Qualcomm CEO reiterates Apple feud comes down to IP pricing

Posted:
in General Discussion edited October 2017
In an interview on Tuesday, Qualcomm CEO Steve Mollenkopf commented on the chipmaker's fierce legal feud with Apple, saying that what appears to be an ever escalating international scrum is, at its core, about IP pricing.


Qualcomm CEO Steve Mollenkopf speaks at the Brainstorm Tech conference in Aspen, Colo. | Source: Fortune


Speaking onstage at the Wall Street Journal's D.Live tech conference on Tuesday, Mollenkopf said negotiations over patent licensing fees are at the heart of the matter, reports Fast Company.

"At the end, the important thing to remember is this is fundamentally a discussion about pricing over the fundamental technology that makes the phone the phone," Mollenkopf said. "It comes down to, 'How much are you going to pay?'"

He went on to point out that Qualcomm has "a long history of providing value and settling these issues," suggesting Apple, too, will settle out of court. Certain legal fights get more publicity than others, Mollenkopf added, noting the tussle with Apple is one of those cases, according to CNET.

"I think we'll get through it, we have a very strong product relationship with [Apple]," Mollenkopf said. "We sometimes have these disputes, but you have a broad relationship."

Mollenkopf's statements echo comments made in July. Speaking with Fortune at the Brainstorm Tech conference, the executive said IP pricing is at the core of Qualcomm's dispute with Apple. More specifically, the argument comes down to what companies want to pay for Qualcomm technology, assets Mollenkopf believes kickstarted the smartphone industry.

"But in reality, if you strip it all away, it's really about -- we have a contract and people want to pay less under the contract and there's a lot of worldwide maneuvering to try to get that resolved," he said at the time.

In the July interview, Mollenkopf said he expects Apple to settle out of court.

Mollenkopf's most recent comments come just days after Qualcomm filed a series of lawsuits in China looking to block the sale and production of iPhones in the country. If successful, the legal gambit would deal a devastating blow to Apple, whose revenues are intrinsically tied to Chinese suppliers and, to a lesser extent, regional retail sales.

Qualcomm is also seeking to block import and sale of iPhone and iPad models in the U.S. through a separate International Trade Commission complaint.

Apple initiated the legal wrangling with a lawsuit in January that claimed Qualcomm abused its "monopoly power" over the wireless modem industry to demand excessive royalties. Qualcomm's royalty rates are calculated based on whole device value, not per-component. That suit further claims Qualcomm withheld almost $1 billion in promised rebates as retribution for Apple's participation in a South Korean antitrust investigation.

Apple later filed two lawsuits in China over similar allegations.

Qualcomm counter-sued in April and has since asked courts to force Apple contract suppliers who stopped paying royalties earlier this year to continue payments. In August, Qualcomm revealed the Apple case has cause the company to shed 20 percent of its market value

Apple has licensed Qualcomm IP for years as it built the company's modems into iPhone and iPad devices. The Cupertino, Calif., tech giant began to diversify with iPhone 7 by sourcing modems from Intel, a strategy that continues with iPhone 8 and iPhone X.

Tangentially related to Apple's case are ongoing investigations into Qualcomm's monopolistic practices. Along with the 2016 South Korean ruling, Qualcomm was most recently slapped with a $773 million fine by the Taiwanese Fair Trade Commission.
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Comments

  • Reply 1 of 31
    radarthekatradarthekat Posts: 3,494moderator
    This statement about it coming down to “IP pricing,” and the assertion that “Qualcomm technology... kickstarted the smartphone industry” reminds me of a former president who made a claim about basic infrastructure being responsible for the success of entrepenuers like Steve Jobs.  Sure, roads and electric grids and such are necessary for a Bill Gates or Steve Jobs or Larry Ellison to create the businesses they created, but that infrustructure was available to everyone and not everyone created a Microsoft or Apple or Oracle.  

    The underlying technology that Qualcomm had under patent at the time the modern smartphone took form (i.e. the form first introduced by the iPhone and since copied by all others; multitouch, no physical keyboard or scroll wheel, etc) was available to any and all who would have wanted to employ it, and yet only Apple created the form factor and UX that we take for granted as a smartphone today.  Qualcomm is a bit disingenuous in suggesting they or their technology somehow should get credit for having kickstarted the smartphone industry.

    edited October 2017 magman1979stompyfotoformatchiamacky the mackyRacerhomieXksecAvieshekClarityToSeebrucemc
  • Reply 2 of 31
    foggyhillfoggyhill Posts: 4,767member
    Complete horseshit as usual from the manure men (Mad men (sic), but the with the added stink...).

