Apple Claims Qualcomm Refused to Sell Its Chips for the Newest iPhones

Posted on January 14, 2019 by Mehedi Hassan in Apple with 53 Comments

Welcome to the latest edition of the Qualcomm vs Apple saga.

Ever since Qualcomm was sued by Apple over excessive licencing fees and accused of being a monopoly, the company essentially went on a big war with Apple. The company first took down Apple’s older iPhone devices in Germany, and it’s even tried to get the company’s newest iPhones banned in China, a market where Apple’s new iPhones are already struggling.

And now, we have some new tidbits on the Apple vs Qualcomm fight. Apple’s Chief Operating Officer, Jeff Williams, testified in court on Monday, revealing some interesting details. Williams claimed that Apple originally wanted to use Qualcomm’s 4G LTE chips on its new iPhones, and Qualcomm refused to supply the chips, forcing Apple to use Intel’s slower 4G LTE chips instead.

The company previously used both Intel’s and Qualcomm’s 4G LTE chips on some older iPhone devices like the iPhone 7, though it mostly relied on Qualcomm for older devices. That deal obviously went down as soon as Apple started complaining about Qualcomm’s unfair licensing fees. “We were working toward doing that with Qualcomm, but in the end they would not support us or sell us chips,” Williams said.

Williams also revealed that Apple pays $7.50 per iPhone for Qualcomm’s tech, which is apparently too high, according to CNET.

Apple’s war against Qualcomm could lead to the company’s iPhones falling behind in the smartphone market. Apple’s main competitors like Samsung and other Android manufacturers are believed to be releasing phones with Qualcomm’s 5G modems later this year. And if Qualcomm continues to refuse to work with Apple, the company would have no other option than to use Intel’s 5G chips, which doesn’t come out till 2020.

At the end of the day, that may not matter too much for Apple. The company’s phones have never really been cutting-edge and that hasn’t affected the popularity of Apple’s iPhone brand.

As for Qualcomm, things are going to be challenging. The company is currently in trial, and its monopolistic practices aren’t really looking too good for the lawsuit. Only time will tell how this proceeds. Remember, Apple is suing Qualcomm for a whopping $1 billion, so there’s a lot at stake here.

Tagged with , , , ,

Join the discussion!


Don't have a login but want to join the conversation? Become a Thurrott Premium or Basic User to participate

Comments (55)

55 responses to “Apple Claims Qualcomm Refused to Sell Its Chips for the Newest iPhones”

  1. Daekar

    So... how is Qualcomm refusing to sell its chips to Apple relevant at all, regardless of the reason?

  2. dontbe evil

    payback time for apple ... with apple style

  3. madthinus

    So a company that is refusing to pay the agreed price, owing me billions is crying foul because I have refused to sell them more chips. Right, Gotcha.

  4. Tony Barrett

    Well, I can see Apple will be a year or more behind on 5G than Android, but that won't matter a jot. Apple users don't seem to care, and you can be sure that when Apple do release a phone with 5G, they'll spin it in a way that makes it sound like Apple did it better than anyone else, and their ever loyal followers were happy to wait for the best 5G implementation.

    Of course that won't be true, but many iPhone users believe everything Apple say, and will lap it up as usual.

  5. Stooks

    It is January of 2019 and the definition of “5G” has still not been clearly defined. It is a marketing buzz word at this point. Real 5G coverage is probably 3-5 years away.

    I have read that Apple is busy making their own modems and in the future will not use Qualcomm or Intel, like they have done with their own ARM chips.

  6. red.radar

    the CNET article is rather informative and builds the case that Qualcomm was extorting apple for trying to find a second source for its modems. It also lays the case that charging a patent on the final value of the device rather than the component supplied is unfair.

    Basically since apple wouldnt use snapdragon they were extorting the profit from loss of chip sale through modem monopoly.

    i Look forwards to Qualcomm’s rebuttal. I foresee the sticking point being that Qualcomm negotiated a discount for being sole source. Not that they raised the price for apple going elsewhere. It looks like if Qualcomm can prove they would sell chips at the undiscounted royalty then I think that closes the case.

    I do want to hear the ruling on the royalty charge for the whole product not just the chip. That one seems cut and dry. Qualcom has no right to the value of the whole device considering there are other suppliers to offer same solution and apple adds its own value (A12 processor ).

  7. Skolvikings

    I'm half surprised Apple hasn't just developed their own modems. They did that with the processor and other silicon in the devices. Considering cash on hand and all that, R&D costs shouldn't be a problem. Plus, if the iPhone ever truly does fall into irrelevance, in additional to services, Apple is sitting on some pretty impressive hardware tech they could license. Adding a really good mobile modem to that lineup couldn't hurt.

