Apple payment to Qualcomm estimated at $6 billion, with $9 per iPhone sold in royalties

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Comments

  • Reply 21 of 48
    mdriftmeyermdriftmeyer Posts: 7,317member
    UBS is routinely wrong. And as someone who watched their Piper Jaffrey early days they have never been worth a piss at tech stock evaluations.
  • Reply 22 of 48
    seneca72 said:
    By the sound of it if Apple is paying Royalties over and above any that are included in the modem chip costs.  Apparently Qualcomm is still double dipping and it appears there's nothing whatever Apple can do about it if they want iPhone modems.  
    Are you sure about that?

    1. The settlement may mean Qualcomm no longer double dips.
    2. The biggest part of the deal is that Apple gets PATENT LICENSES. This means Apple is free to make its OWN MODEM CHIPS for future products.
    3. Qualcomm is now even more vulnerable as a MONOPOLY since Intel stopped being a competitor. Korea declared Qualcomm a monopoly. The US is soon also going to declare Qualcomm a Monopoly. This means its business practices will have a lot of scrutiny - particularly if it double dips - which would be prohibited.

  • Reply 23 of 48
    netroxnetrox Posts: 818member
    I suspect it's Intel that is the reason for Apple's settlement with Qaulcomm. Intel just keeps failing to perform up to specs and that's why Intel announced an exit. Apple needed 5G for new iPhones. Customers want it. Apple has no choice but either pay up or not offer 5G which can make customers move to Android.
    electrosoft
  • Reply 24 of 48
    netroxnetrox Posts: 818member
    And with Intel's exit in 5G, it's inevitable that Apple will exit Intel's business for ARM. Intel's been underperforming lately.
  • Reply 25 of 48
    red oak said:
    It's all moot in 3 years when Apple brings to market its own chips.   This deal is just a bridge to get there.   And then Qualcomm will be shown the proverbial door.  And, the FTC anti-monoply trail is still upcoming - that could turn this all on its head on its own 

    But you'd never know this looking at the QCOM stock surge over the last couple of days 
    They just signed a 6 yr deal. What makes you think Apple can pull of their own 5G chip? They couldn't even make a charging pad.
    k2kwwilliamlondonelectrosoft
  • Reply 26 of 48
    GG1GG1 Posts: 281member
    seneca72 said:
    By the sound of it if Apple is paying Royalties over and above any that are included in the modem chip costs.  Apparently Qualcomm is still double dipping and it appears there's nothing whatever Apple can do about it if they want iPhone modems.  
    Are you sure about that?

    1. The settlement may mean Qualcomm no longer double dips.
    2. The biggest part of the deal is that Apple gets PATENT LICENSES. This means Apple is free to make its OWN MODEM CHIPS for future products.
    3. Qualcomm is now even more vulnerable as a MONOPOLY since Intel stopped being a competitor. Korea declared Qualcomm a monopoly. The US is soon also going to declare Qualcomm a Monopoly. This means its business practices will have a lot of scrutiny - particularly if it double dips - which would be prohibited.

    I agree with you on all points, especially #2.

    I have no legal background, but just the nature of the settlement (seemingly very quick, based on reports of no one talking for months) says to me says that QC knew it may not have won the case, especially with possible monopoly status hanging over QC's head.
  • Reply 27 of 48
    chasmchasm Posts: 1,697member
    As flydog and Matrix say, this is a guess by an analyst. So it's almost certainly not correct.

    But even if it was, it sounds to me like Apple is simply paying back the money it and its suppliers withheld in licensing/royalties and chips (source: https://appleinsider.com/articles/18/10/26/apple-7b-behind-in-royalty-payments-to-qualcomm). That was always going to happen anyway -- even if the FTC rules that Qualcomm's business model is monopoly abuse (as it should), it would never have made that decision retroactive.

    The alleged new royalty of $9 per iPhone is a bit troubling, as that is up from $7.50 or thereabouts before, but to be fair it is not unknown or unusual for a supplier to raise prices on brand-new technology. Again I'm doubtful of these pundit-imagined numbers, but even if its half-right, that's what Apple was going to have to pay in any settlement ahead of any definitive ruling on Qualcomm's double-dipping, the first decision of which is likely to happen this summer. So things could change going forward, but I remain very unconvinced that Apple "caved" or "got a bad deal" given these realities.
    netmage
  • Reply 28 of 48
    carnegiecarnegie Posts: 736member
    chasm said:
    As flydog and Matrix say, this is a guess by an analyst. So it's almost certainly not correct.

