Apple tried to use Qualcomm modems in the iPhone XS and iPhone XR, but was refused

AppleInsider

Apple Chief Operating Officer Jeff Williams testified on Monday that both the iPhone XR, and iPhone XS family were supposed to have modems from both Qualcomm and Intel, but Qualcomm refused to sell the company chips for the new models.

Apple's iPhone XS, iPhone XR, and iPhone XS Max

"We have been unable to get them to support us on new design wins past that time [that Apple filed suit]," Williams testified on Monday, in the US Federal Trade Commission versus Qualcomm trial. "This has been a challenge."

Williams reportedly contacted Qualcomm CEO Steve Mollenkopf directly to strike a deal. When Mollenkopf refused outright, Apple had to turn to Intel to supply the entire 2018 iPhone lineup, instead of around half like it did for the iPhone 8 and iPhone X releases.

"The strategy was to dual source in 2018 as well," Williams said Monday. "We were working toward doing that with Qualcomm, but in the end they would not support us or sell us chips."

Despite the refusal to supply chips and license the technology for the iPhone XS and iPhone XR, Williams testified that it still supplies chips for older devices. Williams was asked if Qualcomm is so abusive from a business standpoint, then why did Apple continue the relationship after the licensing fees and contentious "double-dipping" started to creep up earlier.

"We were staring at an increase of over $1 billion per year in licensing, so we had a gun to our head," Williams answered, according to CNet. "The alternative was if you don't accept it, it just defaults to the contract manufacturer rate of $18, $17. We needed their chip supply. If we tried to pursue them legally, we wouldn't have access to the chips. We didn't have a lot of options."

The FTC suit was initiated nearly two years ago, accusing Qualcomm of forcing Apple into an exclusive modem chip deal between 2011 and 2016 in exchange for lower patent royalties. Qualcomm owns a number of key smartphone-related patents, and has often been accused of failing to follow FRAND (fair, reasonable and non-discriminatory) pricing.

Prior to the FTC action Qualcomm had already been hit with a $853 million fine in South Korea for similar practices. In fact that case led directly to Apple filing a $1 billion lawsuit against Qualcomm, accusing it of withholding rebates in retaliation for cooperating with antitrust investigators.

Since then governments in the U.S., China, Taiwan, and Europe have looked into Qualcomm's business deals. The company avoided most of a fine in Taiwan by agreeing to invest $700 million in the country, but has also been saddled with 997 million euros in fines by the European Union.

Meanwhile the private war between Apple and Qualcomm has only escalated with suits and countersuits around the world, and Apple suppliers boycotting royalty payments. Qualcomm has accused Apple of patent violations and handing trade secrets to rival chipmaker Intel, now the only provider of iPhone modems.

Apple has typically had the upper hand, but that changed towards the end of 2018 when Qualcomm managed to secure limited iPhone bans first in China, then in Germany. So far these only affect older models, and Qualcomm has had no luck trying to secure a U.S. injunction. Apple has tried to detour the Chinese ban with iOS tweaks.

The blowback of legal fights could eventually force the two companies to settle. Qualcomm executives have even claimed that a deal could happen within months, but as recently as late November Apple said that no talks were in progress.


On Jan. 11, Qualcomm CEO Steve Mollenkopf took the stand, defending his company's pricing practices, saying the chipmaker pushed for exclusivity on iPhone because Apple demanded a $1 billion "incentive payment" to secure the deal.

At present, it is not clear when testimony in the matter concludes.

magman1979

Qualcomm = The New Scamsung

ericthehalfbee

Apple should sell A Series processors to third parties.

Better yet, announce they’re doing a feasibility study on whether or not to make custom versions of their A Series for others to use. With support for ARMs version of a Secure Enclave to seamlessly work with Android devices.

I wonder what Qualcomm would think if Apple started to “cut their grass” and enter the SoC market with superior devices?

gatorguy

ericthehalfbee said:

Apple should sell A Series processors to third parties.

Better yet, announce they’re doing a feasibility study on whether or not to make custom versions of their A Series for others to use. With support for ARMs version of a Secure Enclave to seamlessly work with Android devices.

I wonder what Qualcomm would think if Apple started to “cut their grass” and enter the SoC market with superior devices?

Interesting suggestion....
At the moment Qualcomm has its own secured chip-within-a-chip, but apparently that's not good enough for Google since they're adding their own in-house designed security chip (Titan-M) for the "Secure Enclave" in Pixel phones. Not sure what that says about Qualcomm, perhaps nothing or perhaps Google like Apple is looking at backing away from them a little at a time, be less reliant.  

edited January 2019

tmay

gatorguy said:

ericthehalfbee said:

Apple should sell A Series processors to third parties.