    • PeterC

      In reply to Skolvikings:

      Apple are Developing a modem chip. (due in 12-18 months). It’s one of the reasons Qualcomm are being so aggressive, as they hold patents that have had a stranglehold on USA region, it why Samsung have to use Qualcomm chips on USA handset sales, and why Samsung use their own chips in other regions.

      Qualcomm are also desperately trying to give intel a death blow on the modern chip front too via their Apple lawsuits. If they can successfully prove Apple passed Qualcomm IP to intel then they (Qualcomm) can pretty much stop intel having any 5g modem chip business at all. This coupled with their move into ARM PC chip supply is why they’re being “ all billy big pants” at the moment. If Qualcomm are successful they win a fortune in sales/fees etc, if they lose then it’s going to hurt a lot.

      All these companies are exceedingly greedy and aggressive, as are google, amazon and of course intel and Apple. The global reccssion and credit squeeze that’s occurring pretty much everywhere now and to all brands in one way or another will take some impressive scalps. Watch those companies who don’t have enough cash in the bank.....

      Qualcomm last time I looked had some 22 billion dollars of debt ( it doubled in about a year), and about 40 billion in cash and short term investments. So they can cover themselves, but debts growing. If they lose their effective USA patent modem chip grip then they’re in trouble with a capital T..... so they don’t want Apple developing and using their own modem chip, at all, at any costs, as for that to happen would likely mean they had lost their IP grip on the region.

      • joeaxberg

        In reply to PeterC:

        Well said. I used to work in the wireless PCS industry back in the 90's. North America decided to go CDMA and forever shackle themselves to Qualcomm's patents in one way or another.

        Qualcomm's behavior often resembles that of a patent troll. Lawsuits, investigations, and fines have been a regular part of their existence.

        Apple has little interest in using Snapdragon chips. Why would they? Apple designs their own ARM processors and farms out the fabrication. This is exactly what Qualcomm does. Qualcomm doesn't make anything. They design (via companies they acquired) and hold patents and IP. Everyone in the tech industry does this to some extent. And they all challenge each other on it. If I was Apple I'd be challenging them too. Apple is just doing what other companies have done.

        Nobody should think of this as poor innocent Qualcomm vs. mean evil Apple. That's wrong.

  8. HellcatM

    Just because Qualcomm wouldn't sell chips to apple? They work with most phone manufacturers and Microsoft, so that's not anticompetitive. Plus apple has ARM processors made specifically for them. apple does a bunch of things that are anticompetitive, I want to see a law suite against them.

  9. waethorn

    Why isn't Apple integrating the network support right into the SoC?

  10. RM

    So, $1,000+ for an iPhone and Apple says paying $7.50 for Qualcomm tech is too much to allow the iPhone to actually be a phone! I would charge them about $100 to $200 for that tech!

    • Oreo

      In reply to RM:

      Don't let your disdain for Apple blind you. The problem is much bigger than Apple, because Qualcomm is pushing out other modem manufacturers. Less competition means higher prices and less innovation here. And taxing Apple with an extra 10 % will lead to other manufacturers being taxed in the same way if they use modems that are not from Qualcomm; this is the “ND” in FRAND — non-discriminatory.

      Qualcomm is getting royalty payments from the modem manufacturer, as they should, and the rate is determined by the cost of the component. This should take care of all licensing liabilities for smartphone and tablet manufacturers.

    • blackcomb

      In reply to RM:

      Apple is all about having their cake and eating it too.

  11. lordbaal1

    Apple signed the contract.

    How much are other companies paying for the same license?

  12. Jorge Garcia

    Imessage, FaceTime and Airdrop all mean that Apple can sell overpriced junk for years and years and still be fine. I know far too many young people (and people in certain industries) who literally could not get off iOS even if they wished to. It is ASSUMED that everyone in the room/car/office has an iPhone.

  13. Andrew Jackson

    Apple: Boo hoo ... we have to pay $7.50 to get the best version of a critical component for our $1000 products ... whaaa ... I want my mommy!

  14. provision l-3

    1. This isn't from an Apple vs. Qualcomm lawsuit it is the US Federal Trade Commission vs. Qualcomm. The U.S. government is suing Qualcomm for anticompetitive business practices.
    2. Apple isn't paying $7.50 per phone it was paying $37.50 per phone. 30 dollars for the component and 7.50 is the licensing fee.