    Totally ignoring the total war waged against them all around the world (and the many losses).

    Extorting people when they got nowhere to go to buy your industry standard widget that only became a standard because you promise to not do this shit is not a disagreement on price, it's like calling a war a disagreement on line drawing on maps...

    Apple having to both pay twice for the same IP, and then pay IP on the whole device cost despite it being a standard IP, would not occur unless extortion would be at play: that has nothing to do with : just pricing. It's this abuse of power that pissed off Apple to no end.

     to pay and in the case of Apple is forced to pay many many times (more than 3 times) the price it should be paying is not a simple
    disagreement about pricing.

    It's plainly wanting to bring you down for good as a menace to society, once you got the gun off your temple.

    Apple, Samsung and I'm guessing many others wants to maim you and cut you down, for what they did... That's a long way from a disagreement on pricing, that's revenge.


    edited October 2017 magman1979ClarityToSeebrucemcjbdragonnetmage
  • Reply 3 of 31
    chaickachaicka Posts: 250member
    Pricing of IP on basis of percentage of final retail price of an end product is NOT FAIR. How can the cost of IP be $5 for a low priced Android selling at $100 while it costs $50 for a high priced iOS selling at $1000.

    If that’s the basis, why not priced your IPs at dealer price of your own chip then??????
    AvieshekClarityToSeejbdragonnetmageStrangeDays
  • Reply 4 of 31
    tundraboytundraboy Posts: 1,815member
    reminds me of a former president who made a claim about basic infrastructure being responsible for the success of entrepenuers like Steve Jobs. 
    Excuse me, that's not what he said or meant.  And you should know better.  He did not mean that the basic infrastructure was wholly responsible for the success of entrepreneurs as you imply but that the infrastructure (which includes not just roads and bridges but more intangible things like the research and tertiary educational system) that was built using trillions of taxpayers' dollars gave US entrepreneurs a big advantage.  That I think is a pretty reasonable statement.

    The sentiment he raised was a counterpoint to that promoted by people like former Citibank CEO Sandy Weill who once (pre-Great Recession) claimed that he deserved every single dollar of the multimillion bonuses he received because he and no one else was responsible for his company's success.  This was representative of the attitude of a lot of fat cat CEOs.  They were all willing to grab those outsized bonuses when their companies were flying high but when they were on the brink of collapse, they were sure eager to grab the hundreds of billions of rescue dollars that the taxpayers shelled out to keep the US economy from disintegrating.

    And now that their companies have recovered, they're at it again with the same arrogant attitude that the best government regulation is no regulation and that they alone deserve the credit for their companies' success.  That is, until the next crisis when we suckers will have to rescue them again.
    edited October 2017 macky the mackydsdfastasleepgatorguyClarityToSeekylewalterStrangeDaysanantksundaramlarryabb-15
  • Reply 5 of 31
    Mollenkopf is welcome to say whatever he likes about the case, but Apple aren't suing him for the reasons he's stated, Apple's filings are very clear - this is not merely Apple employing advanced negotiation techniques. It's also noteworthy that Apple's complaint is similar to other complaints levied against Qualcomm.

    Also the idea that China would rule in favour of a Qualcomm and disallow production of the iPhone is naive, even if Qualcomm had a reasonable standpoint (which they don't) - they're effectively asking for China to voluntarily cut a significant source of employment and GDP.
    ClarityToSeejbdragonnetmageStrangeDaysjony0
  • Reply 6 of 31
    tundraboytundraboy Posts: 1,815member
    Conveniently, Mollenkopf doesn't mention "FRAND patents" and "patent exhaustion" which is at the heart of Qualcomm's greedy and abusive licensing terms.
    ClarityToSeejbdragonnetmagebb-15jony0
  • Reply 7 of 31
    mubailimubaili Posts: 448member
    The lawyers are very happy to see the disputes to drag on forever for whatever reason.
  • Reply 8 of 31
    jkichlinejkichline Posts: 1,363member
    Sounds like someone is doing the dog and pony show to try to reassure shareholders... Remember what happened to Imagination? Yeah, buckle up buttercup because Apple is dropping your tech and not paying you a dime.
    ClarityToSee
  • Reply 9 of 31
    radarthekatradarthekat Posts: 3,494moderator
    tundraboy said:
    reminds me of a former president who made a claim about basic infrastructure being responsible for the success of entrepenuers like Steve Jobs. 
    Excuse me, that's not what he said or meant.  And you should know better.  He did not mean that the basic infrastructure was wholly responsible for the success of entrepreneurs as you imply but that the infrastructure (which includes not just roads and bridges but more intangible things like the research and tertiary educational system) that was built using trillions of taxpayers' dollars gave US entrepreneurs a big advantage.  That I think is a pretty reasonable statement.