    But even if it was, it sounds to me like Apple is simply paying back the money it and its suppliers withheld in licensing/royalties and chips (source: https://appleinsider.com/articles/18/10/26/apple-7b-behind-in-royalty-payments-to-qualcomm). That was always going to happen anyway -- even if the FTC rules that Qualcomm's business model is monopoly abuse (as it should), it would never have made that decision retroactive.

    The alleged new royalty of $9 per iPhone is a bit troubling, as that is up from $7.50 or thereabouts before, but to be fair it is not unknown or unusual for a supplier to raise prices on brand-new technology. Again I'm doubtful of these pundit-imagined numbers, but even if its half-right, that's what Apple was going to have to pay in any settlement ahead of any definitive ruling on Qualcomm's double-dipping, the first decision of which is likely to happen this summer. So things could change going forward, but I remain very unconvinced that Apple "caved" or "got a bad deal" given these realities.
    A lot of people have referred to the $7.50 figure. But that is not what Apple was effectively paying when it started withholding payments meant to cover Qualcomm royalties and when it filed its lawsuit against Qualcomm.

    We don't have enough information to precisely pin down what Apple was effectively paying (or would have been paying). But, based on what we do know, we can say with confidence that it was more than $10, and it was likely closer to $14. It might even have been a little higher.

    Now, it would seem, Apple has a direct licensing deal, which is something it has indicated it long wanted. And it's at a reasonable rate, dramatically below what Qualcomm says it wants and below what Apple would have been paying if it hadn't withheld payments. And, most likely, Apple hasn't had to agree to the improper terms which Qualcomm had previously imposed. I doubt Qualcomm would even try to impose some of those terms now, considering the regulatory heat it's been under.
  • Reply 29 of 48
    This article makes no sense whatsoever. Why is AI publishing a whole article on one analyst’s wild guess without making any effort to prove or disprove it. Are we to expect a new article from AI every time someone publishes their speculation? 

    QC has been found guilty of violating antitrust laws on two continents, with another adverse decision likely within a month, from the same judge who already ruled that QC must license it’s SEPs to competing chipmakers. There is no way Apple would acquiesce to all of QC’s demands or settle without getting something substantial in return. Anybody who believes that Apple agreed to such a terrible deal must also believe that Tim Cook just had a stroke, and was replaced by a look-alike dummy. 
    edited April 18 tht
  • Reply 30 of 48
    carnegiecarnegie Posts: 736member
    spock1234 said:
    This article makes no sense whatsoever.  Why is AI publishing a whole article on one analyst’s wild guess? AI has not made any effort to prove or disprove this analyst’s guesstimates. Are we to expect a new article from AI every time someone publishes their speculation?  

    QC has been found guilty of violating antitrust laws on two continents, with another adverse decision likely within a month.  There is no way Apple would acquiesce to all of QC’s demands, or settle without getting something substantial in return. Anybody who believes that Apple agreed to such a terrible deal must also believe that Tim Cook just had a stroke, and was replaced by a look-alike dummy. 
    The terms of this deal are, at this moment, of considerable interest to many people interested in Apple. And there is, as we might expect for now, a dearth of information regarding those terms.

    So I don’t see a problem with AI reporting on an analysts’ estimates relating to the terms of the deal, so long as AI doesn’t present those estimates as something other than estimates. And the title of the article makes clear that the numbers are estimates.

    That said, if UBS previously assumed that the going forward royalty cost would be $5 per device, I’d say that it was being pretty optimistic about Apple’s position - all things considered.
    muthuk_vanalingam
  • Reply 31 of 48
    ivanhivanh Posts: 390member
    In 5G, every connected device is an IoT, including an iPhone. So, we now know the basic cost of an IoT device, i.e. US$9. 

    Should iPhone reduces its price? Suppose 5G and evolving technologies should always be cheaper than its predecessors aka 4G, 3G, and etc.
  • Reply 32 of 48
    gatorguygatorguy Posts: 21,225member
    carnegie said:
    chasm said:
    As flydog and Matrix say, this is a guess by an analyst. So it's almost certainly not correct.

