Apple Qualcomm settlement: 6 key takeaways

Ending two-year long battle over Qualcomm’s patent licensing practices, Apple and Qualcomm have entered an agreement to drop all litigation charges between the two companies globally. The deal will put the iPhone maker on a faster path to deliver 5G services on its devices. The Apple Qualcomm settlement includes a payment from Apple to Qualcomm. Here are the six key questions answered from the Apple Qualcomm settlement.

What did Apple and Qualcomm agree on?

Apple has agreed to pay Qualcomm a one-time lump sum amount. While the number is not known to the public, but Qualcomm said there will be $2 per share additional earnings for the year (as products ramp). Apple and its contract manufacturers have not paid Qualcomm for two years during this running dispute.

‘The companies also agreed upon a six-year licensing agreement. These terms were also not made public. The agreement clears the path for Apple to buy Qualcomm modems again. Qualcomm modems were designed out of the latest Apple launches in the Fall of 2018. This is a big win for Qualcomm,’ said Jeff Fieldhack, Research Director at Counterpoint Research.

Will Apple exclusively use Qualcomm modems for 5G smartphones?

Yes. The companies announced Apple will purchase Qualcomm 5G modems. Soon after the two tech giants entered into an agreement, Intel announced they are exiting the 5G modem business.

‘This is probably because Intel had a couple of false starts and problems getting an integrated 5G modem out to their one main customer—Apple. Intel’s modem business faced many challenges and splitting Apple volumes with Qualcomm made the business unit expendable,’ added Fieldhack.

Is there remaining litigation on the Apple Qualcomm settlement?

Yes. There are a few cases remaining. The most important remaining litigation is the Federal Trade Commission case versus Qualcomm.

Does the Apple Qualcomm settlement affect the Federal Trade Commission’s case against Qualcomm and its licensing practice?

The FTC case against Qualcomm for predatory pricing is still waiting Judge Koh’s decision from the trial which ended in January. It is unlikely Judge Koh will make a ruling which would conflict with the agreement Apple and Qualcomm have agreed upon. However, it is still an unknown and a risk for Qualcomm. Things look much better today than before the agreement with Apple.

Could we see an Apple 5G smartphone in 2019?

No. The companies were not working together on 5G and there is not enough time to get one out this year. The earliest we could see an Apple 5G smartphone is 2020. It would be possible for Apple to push forward a 5G smartphone earlier than its usual September cadence. A Spring 2020 5G device would be possible if work begins immediately.

Will this help 5G ramp globally?

Maybe. It is not known when Intel would have been able to deliver a 5G modem to Apple. Rumours were the timing continued to slip. Working with Qualcomm assures Apple will be able to deliver 5G modems in volume in 2020. Qualcomm is working with all global carriers launching 5G and has a head start on its modem competition. This could potentially help 5G ramp with fewer hiccups.

Apple relied on Intel baseband chips for its 2018 iPhones and also used Intel chips in some models of 2016’s iPhone 7. The company’s current line-up that includes iPhone XS, XS Max, and XR — has no Qualcomm modems at all.