Apple Sued Qualcomm for Underpaid Royalties
In April two electronic giants finally had a mighty fight over who must pay royalties to who. Apple sued the leading manufacturer of mobile hardware in three countries: USA, UK and China. Qualcomm allegedly underpaid a significant amount or 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 party are equal. A bit tangled, isn’t it? Who owes who and why… It makes my head spin, honestly.
OK, the three lawsuits in three different countries are only a small part of troubles Qualcomm got 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 But they have withdrawn from the task leaving Qualcomm at the helm.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.
And when you’re the toughest guy in the neighborhood it’s enticing to flex the muscles. At the beginning of this year the United States Federal Trade Commission filed a complaint against Qualcomm for using anticompetitive tactics 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 “onerous and anticompetitive” stressing the fact that they had the negative impact on 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 suspected of charity, 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 and of its’ “no license, no chips” tax policy. In short, smartphone makers should agree to Qualcomm’s preferred licensing terms to get an 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 and you pay even more for NOT using it. This is really outrageous. And as 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, and Apple has been part of it as well.
Cupertino accused the long time supplier of charging the royalties for technologies 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.” Obviously, Qualcomm has been abusing his position as the supplier of the critical iPhone component. Apple decided they had enough of that nonsense and stopped paying and Qualcomm mirrored their move.
But it’s not only the clash of two corporations over money. This way or other the outcome of 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 OK to pay for innovation. It’s absolutely not OK to pay more for the manufacturer superego.
It’s now clear that mobile chips are strategic products and here we need diversity and 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 quote and don’t charge for anything, even shipment! – Sell used iPhone now for top dollar!