    But even if it was, it sounds to me like Apple is simply paying back the money it and its suppliers withheld in licensing/royalties and chips (source: https://appleinsider.com/articles/18/10/26/apple-7b-behind-in-royalty-payments-to-qualcomm). That was always going to happen anyway -- even if the FTC rules that Qualcomm's business model is monopoly abuse (as it should), it would never have made that decision retroactive.

    The alleged new royalty of $9 per iPhone is a bit troubling, as that is up from $7.50 or thereabouts before, but to be fair it is not unknown or unusual for a supplier to raise prices on brand-new technology. Again I'm doubtful of these pundit-imagined numbers, but even if its half-right, that's what Apple was going to have to pay in any settlement ahead of any definitive ruling on Qualcomm's double-dipping, the first decision of which is likely to happen this summer. So things could change going forward, but I remain very unconvinced that Apple "caved" or "got a bad deal" given these realities.
    A lot of people have referred to the $7.50 figure. But that is not what Apple was effectively paying when it started withholding payments meant to cover Qualcomm royalties and when it filed its lawsuit against Qualcomm.

    We don't have enough information to precisely pin down what Apple was effectively paying (or would have been paying). But, based on what we do know, we can say with confidence that it was more than $10, and it was likely closer to $14. It might even have been a little higher.

    Now, it would seem, Apple has a direct licensing deal, which is something it has indicated it long wanted. And it's at a reasonable rate, dramatically below what Qualcomm says it wants and below what Apple would have been paying if it hadn't withheld payments. And, most likely, Apple hasn't had to agree to the improper terms which Qualcomm had previously imposed. I doubt Qualcomm would even try to impose some of those terms now, considering the regulatory heat it's been under.
    Didn't Jeff Williams, Apple COO, testify under oath to the $7.50 per iPhone effective royalties in the FTC case in front of Judge Koh? 
    edited April 18 muthuk_vanalingam
  • Reply 33 of 48
    carnegiecarnegie Posts: 736member
    gatorguy said:
    carnegie said:
    chasm said:
    As flydog and Matrix say, this is a guess by an analyst. So it's almost certainly not correct.

    But even if it was, it sounds to me like Apple is simply paying back the money it and its suppliers withheld in licensing/royalties and chips (source: https://appleinsider.com/articles/18/10/26/apple-7b-behind-in-royalty-payments-to-qualcomm). That was always going to happen anyway -- even if the FTC rules that Qualcomm's business model is monopoly abuse (as it should), it would never have made that decision retroactive.

    The alleged new royalty of $9 per iPhone is a bit troubling, as that is up from $7.50 or thereabouts before, but to be fair it is not unknown or unusual for a supplier to raise prices on brand-new technology. Again I'm doubtful of these pundit-imagined numbers, but even if its half-right, that's what Apple was going to have to pay in any settlement ahead of any definitive ruling on Qualcomm's double-dipping, the first decision of which is likely to happen this summer. So things could change going forward, but I remain very unconvinced that Apple "caved" or "got a bad deal" given these realities.
    A lot of people have referred to the $7.50 figure. But that is not what Apple was effectively paying when it started withholding payments meant to cover Qualcomm royalties and when it filed its lawsuit against Qualcomm.

    We don't have enough information to precisely pin down what Apple was effectively paying (or would have been paying). But, based on what we do know, we can say with confidence that it was more than $10, and it was likely closer to $14. It might even have been a little higher.

    Now, it would seem, Apple has a direct licensing deal, which is something it has indicated it long wanted. And it's at a reasonable rate, dramatically below what Qualcomm says it wants and below what Apple would have been paying if it hadn't withheld payments. And, most likely, Apple hasn't had to agree to the improper terms which Qualcomm had previously imposed. I doubt Qualcomm would even try to impose some of those terms now, considering the regulatory heat it's been under.
    Didn't Jeff Williams, Apple COO, testify under oath to the $7.50 per iPhone effective royalties in the FTC case in front of Judge Koh? 
    Yes, that’s what it was previously.

