Apple sues Qualcomm in China over iPhone modem chip licensing terms

Posted:
in iPhone edited January 25
Apple has expanded its legal actions against Qualcomm's broadband modem chip licensing tactics in China's Intellectual Property Courts, and is seeking 1 billion yuan ($145.3 million) in damages based on iPhone sales in China alone.




In a filing on Wednesday, Apple is alleging the same thing that it has in its suit against the chip manufacturer in the U.S. Apple asserts the Qualcomm is abusing its dominant market position in China to effectively extort unfair licensing fees out of the iPhone manufacturer, and is seeking recompense, and a cessation of potentially illegal licensing tactics.

"These filings by Apple's Chinese subsidiary are just part of Apple's efforts to find ways to pay less for Qualcomm's technology," Qualcomm general counsel Don Rosenberg said in a statement to Reuters. "Apple was offered terms consistent with terms accepted by more than one hundred other Chinese companies and refused to even consider them."

In Apple's U.S. court filing on Friday, Apple accused Qualcomm of exploiting its "monopoly power" to dodge FRAND (fair, reasonable and nondiscriminatory) patent commitments, for instance charging "extortion-level" rates for standards-essential patents.

Above all, Apple suggested that Qualcomm withheld rebates as retaliation for it cooperating with enforcement agencies, and even tried to get Apple to lie to the U.S. Federal Trade Commission (FTC) in exchange for releasing money. Both Apple and the FTC have claimed that Qualcomm forced Apple into an exclusive chip supply deal between 2011 and 2016, making that the condition of rebates.

Qualcomm has been found guilty in China of market power abuse in the past. In Feb. 2015, the company paid a $975 million fine after a 14-month probe by the government that accused it of the same behavior that Apple is alleging.

The iPhone 7, released last September, is Apple's first iPhone model to use two LTE modem suppliers possibly as an attempt to escape a Qualcomm monopoly, with the second supplier Intel.

Comments

  • Reply 1 of 10
    blastdoorblastdoor Posts: 1,584member
    I'm not sure what will happen in the US, but I think it's very likely Apple will win this in China. 
    jbdragonbadmonk
  • Reply 2 of 10
    sog35sog35 Posts: 12,198member
    Good. Sue these basdards.
    badmonk
  • Reply 3 of 10
    blastdoor said:
    I'm not sure what will happen in the US, but I think it's very likely Apple will win this in China. 
    If the article is accurate, not a certainty these days :/, then it should be a slam dunk since the Chinese government has already found Qualcomm guilty of the illegal practice that Apple is alleging.  Since Apple is going thermonuclear on this issue around the globe they also must have great confidence.
    jbdragonbadmonk
  • Reply 4 of 10
    Notsofast said:
    blastdoor said:
    I'm not sure what will happen in the US, but I think it's very likely Apple will win this in China. 
    If the article is accurate, not a certainty these days :/, then it should be a slam dunk since the Chinese government has already found Qualcomm guilty of the illegal practice that Apple is alleging.  Since Apple is going thermonuclear on this issue around the globe they also must have great confidence.
    http://www.wsj.com/articles/qualcomm-settles-china-probe-1423518143
    badmonk
  • Reply 5 of 10
    Qualcomm's licensing tactics are quite odious. It would be like the entire automobile industry being held hostage by a single tire manufacturer holding onto vital patents. And then charging a royalty on the entire vehicle rather than the tire itself. Arguing that a vehicle is operationally useless without the tire like Qualcomm maintains with respect to their cellular patents. There would be no phone without the baseband radios. But there would be no automobile without the tires. Yet Goodyear does not hold the automobile business hostage like Qualcomm does to the cell phone business. 

    Apple could have done the same with WiFi. They did not. Wifi is now universal with very reasonable licensing fees. 

    Qualcomm is finished as a company. Their aspirations for taking Intel's server chip business are also over. 

    Qualcomm's Snapdragon chip development will also come to a standstill. Samsung, LG and Huawei can move away from QCOM modems and no one else in the industry apart from Apple will be able to follow. Samsung can move off of Android and over to Tizen. LG can move to WebOS and Huawei will likely remain Android but can make demands on Google. 

    Mediatek makes low cost ARM CPUs but they do not manufacture cellular modems. Intel is likely to give Apple preferred customer status for its modems and can invest large sums to ensure their baseband modems are cutting edge. 

    With the loss of Apple and likely Samsung as clients, 40% of Qualcomm's revenues are lost. They will not have the capital to compete with Intel over the long term, much less Samsung in baseband technology, never mind the Snapdragon SOCs. 