    The sentiment he raised was a counterpoint to that promoted by people like former Citibank CEO Sandy Weill who once (pre-Great Recession) claimed that he deserved every single dollar of the multimillion bonuses he received because he and no one else was responsible for his company's success.  This was representative of the attitude of a lot of fat cat CEOs.  They were all willing to grab those outsized bonuses when their companies were flying high but when they were on the brink of collapse, they were sure eager to grab the hundreds of billions of rescue dollars that the taxpayers shelled out to keep the US economy from disintegrating.

    And now that their companies have recovered, they're at it again with the same arrogant attitude that the best government regulation is no regulation and that they alone deserve the credit for their companies' success.  That is, until the next crisis when we suckers will have to rescue them again.
    “If you’ve been successful, someone along the way gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in the roads and bridges...”

    https://youtu.be/YKjPI6no5ng

    Yeah, I get what he’s saying, but that doesn’t contradict my point that those things were available to all, maybe not great teachers, but there were great teachers available to many, and not everyone did what a Steve Jobs or Larry Ellison did.  Clearly there are those who work harder and bring fresh ideas and insights, and who, through extraordinary efforts, created amazing things.  The tone of his speech clearly struck a nerve, and for good reason; it was adversarial rather than supportive.  And it deserved the backlash it got.  Having said that, Obama himself is an example of an extraordinary person who through application of significant effort and intellect made it to the top in his field; public service, and deserves respect for that and for his steady hand at the helm for the eight years he served as president. 
    edited October 2017 Ofermacky the mackymetrixClarityToSeerotateleftbyterob53brucemcjbdragonnetmageSoli
  • Reply 10 of 31
    analogjackanalogjack Posts: 1,073member
    Mollenkopf said he expects Apple to settle out of court

    Not sure who he's trying to kid, Apple will not blink first.
    ClarityToSeejbdragon
  • Reply 11 of 31
    metrixmetrix Posts: 256member
      Having said that, Obama himself is an example of an extraordinary person who through application of significant effort and intellect made it to the top in his field; public service, and deserves respect for that and for his steady hand at the helm for the eight years he served as president. 
    Clearly Trumps IQ is superior because he says so. I'm sure he can't spell Quotient either. Feel free to remove 
    baka-dubbs
  • Reply 12 of 31
    ksecksec Posts: 1,568member
    chaicka said:
    Pricing of IP on basis of percentage of final retail price of an end product is NOT FAIR. How can the cost of IP be $5 for a low priced Android selling at $100 while it costs $50 for a high priced iOS selling at $1000.

    If that’s the basis, why not priced your IPs at dealer price of your own chip then??????
    Well it isnt straightly Final Retail Price. It is the price Foxconn sold back to Apple. So it is significantly less, having said that, it is still not "really" fair.

    The idea of percentage based Patents fees stem from the product or services are not large scale enough to cover or recoup what ever investment were made into those patents. So the higher priced product, are paying more to help where smaller player could also have a chance in the market. No one would have thought what a niche and rich only piece of equipment called Mobile Phone one day become ubiquitous.

    When we have 3.5B Smartphone Users, and likely 5B in the coming decade, it is hard to name a services or market that has similar scale. It would only be fair if there were Cap to these fees. Which we still dont know yet. A Cap means more devices you make the cheaper it is, but Apple has never chased volume.

    Then there is Apple's LTE Modem. I am still very skeptical of Apple making their own Baseband ( It is possibly harder to design and get right then CPU ), but now they have W1 ( Bluetooth only ) W2 ( Bluetooth & 802.11n ), it will only make sense 802.11ac / ax and other Wireless technology continue to merge in, the plan would be to have 4G / 5G in every Apple devices.

    “Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined" - Tim Cook

    Five times more then other's total's combined. Sometimes it is hard to figure this out, If Apple is estimated to paid roughly $10 per iPhone to Qualcomm, then there is only two dollars going into the pool for others, that is around $500M to Samsung, LG, Huawei, Nokia, Ericsson, ZTE.

