A 5G iPhone will cost Apple about $21 in licensing fees to Nokia, Qualcomm, and others

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in iPhone
Apple could theoretically end up paying $21 or more per phone to cover licensing fees from 5G-related patents for future iPhones, in large part because of Qualcomm.

Apple iPhone X and Face ID


Nokia on Wednesday announced a flat, 3 euro ($3.48) per-device licensing fee for its 5G standards-essential patents, according to VentureBeat. That contrasts with Ericsson, which is charging on a sliding scale between $2.50 and $5 based on the cost of a device.

Qualcomm, however, is licensing its 5G patents at 2.275 percent of a single-mode phone's total price, and 3.25 percent for multi-mode phones, albeit with a $400 price cap.

A modern smartphone could potentially be saddled with over $21 in combined royalty payments. Around $13 will go to Qualcomm regardless of any current spats.

All of the patent-holders have not yet chimed in on the rate. So, while volume fee arrangements may reduce the $21 per device somewhat, the other companies involved, like Huawei, will push the figure up.

While it is not specifically known what Apple pays per iPhone for 4G technologies, the licensing isn't as simple as what has been worked out for 5G technologies, and is thought to be much higher than the approximate $21 expected for 5G.

Apple and Qualcomm are engaged in a global legal battle over patents and royalties. Apple began the war in January 2017 with a $1 billion lawsuit, claiming Qualcomm abuses its "monopoly power" to demand high royalties and force chip buyers to license patents. The chipmaker countered in April, and the pair have since lodged multiple complaints in domestic and international courts, roping in other Apple suppliers as well.

This year's iPhones are set to use Intel modems exclusively. They are nearly certainly going to skip 5G this time around, since the standard was only finalized in June, and U.S. carriers are only just beginning to deploy coverage.
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Comments

  • Reply 1 of 31
    irelandireland Posts: 17,521member
    And Apple will sell for $1,999
  • Reply 2 of 31
    Ha! And I thought Nokia was dead and buried, but the 5G space is BIG business...
    Avieshek[Deleted User]
  • Reply 3 of 31
    I hope they pay it and stop using the Intel modems. I am assuming the reason my 8 Plus has the worst internet reception I've had since the 4S is due to this.
    aylkmuthuk_vanalingamAvieshek
  • Reply 4 of 31
    sflocalsflocal Posts: 4,382member
    Paying based on the end-price of the phone is just lame all around.  I hope the lawsuit against Qualcomm moves forward and ends this practice.  If I buy a broadband chip, it's non of QC's business after the sale what I do with that chip.  Whether I put it in some $5 phone or a $1000 phone... none of their business.

    Taiwan dropping it's lawsuit against QC and essentially giving QC a slap on the wrist was a tragedy.
    ericthehalfbeeOfermacseekercecil444claire1mizhouRenderdogracerhomie3[Deleted User]ronn
  • Reply 5 of 31
    mknelsonmknelson Posts: 281member
    I hope they pay it and stop using the Intel modems. I am assuming the reason my 8 Plus has the worst internet reception I've had since the 4S is due to this.
    Check the model number on the back.

    A1901 = Intel modem

    Even then, that would effect your cellular internet speeds, not your reception (although reception/signal strength further impacts speeds).
    Solironn
  • Reply 6 of 31
    ireland said:
    And Apple will sell for $1,999
    Yeah, selling a new model of the phone for $1999 makes total sense, considering the fact the previous one went for $999. /s
    smh

    Solironn
  • Reply 7 of 31
    At Apple's 200M iPhones per year run-rate and $21 per phone to Qualcomm, that is a $4.2Bn per year flow out of Cupertino and into San Diego.  Regardless of the public animosity between these two companies, nearly 20% of Qualcomm's revenue is derived from Apple in such an agreement.  -RJ
    Avieshekronn
  • Reply 8 of 31
    nunzynunzy Posts: 662member
    Qualcomm should be ashamed. Apple should pay less than that.
    ronn
  • Reply 9 of 31
    Given Apple's typical margin, that means a $30 increase in the price of a $799 to $1149 phone (in the US), unless Apple is able to find savings elsewhere in the BoM. Or really $998 to $1348 phones if you include AppleCare+. Not exactly going to be noticeable or an obstacle with anyone with the bucks to shell out.
  • Reply 10 of 31
    sflocal said:
    Paying based on the end-price of the phone is just lame all around.  I hope the lawsuit against Qualcomm moves forward and ends this practice.  If I buy a broadband chip, it's non of QC's business after the sale what I do with that chip.  Whether I put it in some $5 phone or a $1000 phone... none of their business.

