Sigh, Qualcomm does not learn. The Apple lawsuit of Qualcomm had one primary objection to Qualcomm’s royalty package and that objection was based on Qualcomm’s policy to charge royalty rates based on the wholesale price of the device. Apple has to pay much more royalty for the same chip as a manufacturer of a cheaper device. Apple believes that this is unfair.
Qualcomm should wave goodbye to their former best customer. Any other company would have learned and charged a straight royalty rate of $25 for their modem chips to all their customers. They can make up for this increase price to Android customers by charging $15 less for their Snapdragon chips, which most Android smartphones use. This would circumvent Apple’s complaint and earn the same profit.
For a company that is supposedly smart and visionary, the following decisions suggest not just stupidity but blindness. First, they kick Apple, their biggest customer, in the teeth by charging Apple twice as much royalty per modem chip as the other customers. To make these high charges palatable, they gave billions in rebates to Apple to not buy competitor chips, making the rebates contingent on secrecy.
Second, when Korea went after Qualcomm for these anti-competitive practices, Qualcomm withheld a billion dollars of rebates from Apple because Apple disclosed the terms of its agreement with Qualcomm. What did Qualcomm think would happen? Apple files a $1 billion lawsuit. The US FTC takes notice and files its own suit against Qualcomm.
Third, Qualcomm then initiates lawsuits against Apple for infringing on Qualcomm’s patent rights, taking care not to include any of the standard essential patents (SEP) in these lawsuits. But, in doing so, they expose their second egregious practice of forcing all their customers to license a bundle of Qualcomm patents in exchange for cross-licensing all of the customer’s IP.
Finally, Qualcomm included SEP in their cross-licensing bundle and may be infringing on its agreement not to overcharge for SEP. It is likely that FTC will no longer allow Qualcomm to include SEP in the cross-licensing bundles but instead must license the SEP separately at a low rate unrelated to device wholesale price, hence the lower royalty for the SEP based on the wholesale price.
Qualcomm has damaged, perhaps irretrievably, their relationship with their largest customer that was providing about a third of Qualcomm’s licensing profit. Instead of stopping their illegal practice of providing rebates contingent on not buying competitor chips and keeping the rebates secret, Qualcomm opened the Pandora’s box to expose their dirty dealings.
In the last three years, Qualcomm has lost four major lawsuits in China, Korea, Taiwan, and the European Union and paid as much as $4 billion dollars of record fines for anti-competitive practices. In my opinion, they will lose the lawsuit filed by Apple and FTC as well. And, here they are proposing essentially similar royalty packages that had gotten them into trouble in the first place.
Previously Qualcomm customers had to pick from two licensing bundles for phones: a robust one costing 5 percent of a phone's price, and a smaller one consisting of just standards-essential cellular patents for 3.25 percent. Most customers chose to license both in order to avoid lawsuits, Reuterssaid on Tuesday.
Under the new scheme, Qualcomm has made it more practical to adopt just the cheaper bundle, which now also includes patents for 5G. All fees will only apply to the first $400 of a phone's net selling price -- in the past, that ceiling was $500.
Past: $1000 phone x 5% licensing = $50 per phone (+ chip cost) Present: $1000 phone capped at $400 x 5% licensing = $20 per phone (+ chip cost)
Correct?
What a business model -- if (while) you can get away with it.
Even though many here have already stated that your math is incorrect, I think you are absolutely correct, but only if Apple can get away with licensing the smaller bundle. What everyone is assuming is that Apple was licensing the smaller bundle for the iPhone. It's reasonable to assume that Apple was licensing the "robust" chip bundle for the iPhone and thus was paying 5% of the iPhone retail cost to Qualcomm.
It was never based on retail cost to begin with, but instead the price Foxconn charged Apple for the finished iPhone. Yes Apple buys them from Foxconn.... and it was never on the entire cost either, capped at $500 instead.
How can Qualcomm charge so much for a standards-essential patent? They do nothing but rip off the entire industry. If not for them, manufacturers could make larger profits while not charging any more for their products.
THis is my question as well - it seems like 5G related patents should fall under FRAND rules
How can Qualcomm charge so much for a standards-essential patent? They do nothing but rip off the entire industry. If not for them, manufacturers could make larger profits while not charging any more for their products.
THis is my question as well - it seems like 5G related patents should fall under FRAND rules
Comments
Qualcomm should wave goodbye to their former best customer. Any other company would have learned and charged a straight royalty rate of $25 for their modem chips to all their customers. They can make up for this increase price to Android customers by charging $15 less for their Snapdragon chips, which most Android smartphones use. This would circumvent Apple’s complaint and earn the same profit.
For a company that is supposedly smart and visionary, the following decisions suggest not just stupidity but blindness. First, they kick Apple, their biggest customer, in the teeth by charging Apple twice as much royalty per modem chip as the other customers. To make these high charges palatable, they gave billions in rebates to Apple to not buy competitor chips, making the rebates contingent on secrecy.
Second, when Korea went after Qualcomm for these anti-competitive practices, Qualcomm withheld a billion dollars of rebates from Apple because Apple disclosed the terms of its agreement with Qualcomm. What did Qualcomm think would happen? Apple files a $1 billion lawsuit. The US FTC takes notice and files its own suit against Qualcomm.
Third, Qualcomm then initiates lawsuits against Apple for infringing on Qualcomm’s patent rights, taking care not to include any of the standard essential patents (SEP) in these lawsuits. But, in doing so, they expose their second egregious practice of forcing all their customers to license a bundle of Qualcomm patents in exchange for cross-licensing all of the customer’s IP.
Finally, Qualcomm included SEP in their cross-licensing bundle and may be infringing on its agreement not to overcharge for SEP. It is likely that FTC will no longer allow Qualcomm to include SEP in the cross-licensing bundles but instead must license the SEP separately at a low rate unrelated to device wholesale price, hence the lower royalty for the SEP based on the wholesale price.
Qualcomm has damaged, perhaps irretrievably, their relationship with their largest customer that was providing about a third of Qualcomm’s licensing profit. Instead of stopping their illegal practice of providing rebates contingent on not buying competitor chips and keeping the rebates secret, Qualcomm opened the Pandora’s box to expose their dirty dealings.
In the last three years, Qualcomm has lost four major lawsuits in China, Korea, Taiwan, and the European Union and paid as much as $4 billion dollars of record fines for anti-competitive practices. In my opinion, they will lose the lawsuit filed by Apple and FTC as well. And, here they are proposing essentially similar royalty packages that had gotten them into trouble in the first place.
(Answer: Nothing)
and it was never on the entire cost either, capped at $500 instead.