    But that’s not what it was when Apple filed suit. That, and what it might have been in the future, are what matter when comparing to what it will be (whatever that is) under this deal.
    netmage
  • Reply 34 of 48
    MacProMacPro Posts: 18,406member
    flydog said:
    MacPro said:
    So much for this being kept secret eh?  So far both stocks are up so that is a good thing.  I for one am glad cooler heads prevailed. We own both.
    No secrets have been revealed. If you actually read the article you’ll see that the number is an estimate by an analyst. 
    I guess you don't understand my sense of humor.
  • Reply 35 of 48
    MacProMacPro Posts: 18,406member
    Notsofast said:
    MacPro said:
    So much for this being kept secret eh?  So far both stocks are up so that is a good thing.  I for one am glad cooler heads prevailed. We own both.
    Go back and read the article.  It's just another guess/speculation by an analyst.  USB "suggests."  It makes for interesting reading, but the authors of these articles consistently fail to make clear that most of what appears in these blogs is totally unsupported speculation by analysts, often who have an incentive to drive stock prices.  
    Jeezy peeps some of you guys just have no sense of humor.  I'll add the wink for you next time.
  • Reply 36 of 48
    davidwdavidw Posts: 977member
    carnegie said:
    chasm said:
    As flydog and Matrix say, this is a guess by an analyst. So it's almost certainly not correct.

    But even if it was, it sounds to me like Apple is simply paying back the money it and its suppliers withheld in licensing/royalties and chips (source: https://appleinsider.com/articles/18/10/26/apple-7b-behind-in-royalty-payments-to-qualcomm). That was always going to happen anyway -- even if the FTC rules that Qualcomm's business model is monopoly abuse (as it should), it would never have made that decision retroactive.

    The alleged new royalty of $9 per iPhone is a bit troubling, as that is up from $7.50 or thereabouts before, but to be fair it is not unknown or unusual for a supplier to raise prices on brand-new technology. Again I'm doubtful of these pundit-imagined numbers, but even if its half-right, that's what Apple was going to have to pay in any settlement ahead of any definitive ruling on Qualcomm's double-dipping, the first decision of which is likely to happen this summer. So things could change going forward, but I remain very unconvinced that Apple "caved" or "got a bad deal" given these realities.
    A lot of people have referred to the $7.50 figure. But that is not what Apple was effectively paying when it started withholding payments meant to cover Qualcomm royalties and when it filed its lawsuit against Qualcomm.

    We don't have enough information to precisely pin down what Apple was effectively paying (or would have been paying). But, based on what we do know, we can say with confidence that it was more than $10, and it was likely closer to $14. It might even have been a little higher.

    Now, it would seem, Apple has a direct licensing deal, which is something it has indicated it long wanted. And it's at a reasonable rate, dramatically below what Qualcomm says it wants and below what Apple would have been paying if it hadn't withheld payments. And, most likely, Apple hasn't had to agree to the improper terms which Qualcomm had previously imposed. I doubt Qualcomm would even try to impose some of those terms now, considering the regulatory heat it's been under.
    Well, if this is any more accurate, an attorney for Qualcomm stated ...... "Out of a $1,000 for that phone, what they're not paying us is $13," Qualcomm attorney Evan Chesler said. 

    https://appleinsider.com/articles/19/04/16/apple-qualcomm-reach-deal-to-end-no-license-no-chips-trial

    I'm assuming that he meant Apple was not paying the $13 because Apple was withholding all royalties payment and not that Apple was paying less than $13.


    So your more than $10 and closer to $14 might be on the mark.

    If this is accurate, the interesting point is that Qualcomm seems not to be limiting the royalties, that is a percentage of the wholesale price of an iPhone, only up to $500 of the price. Some had previously stated that here, to claim that Qualcomm was not collecting royalties for any Apple innovations that results in higher sale price of an iPhone . Thus claiming that the royalties Apple is paying on a $1000 iPhone, is the same that they pay on a $599 iPhone. 

    I think the $7.50 in royalties number, that is floating around, was for a $599 iPhone. So $13.00 for a $1000 iPhone would right be in line, if Qualcomm collected royalties on the full wholesale price of an iPhone and not just up to $500 of its wholesale price.  


    netmage
  • Reply 37 of 48
    HsdonnHsdonn Posts: 5member
    Apple had no choice than to settle. 