    Taiwan dropping it's lawsuit against QC and essentially giving QC a slap on the wrist was a tragedy.

    Absolutely lame. There are only a couple markets I can think of where the price you pay for a component (or software) is based on the retail price of the product it goes into. Smartphone cellular patents is one and game engines is another. Every other industry I've worked in (automotive and electronic components primarily) you pay a fixed fee for a component.

    Imagine, for example, if Microsoft starting charging customers with high-end gaming rigs or workstations double or triple for Windows 10, just because it's running on a more expensive machine? Or Apple having to pay double for RAM or NAND flash chips that go into a Mac while manufacturers of $300 PCs get it for a discount?

    This is the most ridiculous licensing model I've ever seen.
    edited August 2018 cecil444mizhouracerhomie3danhronn
  • Reply 11 of 31
    netroxnetrox Posts: 696member
    Are the patents covered by FRAND? Doesn't FRAND disallow abuse of licensing?
    regurgitatedcoproliteRenderdog
  • Reply 12 of 31
    gatorguygatorguy Posts: 19,805member
    sflocal said:
    Paying based on the end-price of the phone is just lame all around.  I hope the lawsuit against Qualcomm moves forward and ends this practice.  If I buy a broadband chip, it's non of QC's business after the sale what I do with that chip.  Whether I put it in some $5 phone or a $1000 phone... none of their business.

    Taiwan dropping it's lawsuit against QC and essentially giving QC a slap on the wrist was a tragedy.

    Absolutely lame. There are only a couple markets I can think of where the price you pay for a component (or software) is based on the retail price of the product it goes into. Smartphone cellular patents is one and game engines is another. Every other industry I've worked in (automotive and electronic components primarily) you pay a fixed fee for a component.

    Imagine, for example, if Microsoft starting charging customers with high-end gaming rigs or workstations double or triple for Windows 10, just because it's running on a more expensive machine? Or Apple having to pay double for RAM or NAND flash chips that go into a Mac while manufacturers of $300 PCs get it for a discount?

    This is the most ridiculous licensing model I've ever seen.
    Add medical devices to your list. As of a 2016 study about 90% of royalties in that field were based on a percentage of the device selling price. In a related field Pharmacuetical IP is also commonly licensed based on the selling price of the product.  

    In fact if you really look into it 3-6% of sales price is a really common royalty basis for IP licensing across multiple industries. It's not as uncommon as you think. 
    • Sports- Easy Golf Corp. manufactures, and sells a proprietary golf improvement product known as “The Swing-Channel™ Golf Mat”. Easy Golf pays the inventor 5% of sales.
    • Medical -  Baush & Lomb entered into an exclusive worldwide license agreement to develop, manufacture and market a cast-molded multi-focal soft contact lens using Unilens’ patented multi-focal soft contact lens design. Bausch & Lomb pays Unilens a royalty ranging from 3% to 5% of the product’s worldwide sales.
    • Automotive, Research Frontiers Inc. licenses Glaverbel SA the rights to manufacture and sell self-dimmable automotive vehicle rear-view mirrors. Glaverbel’s pays Research Frontiers 5% of sales.
    • Communications, TechAlt, Inc. produces a secure wireless communications toolset to be used by emergency first responders for interagency interoperability, communication and collaboration. TechAlt pays a royalty of 5% of sales for the underlying technology
    • and in more general terms Aircraft Avionics - 10% of the sales cost
    • Automotive air conditioning -  6% of the sales
    • PVC pipe - 2.5% of the selling price
    • Artificial Sweeteners - 5% of the selling price
    edited August 2018 GG1cecil444muthuk_vanalingam[Deleted User]Carnage
  • Reply 13 of 31
    @Ericthehalfbee said: "This is the most ridiculous licensing model I've ever seen." Sounds like you figured out a great way to get rich -- get a bunch of your friends together, combine your savings and buy a big factory. Then develop a chip that does what the Qualcomm chips do and sell 'em at a lower cost based on YOUR licensing model. Everyone will buy your chips! You and all your friends will be gazillionaires! Why didn't anybody think of this before? While you wait for your friends to call you back, shouldn't you be finishing your homework?
    edited August 2018
  • Reply 14 of 31
    gatorguy said:
    sflocal said:
    Paying based on the end-price of the phone is just lame all around.  I hope the lawsuit against Qualcomm moves forward and ends this practice.  If I buy a broadband chip, it's non of QC's business after the sale what I do with that chip.  Whether I put it in some $5 phone or a $1000 phone... none of their business.

