FTC Wins Antitrust Lawsuit Against Qualcomm, Appeal to Follow

The FTC today won its antitrust lawsuit against Qualcomm over the chipmaker's anticompetitive business practices.


As first reported by legal expert Florian Mueller on his blog FOSS Patents, U.S. District Judge Lucy Koh has ruled that Qualcomm's so-called "no license, no chips" model, under which the chipmaker has refused to provide chips to companies without a patent license, violates federal antitrust laws.

The ruling has significant implications for Apple, as Koh ordered that Qualcomm must negotiate or renegotiate license terms with its customers in good faith without threatening to cut off access to its cellular modem chips or related software and technical support, according to Mueller.

Qualcomm also must make patent licenses available to rival cellular modem suppliers on fair, reasonable, and non-discriminatory or "FRAND" terms, and may not enter exclusive agreements for the supply of modem chips.

Apple sued Qualcomm in early 2017 over these anticompetitive business practices, and unpaid royalty rebates, but the two companies announced an agreement to end all ongoing litigation worldwide last month. The settlement includes a six-year licensing agreement and a multiyear chipset supply agreement.

It's unclear if Apple had any hint that the FTC was likely to win its antitrust case and if that had any implications on its settlement with Qualcomm.

While it appears that Intel will remain the sole supplier of LTE modems in 2019 iPhones, Qualcomm is expected to supply Apple with its industry-leading 5G modems for 2020 iPhones now that the companies have settled, so Koh's ruling could lead to a fairer agreement between Apple and Qualcomm moving forward.

Farther down the road, multiple reports have indicated that Apple is designing its own cellular modems that would allow it to drop Qualcomm for good, although they might not appear in iPhones until as late as 2025.

Qualcomm will likely appeal the ruling, but Mueller believes the chipmaker faces an uphill battle given "such a rich and powerful body of evidence" regarding its anticompetitive business practices. Mueller has excellent, in-depth coverage of Koh's ruling on his blog FOSS Patents that is well worth a read.


Update: Qualcomm has announced that it will immediately seek a stay of the ruling and an expedited appeal to the U.S. Court of Appeals for the 9th Circuit.

"We strongly disagree with the judge's conclusions, her interpretation of the facts and her application of the law," said Don Rosenberg, general counsel of Qualcomm, in a statement shared by the Washington Post's Hamza Shaban.

Koh's complete ruling is embedded ahead. Continue reading "FTC Wins Antitrust Lawsuit Against Qualcomm, Appeal to Follow"

Apple-Designed iPhone Modems Could Take Until 2025, Intel Confirms Interest in Modem Business

The Information has published a lengthy look into Apple's seemingly deteriorating relationship with Intel in terms of iPhone modems, leading to Apple's rekindled relationship with rival chipmaker Qualcomm last month.

Intel 5G Modem
The report claims that Apple's frustrations with Intel's modem efforts began earlier than previous reports have indicated and involved Intel's struggles with modems for the iPhone XS, iPhone XS Max, and iPhone XR, not just the 5G smartphone modem business that Intel announced its exit from last month.
It was early 2017 and Apple was preparing a new line of iPhones to be released the next year, but the Intel modem for the devices, known as the 7560, wasn't working properly, according to two people with knowledge of the relationship. […] Intel had already overhauled the modem four times to bring it up to par with the latest Qualcomm modem. But missed deadlines and continuing technical issues with the chip were making Apple executives anxious, said one of the people.

"This would have never happened at Apple under my watch," Mr. Srouji barked at his Intel counterpart, Venkata "Murthy" Renduchintala, during a meeting on Apple's campus, according to the person, who was present at the meeting.
The size and structure of Intel's mobile division made it difficult to efficiently engineer modems, with teams struggling to work together, according to multiple current and former Intel employees and industry partners cited in the report.

In a statement provided to The Information, Intel also confirmed interest in its modem business from many companies, reportedly including Apple:
We have world-class 5G modem technology that very few companies have the IP and expertise to deliver. That's why many companies have expressed interest in acquiring our cellular modem assets since our recent announcement that we are assessing our options to realize the value we have created.
While it appears that Apple and Qualcomm's multi-year licensing and chipset supply agreement will result in Qualcomm supplying modems for the first 5G-enabled iPhones, expected to launch in 2020, multiple reports have indicated that Apple is on the path to developing its own cellular modems.

According to The Information, however, those in-house effort appear to be farther away than initially thought. During interviews, the report claims Apple told prospective engineers that they expect to have their own modem ready by 2025, far later than the earliest theoretical possibility of 2021.


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iPhone XS Max Signal Strength Compared to OnePlus 7 Pro and Samsung Galaxy S10

The Samsung Galaxy S10 and the new OnePlus 7 Pro are both flagship smartphones that are designed to compete with the iPhone XS Max, and to see how their LTE chips compare, PCMag teamed up with Cellular Insights to test the signal strength of the new devices.

