Apple, Qualcomm Settle Royalty and Patent Dispute

CNBC reports that Apple and Qualcomm have settled their royalty and patent dispute that went to trial this week. It was a very closely-watched battle between the two companies, makers of iPhones and one of the largest providers of mobile chips, and one that we’ve covered extensively over the course of the past couple of years as the companies have slugged it out. News of the settlement was released just as the trial got underway.

As part of the settlement, the parties agreed to dismissal of all legal action worldwide between the two companies. Apple and Qualcomm have reached a global patent license agreement and a chipset supply agreement. The new agreement also includes Apple’s manufacturers.

The agreement between Apple and Qualcomm ends a long battle between the companies, who have been fighting over Qualcomm’s patent licensing practices for the last two years. The core of the battle was that Apple argued that Qualcomm charged high fees for essential patents, and that the chip maker used its position as the dominant supplier of smartphone modems to demand unreasonable prices. Qualcomm had a lot at stake in the legal fight with Apple, including the patent licensing accounts for the vast majority of its profits.

Qualcomm stock has soared since news of the settlement broke, rising over 20 percent and boosting its market cap by about $14.5 billion to more than $84 billion. It’s Qualcomm’s best day since 1999.

Analyst Take: Apple finally realized it had overplayed its hand. Tim Cook caved. Qualcomm won.

What this probably means:

• 2020 iPhones will have Qualcomm 5G modems instead of vastly inferior Intel modems. Since it is already April, it is probably too late for 2019 iPhones though.
• Intel may have to get out of the 5G phone modem business. Apple was its only customer, and Intel was struggling to get anywhere with that product. This doesn’t mean that Intel is out of 5G. It still has strong plays to make in that space. In a way, no longer having to chase 5G modem development might be a blessing in disguise. Intel will now be able to focus on its core business again.

• Apple might actually be able to release a premium XR product in 2020 now., and perhaps an automotive product or solution by 2025. I don’t think it could do either without a reliable 5G partner like Qualcomm.
• Apple still has a lot of problems to fix, but at least its inability to compete against premium mobile handset makers like Samsung, Huawei, and Pixel won’t be one of them. Apple can now join the rest of the industry in 5G.
• Depending on how deep Apple’s new relationship with Qualcomm becomes, iPhone performance and feature improvements may extend well beyond download speeds and broadband connectivity. I wouldn’t be surprised to see Qualcomm-powered iPhones deliver significantly better battery life and sound quality, especially with BT accessories.

The original version of this article was first published on Futurum Research.

Photo Credit: TheVerge.com