apple has agreed to once again purchase chips from Qualcomm for what is likely 5G versions of the iPhone, appeared to indicate that Apple was concerned about the schedule for 5G modems from Intel, its current and sole modems supplier,” Jim McGregor writes for Forbes.

Indeed, Apple can now “fire up the engines,” Isobel Asher Hamilton points out for Business Insider. “Previously Wall Street analysts had voiced concerns that Apple was lagging in the race to faster 5G phones, in part due to its fight with Qualcomm. Soon after news broke that the companies had settled … Intel announced it was pulling out of the 5G modem race entirely. ‘It has become apparent that there is no clear path to profitability and positive returns,’” said CEO Bob Swan, Hamilton adds.

“Apple has filed lawsuits against Qualcomm in China and the UK, while Qualcomm has responded with countersuits in China and Germany,” Shara Tibken writes in a comprehensive piece for CNET covering all aspects of the dispute over the years. Those will be put to rest also. But Qualcomm still faces one big challenge in the U.S.

“In January 2017, the Federal Trade Commission brought its own case against Qualcomm stemming from the same issues. Qualcomm defended itself in an 11-day trial in January. The company is awaiting a decision from Judge Lucy Koh, who presided over the trial,” which was held in U.S. District Court for the Northern District of California, Reed Albergotti reports  for the Washington Post.

“The terms of Apple’s new licensing agreement with Qualcomm were not disclosed Tuesday, and it’s unclear whether those terms will still put Qualcomm in the crosshairs of the FTC. Qualcomm could have licensing agreements with other companies that the FTC may find problematic,” Albergotti adds.

Yesterday’s deal “caught the technology industry by surprise,” write the NYT’s Clark and Wakabayashi. “In the past, Apple had refused to settle an intellectual property fight with Samsung, pursuing the case for seven years all the way to the Supreme Court before calling a truce last year. The case with Qualcomm had become so ugly and so personal that observers thought Apple would be even less likely to settle quickly.”

“I’m floored,” Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, tells them. “Qualcomm got the bigger win because it had the most to lose and the most to gain. And it ended today.”

“Remember this for the next protracted, hyperbolic and ugly spat between giant companies: It’s never about the principle. It’s always about the money,” observes Shira Ovide for Bloomberg.

More specifically, with 5G a-coming, it’s about continuing to gain on the Androids. Which is exactly what Apple did this last quarter, as Marketing Daily’s P.J. Bednarski reports.

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