Better yet, announce they’re doing a feasibility study on whether or not to make custom versions of their A Series for others to use. With support for ARMs version of a Secure Enclave to seamlessly work with Android devices.

I wonder what Qualcomm would think if Apple started to “cut their grass” and enter the SoC market with superior devices?

Interesting suggestion....
At the moment Qualcomm has its own secured chip-within-a-chip, but apparently that's not good enough for Google since they're adding their own in-house designed security chip (Titan-M) for the "Secure Enclave" in Pixel phones. No sure what that says about Qualcomm, perhaps nothing or perhaps Google like Apple is looking at backing away from them a little at a time, be less reliant.  

Good Point. 

I think that any company in the smartphone space needs/wants to have as much control of the supply chain as possible, and in many ways, Qualcomm is both a source, and a competitor.

jmey267

So much for FRAND, how can any court not nail them on that alone?

gatorguy

jmey267 said:

So much for FRAND, how can any court not nail them on that alone?

Do you know who establishes what those F/RAND rules mean and what they require in the case of 3G/4G standards? What in them would require Qualcomm to sell wifi chips to Apple? 

matteblack13

Who cares? All they would do is end up throttling the Qualcomm chips to the performance of the Intel chips, making it a total waste and a wash. 

muthuk_vanalingam

ericthehalfbee said:

Apple should sell A Series processors to third parties.

Better yet, announce they’re doing a feasibility study on whether or not to make custom versions of their A Series for others to use. With support for ARMs version of a Secure Enclave to seamlessly work with Android devices.

I wonder what Qualcomm would think if Apple started to “cut their grass” and enter the SoC market with superior devices?

I don't think it is going to work out, for the below reasons:

1. Apple doesn't sell "cheap" products in ANY category. That would rule out low-end/mid-range Android phones with <$600 (about 95% of the Android market).

2. Apple cannot make "modem" whether it is integrated or not, without Qualcomm licensing those patents at a reasonable cost to them. That would make it a cost-prohibiting move for Android OEMs to pay for.

3. Risk of Android flagship phones (>$600) taking away sales from iPhones. To prevent it, Apple would have to cut-down performance/features which would bring Qualcomm's SoCs on-par with the supposed A-series SoCs specifically designed for Android OEMs. And Apple cannot offer them at a cost, which is competitive enough for Android OEMs to make it an attractive option. And there is no way Android OEMs can be convinced about using Apple SoCs just for flagship phones and rely on Qualcomm for mid-range phones.

maestro64

Now you know why Qualcomm is not trying to block the sells of the new phones only the older ones. No judge would like the fact Qualcomm refuses to sell parts to apple then turned around and sued them to block the sale of those same products.

mhback55

This is such a joke. $7.50 sounds more than fair. The fees Apple charges to sell in the App Store now that's is just wrong.

mike wuerthele

mhback55 said:

This is such a joke. $7.50 sounds more than fair. The fees Apple charges to sell in the App Store now that's is just wrong.

Whataboutism. Two different matters.

And, keep in mind, that's $7.50 for FRAND patents, on top of what Qualcomm charges for the chips. Thus, the double-dipping that the Federal Trade Commission is worried about in this particular action.

edited January 2019

pk22901

mhback55 said:

This is such a joke. $7.50 sounds more than fair. The fees Apple charges to sell in the App Store now that's is just wrong.

Interesting. Source for "$7,50"?????

anantksundaram

If I was a Qualcomm shareholder, I'd be livid -- no, frothing at the mouth -- at this news.

I think Mr. Mollenkopf will be hearing hearing from analysts, hedge, funds, and activists soon. And facing some serious shareholder lawsuits.

mattinoz

ericthehalfbee said:

Apple should sell A Series processors to third parties.

Better yet, announce they’re doing a feasibility study on whether or not to make custom versions of their A Series for others to use. With support for ARMs version of a Secure Enclave to seamlessly work with Android devices.

I wonder what Qualcomm would think if Apple started to “cut their grass” and enter the SoC market with superior devices?

They could annoucne a cross-licensing deal with Intel to use the Apple's ARM cores in return unspecifiy Intel IP. That would have Qualcomm and others stressed.

bluefire1

Qualcomm modems were the best, and I"m hoping they're in the next version of iPhones this fall. The difference between their modems and what Intel manufactures is pronounced.

airnerd

Mike Wuerthele said:

mhback55 said:

This is such a joke. $7.50 sounds more than fair. The fees Apple charges to sell in the App Store now that's is just wrong.