    - Intel was not capable to compete on 5g, which was not a secret since last year (google it).
    - No alternative available.
    - which means they will be far behind in 5g market, which is already on scene like in US and Korea etc..
    - Practically, the whole iPhone sales were in threat for 2020, hence Apple was under pressure.
    - Furthermore, Apple had also patent issues  with Qualcomm which prevented them to sell iPhones in Germany and put the sales of future iPhones in US under threat. These patents relate to power conservation and operating efficiency which are crucial to keep the size down and upgrade all functions.
    - Had Apple any alternative to Qualcomm, I see no reason why Apple would have sat on the negotiation table. 

    On the other hands, even though the sales of the company downsized, Qualcomm still could live without Apple.

    FTC case will go forward anyway, so not relevant with this issue.
    williamlondonLatko
  • Reply 38 of 48
    gatorguygatorguy Posts: 21,225member
    carnegie said:
    gatorguy said:
    carnegie said:
    chasm said:
    As flydog and Matrix say, this is a guess by an analyst. So it's almost certainly not correct.

    But even if it was, it sounds to me like Apple is simply paying back the money it and its suppliers withheld in licensing/royalties and chips (source: https://appleinsider.com/articles/18/10/26/apple-7b-behind-in-royalty-payments-to-qualcomm). That was always going to happen anyway -- even if the FTC rules that Qualcomm's business model is monopoly abuse (as it should), it would never have made that decision retroactive.

    The alleged new royalty of $9 per iPhone is a bit troubling, as that is up from $7.50 or thereabouts before, but to be fair it is not unknown or unusual for a supplier to raise prices on brand-new technology. Again I'm doubtful of these pundit-imagined numbers, but even if its half-right, that's what Apple was going to have to pay in any settlement ahead of any definitive ruling on Qualcomm's double-dipping, the first decision of which is likely to happen this summer. So things could change going forward, but I remain very unconvinced that Apple "caved" or "got a bad deal" given these realities.
    A lot of people have referred to the $7.50 figure. But that is not what Apple was effectively paying when it started withholding payments meant to cover Qualcomm royalties and when it filed its lawsuit against Qualcomm.

    We don't have enough information to precisely pin down what Apple was effectively paying (or would have been paying). But, based on what we do know, we can say with confidence that it was more than $10, and it was likely closer to $14. It might even have been a little higher.

    Now, it would seem, Apple has a direct licensing deal, which is something it has indicated it long wanted. And it's at a reasonable rate, dramatically below what Qualcomm says it wants and below what Apple would have been paying if it hadn't withheld payments. And, most likely, Apple hasn't had to agree to the improper terms which Qualcomm had previously imposed. I doubt Qualcomm would even try to impose some of those terms now, considering the regulatory heat it's been under.
    Didn't Jeff Williams, Apple COO, testify under oath to the $7.50 per iPhone effective royalties in the FTC case in front of Judge Koh? 
    Yes, that’s what it was previously.

    But that’s not what it was when Apple filed suit. That, and what it might have been in the future, are what matter when comparing to what it will be (whatever that is) under this deal.
    As far as I been reading it Apple never did pay royalties at the higher rate you're surmising. When QC withheld the first rebate that brought down the effective rate to $7.50 is when Apple filed suit and began withholding any further payments. QC was asking for for a higher rate at that point according to reports and due to "breach of contract", but no indications that Apple ever paid it.

    If we accepted  that $9/handset was now accurate Apple would be paying a HIGHER effective royalty than under the old contract. 
    edited April 19
  • Reply 39 of 48
    carnegiecarnegie Posts: 736member
    gatorguy said:
    carnegie said:
    gatorguy said:
    carnegie said:
    chasm said:
    As flydog and Matrix say, this is a guess by an analyst. So it's almost certainly not correct.

    But even if it was, it sounds to me like Apple is simply paying back the money it and its suppliers withheld in licensing/royalties and chips (source: https://appleinsider.com/articles/18/10/26/apple-7b-behind-in-royalty-payments-to-qualcomm). That was always going to happen anyway -- even if the FTC rules that Qualcomm's business model is monopoly abuse (as it should), it would never have made that decision retroactive.