    Both of these points are mentioned in the CNET article you linked to in the article. You might want to go back and re-read it.

    • skane2600

      In reply to provision l-3:

      For a $1000 phone that's less than 4% both for the license and the chip. Sounds pretty reasonable to me.

      • provision l-3

        In reply to skane2600:

        I'm in no way qualified to offer an opinion on what reasonable component pricing and licensing fees would be for a smartphone or anything else for that matter which is why my comment didn't weigh on the matter. I simply pointed out two glaring factual errors in the article.

          • provision l-3

            In reply to skane2600:

            Component procurement aside, if you are interested in the actual FTC vs. Qualcomm case I'd suggest reading the FOSS Patents blog. He has been doing a daily recap of what is happening in court. He feels the FTC backed by Samsung, Intel, Apple, Huawei and a host of others have put together a fairly strong anticompetitive case against Qualcomm. That said, the FTC is just wrapping up their side and Qualcomm has yet to offer its defense so the strength of the case against them could very well fall apart. It's all interesting to say the least.

            • Greg Green

              In reply to provision l-3:

              Thanks for that site, very informative. Paints quite a different picture than what you get here.

              The testimony from industry players--of all sizes and from multiple countries--that the FTC has presented is extremely strong. In fact, it's so strong that the FTC's expert witnesses...are going to be much less influential in this case than they would be in others. Those industry witnesses have established so many facts relating to the question of anticompetitive harm that I don't think Qualcomm can this around by winning the "battle of the experts," which it may or may not.”

    • AnOldAmigaUser

      In reply to provision l-3:

      The lawsuit is over the licensing fee, which is $7.50/phone. They have to pay the price of the chip. Apple is saying they should only pay licensing on the price of the component chip, but the standard in the industry is to base it on the price of the phone.

      I suppose, if they want to lower the licensing fee, then Apple could cut the price of the phone.

      • RM

        In reply to AnOldAmigaUser:Also, if Apple didn't make so much money in profits for a phone, they wouldn't have to pay so much for the license! ;)

      • provision l-3

        In reply to AnOldAmigaUser:

        I'm not sure where you are going with this. You are reiterating the pricing I broke out in my comment.

        My point isn't about what Apple should or shouldn't be paying or how that price is derived. I was pointing out that the article had factual errors.

        • AnOldAmigaUser

          In reply to provision l-3:

          The article did not mention the price of the Qualcomm chip, but the suit is about the licensing fee, and that is $7.50, based on the selling price of the phone. The cost of the chip is immaterial to the case Apple is trying to make.

          • provision l-3

            In reply to AnOldAmigaUser:

            Again, my point is that reporting is incorrect. Let's look at what Mehdei wrote again; "Apple pays $7.50 per iPhone for Qualcomm’s tech"

            That is ambiguous at best as it doesn't say what the 7.50 is for and the implication is that it is all Apple is paying which is factually incorrect. That is the point I made.

            As for the lawsuit itself, you are partially correct. This testimony was from the lawsuit that the FTC brought against Qualcomm not Apple. The FTC is suing for anticompetitive behavior with licensing being one piece of that. In the FTC suit the issues are:

            1. Withholding chips unless customers paid their preferred prices for SEP licenses and charging elevated royalties for third party chips.
            2. Refusing to license SEP to competitors in violations of their FRAND commitments.
            3. Entering into an exclusive dealings with Apple, a "particularly important cellphone manufacturer.
            4. There is a fourth count but it is redacted.

            The third point is the only part of the FTC case that involves Apple and it is not about pricing but rather entering into an exclusive agreement. Granted Mehdei offers no context for the testimony nor does he provide the full testimony. He also misidentifies the case as being Apple vs. Qualcomm. So it is completely understandable why people are confused on this one.

            The other two points in the case involve other companies including Samsung, Lenovo, Intel, Huawei, LG and a host of others.

            If you think I got any of that wrong, here is the FTC case filing. Please point to the relevant part and I'll happy correct anything I missed:

            www. ftc. gov/system/files/documents/cases/170117qualcomm_redacted_complaint.pdf

            Apple has a lawsuit about pricing that was filed after the FTC field it's suit and that is about pricing but the testimony mentioned in this article is not from that.  

  15. spraly

    I'm not an apple fan boy but what's the rush on putting out 5G phones since true 5G networks are out there anyway? Plus Apple like to squeeze its suppliers and keep all the profits. Not surprised Qualcomm doesn't want to do business with Apple.

Leave a Reply