    Really Qualcomm should only ever get $500M max, compared to the current $2.5B. And even $500M is quite a lot for someone with 40% of 4G patents. 

    *And people keep saying Apple are squeezing their suppliers? ( They may be an offender, but in other industry there are many other big company which have done things ten times worst. )  




    ClarityToSeenetmage
  • Reply 13 of 31
    croprcropr Posts: 1,075member
    This statement about it coming down to “IP pricing,” and the assertion that “Qualcomm technology... kickstarted the smartphone industry” reminds me of a former president who made a claim about basic infrastructure being responsible for the success of entrepenuers like Steve Jobs.  Sure, roads and electric grids and such are necessary for a Bill Gates or Steve Jobs or Larry Ellison to create the businesses they created, but that infrustructure was available to everyone and not everyone created a Microsoft or Apple or Oracle.  

    The underlying technology that Qualcomm had under patent at the time the modern smartphone took form (i.e. the form first introduced by the iPhone and since copied by all others; multitouch, no physical keyboard or scroll wheel, etc) was available to any and all who would have wanted to employ it, and yet only Apple created the form factor and UX that we take for granted as a smartphone today.  Qualcomm is a bit disingenuous in suggesting they or their technology somehow should get credit for having kickstarted the smartphone industry.

    Most of the  2G related patents (the original iPhone was 2G technology)) are expired.  But 4G technology was not available at the launch of the original iPhone, meaning that  all 4G related technology that is included in the current iPhones, could have been invented or co-invented by Apple if Apple would have wanted.   The same applies to the 5G technology that is being developed right now. Apple choose not to invest in radio technology but to license the technology, so it should pay the license fees.

    That Apple created the form factor is not correct (there was an unsuccessful Alcatel phone with touch interface before the iPhone was launched) and also irrelevant as the Qualcomm patents are about the radio technology, not about the user interface or form factor.

    Whether the prices for the license of these payments should be linear dependant on the end user price of the phone, is of course another question.  Apple has indeed a point that this is not fair, but it is a common practice for telecom related patents.  Apple accepted the practice when the iPhone was launched, later realizing that it is a burden and now trying to fight it.  But accepting it in the first place, does jeopardize the chances in court.

    gatorguyGG1
  • Reply 14 of 31
    maestro64maestro64 Posts: 5,035member
    This statement about it coming down to “IP pricing,” and the assertion that “Qualcomm technology... kickstarted the smartphone industry” reminds me of a former president who made a claim about basic infrastructure being responsible for the success of entrepenuers like Steve Jobs.  Sure, roads and electric grids and such are necessary for a Bill Gates or Steve Jobs or Larry Ellison to create the businesses they created, but that infrustructure was available to everyone and not everyone created a Microsoft or Apple or Oracle.  

    The underlying technology that Qualcomm had under patent at the time the modern smartphone took form (i.e. the form first introduced by the iPhone and since copied by all others; multitouch, no physical keyboard or scroll wheel, etc) was available to any and all who would have wanted to employ it, and yet only Apple created the form factor and UX that we take for granted as a smartphone today.  Qualcomm is a bit disingenuous in suggesting they or their technology somehow should get credit for having kickstarted the smartphone industry.

    Let's not forget Motorola invented the modern day cell phone technology. They only reason QCOM exists is due to the deal they did with Verizon to standardize on QCOM CDMA technology, if VZ went in different direction QCOM would not be where they are at. 
    ClarityToSee
  • Reply 15 of 31
    ClarityToSeeClarityToSee Posts: 34unconfirmed, member
    I am honestly getting tired of the argument that since Apple did not make the initial investment in the development of radio technology used in 4G and 4G LTE modems, Apple should pay whatever Qualcomm deems the fair pricing to be. 
    This type of mentality is not a problem for just Apple, but also Pharmaceuticals, Telecommunications and other industries. This type of thinking is an issue in general. Where there is fair and free market with healthy competition, this would have worked just fine. However, what happens when there is a Monopoly or a Duopoly?  Do you think Comcast would be able to get to a fair pricing point for their customers if left to their own device?? After all, there is nobody to compete with them in more than half the country. Even when there is competition, there is only one competitor.  Same goes with Genzyme, Pfizer and QUALCOMM. These companies think they can make you sell the shirt off your back, because they CAN and because they think it would be fair because of their initial investments! You decide if you can totally and truly be fair when you are holding all the cards on the table! Can you? Especially when you are measured only in numbers and nothing else! Moral character does not count and does not give you any points in WallSt. 
    edited October 2017 netmage
  • Reply 16 of 31
    Well, yeah. But more to the point, it's about what Qualcomm has done to realize higher (effective) IP pricing. It's about Qualcomm's illegal and contract violative actions which have helped it extract more money from IP users than it otherwise would have been able to.