    The alleged new royalty of $9 per iPhone is a bit troubling, as that is up from $7.50 or thereabouts before, but to be fair it is not unknown or unusual for a supplier to raise prices on brand-new technology. Again I'm doubtful of these pundit-imagined numbers, but even if its half-right, that's what Apple was going to have to pay in any settlement ahead of any definitive ruling on Qualcomm's double-dipping, the first decision of which is likely to happen this summer. So things could change going forward, but I remain very unconvinced that Apple "caved" or "got a bad deal" given these realities.
    A lot of people have referred to the $7.50 figure. But that is not what Apple was effectively paying when it started withholding payments meant to cover Qualcomm royalties and when it filed its lawsuit against Qualcomm.

    We don't have enough information to precisely pin down what Apple was effectively paying (or would have been paying). But, based on what we do know, we can say with confidence that it was more than $10, and it was likely closer to $14. It might even have been a little higher.

    Now, it would seem, Apple has a direct licensing deal, which is something it has indicated it long wanted. And it's at a reasonable rate, dramatically below what Qualcomm says it wants and below what Apple would have been paying if it hadn't withheld payments. And, most likely, Apple hasn't had to agree to the improper terms which Qualcomm had previously imposed. I doubt Qualcomm would even try to impose some of those terms now, considering the regulatory heat it's been under.
    Didn't Jeff Williams, Apple COO, testify under oath to the $7.50 per iPhone effective royalties in the FTC case in front of Judge Koh? 
    Yes, that’s what it was previously.

    But that’s not what it was when Apple filed suit. That, and what it might have been in the future, are what matter when comparing to what it will be (whatever that is) under this deal.
    As far as I been reading it Apple never did pay royalties at the higher rate you're surmising. When QC withheld the first rebate that brought down the effective rate to $7.50 is when Apple filed suit and began withholding any further payments. QC was asking for for a higher rate at that point according to reports and due to "breach of contract", but no indications that Apple ever paid it.

    If we accepted  that $9/handset was now accurate Apple would be paying a HIGHER effective royalty than under the old contract. 
    In my earlier post (which you quoted), I was careful to make clear that what I was referring to was what Apple would have effectively been paying in royalties if it had continued to pay them - I used a parenthetical to make that clear.

    The reality is that that cost - whatever it was, but based on a number of things I think it was in the range of $10-15 per device - was what Apple would have been paying had it not filed suit and withheld payments. Qualcomm had stopped making the rebate payments. That's what precipitated Apple's actions and the suit. But even if Qualcomm hadn't withheld three quarters worth of royalty payments, the BCPA expired at the end of 2016. And the parties hadn't been able to reach a new agreement. So the contract manufacturers would have been paying royalties in accordance with the terms of their existing agreements with Qualcomm. Those agreements hadn't expired.

    I can't know this for sure, but if Qualcomm had been wiling to give Apple the equivalent of a $7.50 per-device rate in early 2017 - and not insisted on imposing some of the onerous terms which it had previously imposed in order for Apple to get that effective rate, and been willing to give Apple a long-term direct licensing deal - I suspect Apple would have been happy to take that deal. It always wanted a direct licensing deal. And it had, apparently, found $7.50 acceptable. But it didn't want to have to agree to the terms it had to agree to to get that rate. But, from Qualcomm's perspective, it would seem the $7.50 rate was no longer on offer, particularly if it didn't come with some of the other terms which Apple was no longer willing to accept. Qualcomm had, after all, stopped paying the rebates which (perhaps) got the rate that low even before the existing agreement expired.

    We should keep in mind that, for all inclusive 5G licensing Qualcomm says its rate is 5% with a $400 per-device base cap. That cap had previously been $500, but some time last year Qualcomm reduced it to $400 - at least for the 3.25% (out of the 5%) which was for cellular SEPs only.
  • Reply 40 of 48
    chasmchasm Posts: 1,697member
    A small correction to my previous post: According to Qualcomm's attorney in his opening remarks on the day of the trial, Apple was paying $13 per iPhone for it's parts, which (incidentally) Apple said was "five times" the aggregate amount of all other standards-essential patents combined.

    With the new deal, Apple is paying about $9 per iPhone. So not quite the "Apple capitulated" angle the media has been playing up ...
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