Apple's iPhone XS Max is equipped with an XMM7560 modem chip from Intel, while the Galaxy S10 and the OnePlus 7 Pro are using Qualcomm's X24 modem, which theoretically offers better performance.

iPhone XS Max in blue, OnePlus 7 Pro in orange, Samsung Galaxy S10 in gray, and LG V40 in yellow

The Intel XMM7560 modem in the iPhone XS Max supports supports 5-carrier aggregation but offers 1Gb/s maximum theoretical data transfer speeds, while the Qualcomm X24 in the Galaxy S10 has max theoretical speeds of 2Gb/s (it uses 7-carrier aggregation) and the OnePlus 7 Pro has max theoretical speeds of 1.2Gb/s (lower because it uses 5-carrier aggregation like the iPhone).

In testing on LTE band 4 with good signal, there wasn't a lot of difference in performance between the iPhone XS Max, the newer smartphones from Samsung and OnePlus, and the LG V40, which PCMag added in because it was 2018's best performing phone in terms of cellular speed.

All of the smartphones performed similarly, but the Samsung Galaxy S10 did see some of the slowest speeds, and at peak signal, the iPhone XS came in behind the OnePlus 7 Pro and the LG V40.

In a test with poorer LTE signal, the iPhone XS Max saw the slowest speeds and was outperformed by all of the Qualcomm chips. The iPhone XS Max was quite a bit slower than the Galaxy S10 and the OnePlus 7 Pro specifically.


Starting in 2020, Apple is no longer going to use Intel chips and is instead going to transition to Qualcomm's 5G chips. Intel has decided that it's exiting the 5G smartphone modem chip business leaving Apple no choice but to rely on Qualcomm technology and perhaps some chips from Samsung.

Apple and Qualcomm recently settled a vicious legal battle which had seen Apple refusing to use Qualcomm chips. Because of the dispute, Apple used Intel chips in the 2018 iPhones, and is expected to continue to use Intel chips for the 2019 iPhones.

Though the legal battle is over, Apple isn't likely to have time to swap over to Qualcomm modem chips for the 2019 iPhones, and Intel has confirmed that it's going to continue to supply 4G chips to meet its current obligations.


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Qualcomm Got $4.5 Billion From Apple Settlement According to Earnings Release

Qualcomm today announced its quarterly earnings results and shared details on the amount of revenue that it will be receiving in the coming quarter as part of its recent settlement with Apple.

As pointed out by Axios, Qualcomm will record $4.5 to $4.7 billion in revenue from the Apple settlement, which includes a "cash payment from Apple and the release of related liabilities."


Apple and Qualcomm announced a settlement in mid-April, dropping all lawsuits and litigation against one another. Apple at the time said the settlement included a payment from Apple to Qualcomm, but both companies declined to provide specific details on just how much Apple paid out in backdated royalties.

An analyst estimate put the number at around $5 billion to $6 billion, but it appears Apple didn't shell out quite that much.

Apple's deal with Qualcomm also includes a direct six year licensing agreement and a multiyear chipset supply agreement, which will see Qualcomm supplying modem chips to Apple for future devices.

Apple appears to have had no alternative but to settle with Qualcomm as it needed 5G modem chips for its 2020 iPhone lineup. Apple originally planned to use Intel chips, but rumors suggested Intel wasn't meeting development goals, leading to tension between Apple and Intel.

Just hours after Apple and Qualcomm announced a settlement deal, Intel said that it was exiting the 5G smartphone modem business and would not be making 5G smartphone chips at all, a decision the company later said was based on Apple and Qualcomm's settlement.

Yesterday, Apple CEO Tim Cook said that Apple "feels good" about the resolution with Qualcomm. "We're glad to put the litigation behind us and all the litigation around the world has been dismissed and settled," said Cook. "We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies."


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Apple CEO Tim Cook: We Feel Good About Resolution With Qualcomm

During today's earnings call covering the second fiscal quarter of 2019 (first calendar quarter), Apple CEO Tim Cook was asked about Apple's settlement with Qualcomm.

While Cook declined to provide color on how this will affect Apple's development plans in the future, he did say that Apple is satisfied with the resolution.

We're glad to put the litigation behind us and all the litigation around the world has been dismissed and settled. We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution.
Apple and Qualcomm reached a settlement in mid-April and agreed to drop all litigation in multiple countries around the world. Apple made a one-time payment to Qualcomm and inked a six-year licensing agreement to use Qualcomm's patented technologies.

The settlement also included a chipset supply agreement, and Qualcomm is expected to provide the 5G chips that Apple will need to introduce 5G connectivity in its 2020 iPhones.