Whataboutism. Two different matters.

And, keep in mind, that's $7.50 for FRAND patents, on top of what Qualcomm charges for the chips. Thus, the double-dipping that the Federal Trade Commission is worried about in this particular action.

I don't follow how this idea of "double dipping" is illegal or punishable.  I pay a vehicle registration fee to drive my car on the roads.  I pay a roads tax via fuel, to operate that car I paid a fee to operate on a road, on a road.  I pay numerous other taxes and fees for road upkeep just to drive my car on safe roads.  No one has an issue with double dipping there.  

I have a PS4 that I bought outright.  I bought complete games for it as well.  Guess what happens if I want to use any of the online features?  I have to pay a yearly PSN fee...to use the system I already own to play the game I already own using the internet I already pay for.  


To me it seems there is double dipping everywhere in society.  If a company has a model that allows them to extract more fees, why is it all of a sudden wrong here?  

macpro

magman1979 said:

Qualcomm = The New Scamsung

To be fair, as far as I know, at least, Samsung and Apple always did business throughout legal fights over Samsung ripping off Apple's IP.  Same true of Google.  

radarthekat

bluefire1 said:

Qualcomm modems were the best, and I"m hoping they're in the next version of iPhones this fall. The difference between their modems and what Intel manufactures is pronounced.

Specifics?  That materialize in the real world, please? 

radarthekat

airnerd said:

Mike Wuerthele said:

mhback55 said:

This is such a joke. $7.50 sounds more than fair. The fees Apple charges to sell in the App Store now that's is just wrong.

Whataboutism. Two different matters.

And, keep in mind, that's $7.50 for FRAND patents, on top of what Qualcomm charges for the chips. Thus, the double-dipping that the Federal Trade Commission is worried about in this particular action.

I don't follow how this idea of "double dipping" is illegal or punishable.  I pay a vehicle registration fee to drive my car on the roads.  I pay a roads tax via fuel, to operate that car I paid a fee to operate on a road, on a road.  I pay numerous other taxes and fees for road upkeep just to drive my car on safe roads.  No one has an issue with double dipping there.  

I have a PS4 that I bought outright.  I bought complete games for it as well.  Guess what happens if I want to use any of the online features?  I have to pay a yearly PSN fee...to use the system I already own to play the game I already own using the internet I already pay for.  


To me it seems there is double dipping everywhere in society.  If a company has a model that allows them to extract more fees, why is it all of a sudden wrong here?  

You’re not paying for the PS4 internet, you’re paying for general internet access.  If you’re using it only for gaming then you might think you’re being double dipped, but you aren’t in that case.

diyble dipping is about paying twuce for the same thing, not some other thing that might be necessary to get the thing you intend to pay for.   

gatorguy

radarthekat said:

airnerd said:

Mike Wuerthele said:

mhback55 said:

This is such a joke. $7.50 sounds more than fair. The fees Apple charges to sell in the App Store now that's is just wrong.

Whataboutism. Two different matters.

And, keep in mind, that's $7.50 for FRAND patents, on top of what Qualcomm charges for the chips. Thus, the double-dipping that the Federal Trade Commission is worried about in this particular action.

I don't follow how this idea of "double dipping" is illegal or punishable.  I pay a vehicle registration fee to drive my car on the roads.  I pay a roads tax via fuel, to operate that car I paid a fee to operate on a road, on a road.  I pay numerous other taxes and fees for road upkeep just to drive my car on safe roads.  No one has an issue with double dipping there.  

I have a PS4 that I bought outright.  I bought complete games for it as well.  Guess what happens if I want to use any of the online features?  I have to pay a yearly PSN fee...to use the system I already own to play the game I already own using the internet I already pay for.  


To me it seems there is double dipping everywhere in society.  If a company has a model that allows them to extract more fees, why is it all of a sudden wrong here?  

You’re not paying for the PS4 internet, you’re paying for general internet access.  If you’re using it only for gaming then you might think you’re being double dipped, but you aren’t in that case.

diyble dipping is about paying twuce for the same thing, not some other thing that might be necessary to get the thing you intend to pay for.   

That's alos part of QC's defense: To fully license the needed QC IP used in a smartphone requires more than just the SEP package. That's part of their reasoning for royalties tied to both a component and the finished product. I am not saying it is or isn't a legitimate argument but applying the royalties as a percentage of the sales (ie, product price) is a common and legal basis.