Apple Sued Qualcomm for Underpaid Royalties
In April, two electronic giants finally had a mighty fight over who must pay royalties to whom. Apple sued the leading manufacturer of mobile hardware in three different countries: USA, UK and China. Qualcomm allegedly underpaid a significant amount of royalties to the American company. While Qualcomm claims to have suffered significant loss of profits in the second fiscal quarter due to unpaid royalties, Apple owed to the greatest LTE chips supplier. The sums underpaid by both parties are equal. A bit tangled, isn’t it? Who owes whom, and why… It makes my head spin, honestly.
The three lawsuits in three different countries are only a small part of troubles Qualcomm has gotten itself into. For those who don’t know, Qualcomm is one of the two world’s manufacturers of mobile CPUs and chipsets. (The other is MediaTek). Until recently, many electronic corporations developed their own mobile chips, Intel among them. But, they have withdrawn from the task, leaving
Qualcomm at the helm. Perhaps, you’re reading this very article from your mobile powered with a Qualcomm chip!
When you’re the toughest guy in the neighborhood, it’s enticing to flex your muscles. At the beginning of this year, the United States Federal Trade Commission filed a complaint against Qualcomm for using anticompetitive tactics, in order to ensure the position of the dominant supplier of baseband processors (or simply LTE chips) for smartphones.
The FTC labeled the supply and licensing terms Qualcomm offered to cell phone manufacturers, as “onerous and anticompetitive”, stressing the fact that they had the negative impact of the competitors. As an example of such behavior, a deal with Apple was cited. Qualcomm allegedly required Apple to exclusively use its modems from 2011 to 2016 in exchange for lower patent royalties.
Up until 2016, everything went smoothly for both parties. Apple only used Qualcomm modems in its line of iPhones, with the only exception of the iPhone 7 and the iPhone 7 Plus. Such a move led to certain compatibility and performance inconsistencies.
The FTC found that Qualcomm precluded Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016. Obviously, cooperation with Apple would have boosted other manufacturers effectiveness, and Qualcomm saw to it that nothing of the kind happened. But really, they’ve never been accused of being charitable, have they?
From the look of it, Qualcomm is accused of no less than a typical business strategy. No wonder Don Rosenberg, executive vice president and general counsel, accused the FTC back with “flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry” to motivate such a decision. But, it’s not that simple. Qualcomm is also found guilty of refusing to license its standard-essential patents to competing suppliers, as well as it’s “no license, no chips” tax policy. In short, smartphone makers are required to agree to Qualcomm’s preferred licensing terms in order to get access to the baseband processors, and that means royalties all right. But, then Qualcomm does a twist. If the manufacturer tries to implement the third-party LTE chips, the royalties are increased.
So, you pay for using the Qualcomm technology, but you pay even more for NOT using it. This is really outrageous. SInce Qualcomm was not going to put a stop to its anticompetitive conduct, the FTC asked the court to order it. Not that it will be the first time the corporation will have to stand its ground against such accusations. Qualcomm has already faced the anti-trust lawsuit in South Korea, which Apple was a part of, as well.
Cupertino accused the long-time supplier of charging the royalties for technologies in which they have nothing to do with. “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.” Apple stated. Obviously, Qualcomm has been abusing their position as the supplier of the critical iPhone component. Apple decided they had enough of that nonsense and stopped paying, to which Qualcomm mirrored their move.
But, it’s not only the clash of two corporations over money. Whatever the outcome of this argument is, it will influence us all. You see, technologies rule the world and exclusive technologies dominate it. They can’t be aggregated by one manufacturer, be it LTE chips, displays or an implant. Because, in this case, the ultimate price for the product will be very high. Unreasonably high. It’s okay to pay for innovation. It’s absolutely not okay to pay more for the manufacturer superego.
It’s now clear that mobile chips are strategic products and here we need diversity with as many players as we can get. I’d like to see Intel and AMD in this field, myself!
- Meanwhile, we buy old iPhones, Qualcomm inside, or not. We give fair quotes and don’t charge for anything, even shipment! – Sell used iPhone now for top dollar!