    This development was coming. 

    Jobs would be pleased. This would have been the thermonuclear event he would have wanted to see brought against Android. Samsung can put their highest performing Exynos CPU and hardware developments in their own Tizen line of phones. 

    Android can be relegated to the dust bin. 
  • Reply 6 of 10
    gatorguygatorguy Posts: 15,817member

    Herbivore2 said: Google is doomed

  • Reply 7 of 10
    blastdoorblastdoor Posts: 1,584member
    Qualcomm's licensing tactics are quite odious. It would be like the entire automobile industry being held hostage by a single tire manufacturer holding onto vital patents. And then charging a royalty on the entire vehicle rather than the tire itself. Arguing that a vehicle is operationally useless without the tire like Qualcomm maintains with respect to their cellular patents. There would be no phone without the baseband radios. But there would be no automobile without the tires. Yet Goodyear does not hold the automobile business hostage like Qualcomm does to the cell phone business. 

    Apple could have done the same with WiFi. They did not. Wifi is now universal with very reasonable licensing fees. 

    Qualcomm is finished as a company. Their aspirations for taking Intel's server chip business are also over. 

    Qualcomm's Snapdragon chip development will also come to a standstill. Samsung, LG and Huawei can move away from QCOM modems and no one else in the industry apart from Apple will be able to follow. Samsung can move off of Android and over to Tizen. LG can move to WebOS and Huawei will likely remain Android but can make demands on Google. 

    Mediatek makes low cost ARM CPUs but they do not manufacture cellular modems. Intel is likely to give Apple preferred customer status for its modems and can invest large sums to ensure their baseband modems are cutting edge. 

    With the loss of Apple and likely Samsung as clients, 40% of Qualcomm's revenues are lost. They will not have the capital to compete with Intel over the long term, much less Samsung in baseband technology, never mind the Snapdragon SOCs. 

    This development was coming. 

    Jobs would be pleased. This would have been the thermonuclear event he would have wanted to see brought against Android. Samsung can put their highest performing Exynos CPU and hardware developments in their own Tizen line of phones. 

    Android can be relegated to the dust bin. 
    I don't think it's necessarily that dramatic. 

    If they end up with less revenue from patent licensing it will most likely just result in big dividend cuts. The dividend yield on their stock is relatively high, and I bet a big chunk of it comes from the patent profits. 

    If the Android SOC businesses weren't profitable in and of themselves I doubt QCOM would be investing in them. In other words, I doubt they subsidize those businesses with patent profits -- that just wouldn't be good profit maximizing business practice. So I'll hazard a guess that those businesses make enough money to fund continued R&D. That means no real impact on Android. 

    Their aspirations in the server CPU market *might* be damaged, just because that's a new product category and so probably is receiving a temporary subsidy from other profitable businesses. But that was probably going to fail anyway, frankly. Competing with Intel is very hard. 
  • Reply 8 of 10
    In today's news, Qualcomm execs take aim and miss the other foot, and rather unfortunately, shoot themselves in the face. Taking a peculiarly incendiary strategy with the largest, most profitable customer they have, Qualcomm is giving every indication it wishes to leave the industry to Intel. Inside sources reportedly said that top execs are 'bored' with wireless communications technology, and were 'not bothered' with Qualcomm becoming a patent troll. Industry analysts are still in the process of reformatting their Apple Doom(c) generators for their latest Google ads-supported source of income.
  • Reply 9 of 10
    ksecksec Posts: 1,254member
    Notsofast said:
    blastdoor said:
    I'm not sure what will happen in the US, but I think it's very likely Apple will win this in China. 
    If the article is accurate, not a certainty these days :/, then it should be a slam dunk since the Chinese government has already found Qualcomm guilty of the illegal practice that Apple is alleging.  Since Apple is going thermonuclear on this issue around the globe they also must have great confidence.
    Some conspiracy theory, ( or more like reality ).
     
    Xiaomi, along with other chinese smartphone players thought the licensing terms from Qualcomm were outrageous. They have been dodging these patents cost by mis reporting their sales numbers. Chinese government step in, make a ( what they think is ) fair deal. And that was that.

    However that applies to all Chinese Phone makers, and not Apple. Given patents cost are always sold at % of phone's RSP, so not only is Apple paying more per phone ( They have the highest RSP ), they are paying higher %.

    So likely Apple start negotiating, failed, and now it is a case for the court to decide.




  • Reply 10 of 10
    I suspect QCOM wishes they would have paid Apple their owed rebates now. Though their stock was up yesterday, it has taken a drudging.
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