Apple vs Qualcomm settled: 2020 iPhone 5G gets some new options

Kelley Robertson
April 17, 2019

Apple, on the other hand, saw a small dip before going up by barely 1%.

How the jury decides this case could have a large impact on Qualcomm's business practices moving forward. Adding this sort of new connectivity means Qualcomm working WITH Apple to design their next-generation chip - which is a different situation (in a few different ways) from what goes on with Android smartphone makers. "A settlement is a surprise to investors as ultimately Apple realized this was more about two kids fighting in the sandbox and they have bigger issues ahead with 5G and iPhone softness rather than battling Qualcomm in court". Both sides were asking for billions in damages.

Brokerage UBS earlier this month said Apple, also battling falling iPhone sales, is increasingly in jeopardy of being unable to ship a 5G iPhone in 2020 which could cause near-term headwind for the company. The case was originally filed by Apple in January 2017, but the litigation became complicated with Qualcomm countersuing. Qualcomm hit back with a countersuit accusing Apple of instructing its contractors to withhold royalty payments to Qualcomm - and the litigation snowballed from there. But Qualcomm stopped making this payment after Apple spoke out against it during a hearing held by the South Korea Fair Trade Commission.

Qualcomm has an extensive patent portfolio covering numerous technologies used in smartphones and derives a significant amount of its annual revenue through licence payments from phone makers. However Qualcomm has put out a summary slide disclosing that as product shipments ramp, the company is expecting the deal to bring the company's incremental earnings to around two dollars per share. Apple CEO Tim Cook contradicted him shortly after, saying that Apple hasn't been in settlement discussions since the third calendar quarter of 2018.

Qualcomm was the sole supplier of iPhone modem chips between 2011 and 2016, before Apple split the contract with Intel.

Chipmaker Intel has announced today that it will be cancelling production of it's 5G modems. So the Cupertino-based company should select one (or more) suppliers for the 5G-enabled iPhone. And Intel was reportedly struggling to deliver its planned 5G modem, raising questions about whether Apple would even be able to deliver a 5G-ready iPhone in 2020. Accordingly, as noted by CNBC, Qualcomm's stock had its best day since 1999, with the stock jumping up 23% during market hours, and a further 7% after-hours.

The royalty agreement - pertaining to the licensing of Qualcomm patents for use in Apple products - will last for six years, effective April 1, 2019.

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