While rumors have suggested Apple is going to add 5G in 2020, Apple itself has not confirmed those plans and Cook did not provide details on Apple's 5G timeline when asked. He did, however, say that Apple aims to get new technologies into products as soon as it can.
We look at a lot of things on the different technologies and try to look at and select the right time that things come together and get those into products as soon as we can.
After Apple and Qualcomm announced their settlement agreement, Intel said that it was dropping out of the smartphone modem chip market entirely, with no plans to manufacture 5G chips.


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Apple Considered Purchasing Intel’s Smartphone Modem Chip Business

Apple had discussions with Intel about potentially acquiring parts of Intel's smartphone modem chip business, reports The Wall Street Journal. Apple was interested in Intel's technology to speed up its own efforts to build modem chips for smartphones.

Intel and Apple entered into discussions last summer and the talks continued for months, but ended right around the time Apple settled its legal dispute and reached a supply agreement with Qualcomm.

Intel 5G Modem
Sources at Intel that spoke to The Wall Street Journal said that Intel is exploring "strategic alternatives" for its smartphone modem chip business, and is still interested in a sale to Apple or another company.

In an interview yesterday, Intel CEO Bob Swan confirmed that Intel is considering alternatives "based on what's best" for Intel's IP and employees.
Selling the modem business would allow Intel to unload a costly operation that was losing about $1 billion annually, according to another person familiar with its performance. Any sale would likely include staff, a portfolio of patents and modem designs related to multiple generations of wireless technology, said Patrick Moorhead, principal at Moor Insights & Strategy, a technology firm.
Intel announced earlier this month that it was exiting the 5G smartphone business, just hours after Apple and Qualcomm announced a resolution to their legal troubles and a new supply deal.

Apple had been planning to use Intel's 5G chips in its 2020 iPhones, but rumors suggested Intel was having trouble meeting design deadlines and that the relationship between Apple and Intel was souring. Just yesterday, Swan also confirmed that Apple's deal with Qualcomm was the reason why Intel decided to stop making 5G chips.

Apple is now planning to use Qualcomm's 5G modem chips in its 2020 5G iPhones. Intel has said that it is going to continue to supply 4G LTE chips to meet already established orders, which means that Apple's 2019 iPhone lineup will likely continue to use Intel chips rather than Qualcomm chips. It is too late in the design cycle for Apple to swap chips for this year's upcoming devices.


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Intel Cites Apple-Qualcomm Settlement as Reason Behind Exiting 5G Smartphone Modem Business

Last week's surprise Apple and Qualcomm settlement and multiyear chipset supply agreement was the driving force behind Intel exiting the 5G smartphone modem business, according to Intel CEO Bob Swan.

Intel 5G Modem
"In light of the announcement of Apple and Qualcomm, we assessed the prospects for us to make money while delivering this technology for smartphones and concluded at the time that we just didn't see a path," Swan said in an interview with The Wall Street Journal, as noted by The Verge.

Swan's comment suggests that Intel was surprised by the Apple-Qualcomm settlement and acted reactively when it announced its exit from the 5G smartphone modem business just hours later, but multiple reports indicate that Intel was unable to meet Apple's demands for 5G modems in 2020 iPhones.

It's hard to imagine that Apple and Qualcomm would have suddenly settled their bitter legal battle if Intel was able to supply 5G modems for 2020 iPhones, but Intel was reportedly struggling with its 5G modem development, possibly leaving Apple with little to no choice but to settle with Qualcomm.

iPhones have a long development cycle, so it was likely crunch time for Apple to choose a 5G modem supplier for its 2020 iPhones. Given this long lead time, Intel is still expected to supply LTE modems for 2019 iPhones.


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Kuo: 2020 iPhones to Support 5G, Qualcomm and Samsung Likely to Supply Modems

2020 iPhones will support 5G networks, with chipmaker Qualcomm likely to supply Apple with 5G modems for the devices after the two companies settled their high-profile legal battle last week, according to analyst Ming-Chi Kuo.


Interestingly, Kuo also expects Samsung to fulfill some of the 5G modem orders in select markets. Apple frequently aims to diversify its supply chain in an effort to reduce risk and have improved bargaining power, potentially reducing its costs as multiple suppliers engage in a price war to win orders.

An excerpt from Kuo's latest research note, obtained by MacRumors:
Apple and Qualcomm's end of patent dispute and entrance into a six-year licensing deal implies new 2H20 iPhone models will support 5G; Qualcomm and Samsung are potential 5G baseband chip suppliers: The market was worried that Intel's disappointing 5G baseband chip development might be the most severe uncertainty for the new 2H20 iPhone models' adoption of 5G. But we believe the uncertainty has been removed after Apple and Qualcomm's end of patent dispute and entrance into a six-year licensing deal, and Intel's announcement that it will exit the 5G baseband chip business. We expect Apple will likely adopt 5G baseband chips made by Qualcomm (focus on mmWave markets) and Samsung (focus on Sub-6GHz markets) for lowering supply risk, reducing costs and having better bargaining power.
Kuo believes that 5G will be a boon for both iPhone sales and Apple's supply chain in 2020. He forecasts total iPhone shipments of 195–200 million units in 2020, including 70–75 million 5G models released in the second half of the year.