    Similarly robbery is, you could say, just about money. Someone not wanting to be robbed and complaining about being robbed is, you could say, just complaining about money. Someone complaining about extortion is, you could say, just complaining about money. Someone complaining about contract obligations not being fulfilled is, you could say, just complaining about money. But so what? The reality that you could describe certain things in such a way - a way that avoids recognizing the most important point - doesn't diminish the rightfulness of complaints about those things. That, of course, is what Qualcomm is trying to do.

    Qualcomm is desperate. And the battle it is really fighting is over investor relations. It knows that it's on the losing side of legal battles. What it has done (i.e. what it has been accused of doing by multiple parties and numerous regulating bodies) is near to indefensible. It's wrong in its legal arguments. And at this point it is, I think, safe to accept that at least some of the factual allegations made against it are true - some of them it doesn't even deny itself.
    netmage
  • Reply 17 of 31
    Mollenkopf said he expects Apple to settle out of court

    Not sure who he's trying to kid, Apple will not blink first.
    Yeah, what his expectation that Apple will settle out of court means is that he expects that Qualcomm will eventually - when it decides that it's fought the investor PR battle long enough - capitulate in its legal fight with Apple.
    netmage
  • Reply 18 of 31
    plovellplovell Posts: 819member
    Mollenkopf said he expects Apple to settle out of court

    Not sure who he's trying to kid, Apple will not blink first.
    You're both right.

    1. it will be settled out of court
    2. it will be settled on Apple's terms
    ksec
  • Reply 19 of 31
    wizard69wizard69 Posts: 13,377member
    tundraboy said:
    reminds me of a former president who made a claim about basic infrastructure being responsible for the success of entrepenuers like Steve Jobs. 
    Excuse me, that's not what he said or meant.  And you should know better.  He did not mean that the basic infrastructure was wholly responsible for the success of entrepreneurs as you imply but that the infrastructure (which includes not just roads and bridges but more intangible things like the research and tertiary educational system) that was built using trillions of taxpayers' dollars gave US entrepreneurs a big advantage.  That I think is a pretty reasonable statement.

    The sentiment he raised was a counterpoint to that promoted by people like former Citibank CEO Sandy Weill who once (pre-Great Recession) claimed that he deserved every single dollar of the multimillion bonuses he received because he and no one else was responsible for his company's success.  This was representative of the attitude of a lot of fat cat CEOs.  They were all willing to grab those outsized bonuses when their companies were flying high but when they were on the brink of collapse, they were sure eager to grab the hundreds of billions of rescue dollars that the taxpayers shelled out to keep the US economy from disintegrating.

    And now that their companies have recovered, they're at it again with the same arrogant attitude that the best government regulation is no regulation and that they alone deserve the credit for their companies' success.  That is, until the next crisis when we suckers will have to rescue them again.
    You have twisted things a bit here.  There certainly is an issue with respect to commercial banking here, im not disagreeing with that.   However many business people, even very tiny businesses to great offense to those statements of a few years ago because businesses succeed or fail based on the abilities of the person driving those businesses.    Most business people saw the comments as a massive insult.    Rightfully so too because most businesses do not get bail outs, in fact many people would have rather seen the auto industry fail then the stupidity of giving them handouts.  

    So yeah for any politician to publicly say what was said just demonstrates a gross misunderstanding of the reality most businesses operate under and thus was rightfully seen as an insult by many business people.   It is simply ignorant to support a politician in this case based on the behavior of a certain class of "businessmen".  

    netmagestompy
  • Reply 20 of 31
    SoliSoli Posts: 10,033member
    Qualcomm is now testing a '5G' chip. I suspect that we may be in for another mobile communications war as Qualcomm tries to assure dominance in this area for decades to come while others try to unseat them. From what I can see Qualcomm is at a disadvantage when looking at companies involved, but Qualcomm could still have a major advantage in terms of patents and technologies. I just hope the consumer doesn't pay the price in stalled progress or disjunct '5G' standards.

    edited October 2017 GG1
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