    Taiwan dropping it's lawsuit against QC and essentially giving QC a slap on the wrist was a tragedy.

    Absolutely lame. There are only a couple markets I can think of where the price you pay for a component (or software) is based on the retail price of the product it goes into. Smartphone cellular patents is one and game engines is another. Every other industry I've worked in (automotive and electronic components primarily) you pay a fixed fee for a component.

    Imagine, for example, if Microsoft starting charging customers with high-end gaming rigs or workstations double or triple for Windows 10, just because it's running on a more expensive machine? Or Apple having to pay double for RAM or NAND flash chips that go into a Mac while manufacturers of $300 PCs get it for a discount?

    This is the most ridiculous licensing model I've ever seen.
    Add medical devices to your list. As of a 2016 study about 90% of royalties in that field were based on a percentage of the device selling price. 

    So another bunch of greedy aholes who abuse their IP.

    Pointing out others who do something similar doesn't make them right.
    edited August 2018 Rayz2016ronn
  • Reply 15 of 31
    @Ericthehalfbee said: "This is the most ridiculous licensing model I've ever seen." Sounds like you figured out a great way to get rich -- get a bunch of your friends together, combine your savings and buy a big factory. Then develop a chip that does what the Qualcomm chips do and sell 'em at a lower cost based on YOUR licensing model. Everyone will buy your chips! You'll all be gazillionaires! Why didn't anybody think of this before? While you wait for your friends to call you back, shouldn't you be finishing your homework?
  • Reply 16 of 31
    avon b7avon b7 Posts: 3,179member
    netrox said:
    Are the patents covered by FRAND? Doesn't FRAND disallow abuse of licensing?
    Huawei has publicly stated it will use FRAND for its 5G patents.

    http://carrier.huawei.com/en/events/mwcs2018/mwcs18-keynote-5g-mbb
    edited August 2018 muthuk_vanalingam
  • Reply 17 of 31
    mknelson said:
    I hope they pay it and stop using the Intel modems. I am assuming the reason my 8 Plus has the worst internet reception I've had since the 4S is due to this.
    Check the model number on the back.

    A1901 = Intel modem

    Even then, that would effect your cellular internet speeds, not your reception (although reception/signal strength further impacts speeds).
    Again, it all depends on your service providers and your purchased data speed....
  • Reply 18 of 31
    claire1claire1 Posts: 494unconfirmed, member

    I hope they pay it and stop using the Intel modems. I am assuming the reason my 8 Plus has the worst internet reception I've had since the 4S is due to this.
    I wish they would stop using 3rd party modems altogether. Apple makes everything better.
    mizhou
  • Reply 19 of 31
    rob53rob53 Posts: 1,974member
    The way around the 5G licensing is for Apple to develop a 6G standard that isn't based on existing cellular standards but is able to be used on existing cellular transceivers. At the same time, Apple could come out with their own cellular service, effectively getting rid of all current services in the US.

    Yea, not going to happen but I'm tired of FRAND patents costing so much. $21 doesn't sound like a lot but that's only for cellular patents, their are a lot of other royalties Apple has to pay for.
  • Reply 20 of 31
    MplsPMplsP Posts: 998member
    How much does 5G even matter for smart phones? Half the time I’ve got a mediocre LTE or 4G signal. If I can’t get that, what difference does 5G make anyway?
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