Qualcomm was already the widely expected frontrunner for 5G modems in 2020 iPhones after Intel announced it is exiting the 5G smartphone modem business.


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Apple Paid an Estimated $5-$6 Billion to Settle Qualcomm Dispute, Plus $8-$9 Per iPhone in Royalty Fees

Apple likely paid somewhere around $5 to $6 billion to settle its ongoing legal battle with Qualcomm, according to estimates shared today by UBS analyst Timothy Arcuri (via CNBC).

The $5 to $6 billion payment would have been for royalty fees that Apple had stopped paying over the course of its two year legal fight with Qualcomm.


Qualcomm may also be receiving between $8 and $9 per iPhone from Apple in ongoing patent royalties, a figure calculated based on guidance numbers that Qualcomm provided following the settlement. Qualcomm said that it expects its earnings per share to increase by $2.

Apple previously paid $7.50 in royalties, so at $8 to $9 per iPhone, Apple would be shelling out more cash than it did before.

Apple appears to have had no alternative but to settle with Qualcomm, as it had no other way to source 5G chips for its 2020 iPhone lineup. Apple initially planned to use Intel chips, but rumors suggested Intel wasn't meeting development goals, leading to tension between Apple and Intel.

Just hours after Apple and Qualcomm announced a settlement deal, Intel said that it was exiting the 5G smartphone modem business and would not be making 5G smartphone chips at all.

It's not entirely clear if Apple settled with Qualcomm because it knew of Intel's plan to abandon 5G chip development or if Intel made the decision after learning of Apple's settlement plans, but either way, it leaves Apple with no choice but to re-adopt Qualcomm chips for future iPhones.

Smartphone makers like Samsung will have 5G smartphones available starting this year, so Apple could not afford to delay the rollout of its 5G iPhones. Launching in 2020 already puts Apple somewhat behind, but 5G networks from U.S. carriers are still very much in development.

Following news of the settlement, Qualcomm's stock has gone up over 38 percent, marking a big win for the San Diego company. The agreement includes a six-year licensing deal along with a "multiyear chipset supply agreement."

It sounds like Apple will need to rely on Qualcomm for the foreseeable future, but Apple is working on its own modem chip technology, which may eventually allow it to drop Qualcomm as a modem chip supplier.


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Qualcomm CEO Steve Mollenkopf Shares Thoughts on Apple Deal but Declines to Give Specific Details

Following yesterday's surprise announcement of a settlement between Qualcomm and Apple, Qualcomm CEO Steve Mollenkopf sat down with CNBC to share a few more details about the new agreement between the two companies.

According to Mollenkopf, after "a lot of talking" both between teams and with Apple CEO Tim Cook, Apple and Qualcomm came to an agreement that "both companies like." Qualcomm and Apple are now focusing on getting new products out, such as the 5G iPhone coming in 2020 that Qualcomm will supply chips for.

And really, if you look at the focus of that energy now, it's very much on, 'Let's get these products out.' You know, it really clears the way for, I think, a much more natural relationship between the two companies. One that we certainly enjoy working on products together. And that's what we're doing now.
Apple and Qualcomm have established a "very broad deal" across all of Qualcomm's technologies, which Mollenkopf says is the first direct license that Qualcomm has had with Apple rather than contract manufacturers.

Each side "found something that was useful" in the deal, and according to Mollenkopf, Apple and Qualcomm "want to work together on products," as evidenced by the multiyear product deal the two signed as part of the settlement.

Part of the agreement between the two companies included a payment from Apple to Qualcomm, but Mollenkopf declined to provide further details on the size of the payment. He also refused to reveal how much Apple is paying Qualcomm per phone.

On the topic of 5G chips for future iPhones, Mollenkopf said that Qualcomm is "excited" and has the "entire team" working to support Apple. Unsurprisingly, no details were given on Apple's product plans or launch timelines for 5G connectivity.

While Apple settled with Qualcomm, Qualcomm continues to face an FTC inquiry into anticompetitive business tactics, which Mollenkopf says is still a risk to Qualcomm. He doesn't believe the Apple decision will impact what the FTC decides.
I don't think so. I think when we look at this deal, we're just happy to be able to do it. The environment with which we were able to put the deal together is obviously right in the middle of a trial. But, you know, the court is going to make its decision.
Mollenkopf's full interview, which includes additional details about Qualcomm's relationship with Apple and Qualcomm's goals moving forward, can be watched on CNBC's website.


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