Qualcomm and Apple drops all litigation; Intel exits 5G smartphone modem business

Ruben Fields
April 17, 2019

Apple and Qualcomm had been locked in a global, years-long legal battle over patent royalties.

Qualcomm also held another bargaining chip: It makes the modem chips needed for future smartphones to work with the next generation of high-speed wireless networks known as "5G". It also includes a six-year licensing agreement that likely involves recurring payments to the mobile chip maker.

The settlement followed two years of increasingly bitter legal battles between the two companies and came as opening arguments took place at a trial in federal court in San Diego.

"Qualcomm and Apple today announced an agreement to dismiss all litigation between the two companies worldwide", an Apple announcement reads.

It seems that Apple will be making a one-time payment to Qualcomm to cover any IP use since Apple cut off payments to Qualcomm in 2017.

As part of its settlement, the two companies said that they had reached a six-year license agreement, effective April 1 of this year.

Apple has been aggressively hiring RF engineers in San Diego, where Qualcomm is located.

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Qualcomm's share price surged 23.2 per cent, its biggest gain in more than 19 years, while Apple's stock ended its day flat. Apple had begun to have misgivings about that deal as it added more features to its increasingly popular line-up of iPhones.

"We are very excited about the opportunity in 5G and the "cloudification" of the network, but in the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns", said Intel CEO Bob Swan.

A US Federal Trade Commission lawsuit against Qualcomm over alleged anti-competitive tactics concluded in January, though a decision has yet to be announced.

Apple and Qualcomm have settled their patent royalty dispute. Qualcomm countered that Apple reneged on its contracts. It has also been hit with competition fines in South Korea, although the Japanese authorities have found in Qualcomm's favor. Qualcomm demands that companies license its patent portfolio before they can buy the company's chips.

While Intel is the immediate loser in the deal between Qualcomm and Apple, Greengart said, "Realistically, Intel had to assume that Apple was going to build its own modem at some point".

The epic legal battle started in January 2017 when Apple sued Qualcomm for almost $1 billion.

Qualcomm and Apple did not say when their new supply agreement would start. Apple stock rose slightly on the news but has fallen to near its previous level. This goes for all court cases between the two companies, for all instances of litigation around the world.

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