Apple, Qualcomm settle billions of dollars of licensing dispute

Bloomberg

Apple Inc. and Qualcomm Inc. agreed to end a two-year legal battle over billions of dollars of technology licensing fees that threatened the chipmaker’s most profitable line of business.
Apple will make a one-time payment to Qualcomm, and the two reached a multiyear agreement whereby Qualcomm will supply chips and license its technology to the iPhone maker in exchange for royalty payments, the companies said in a statement. Litigation between the two around the world will be dismissed, but no details were disclosed about the payments or fees. Qualcomm’s stock gained the most in a single day since 1999.
A victory for Apple would have hampered Qualcomm’s ability to collect fees on the technology that powers mobile phones. But Apple had an incentive to settle, too. The arrangement helps keep the company from falling behind in fifth generation, or 5G, technologies designed to provide blanket wireless coverage and propel faster and more versatile mobile services. Apple’s current modem supplier, Intel Corp., won’t have its 5G chip in phones until next year — about the time Qualcomm expects to have an updated 5G modem available.
Apple’s biggest rival, Samsung Electronics Co., already has a phone in the market that will support that new technology based on a
Qualcomm chip.
“There were worries that this was going to be a nasty court battle, and I think that Apple realised, despite wanting to make a statement, that it was in their best interest, based on 5G and licensing issues, to settle,” said Dan Ives, an analyst at Wedbush Securities. “Apple and Qualcomm both had more to lose in trial than if they just settled.”
Qualcomm said it anticipates the agreement will add $2 per share to its earnings when it begins chip shipments to Apple. While it’s not clear how much Qualcomm gave up in concessions in terms of payments and rates, the settlement lets it continue one of the most profitable businesses in the $400 billion semiconductor industry. Apple was the remaining holdout from a licensing practice that allows the San Diego-based chipmaker to charge patent royalties on its technology.
Based on that $2-dollar-per share forecast and a rough estimate of how many iPhones might be sold with Qualcomm’s modems, it doesn’t appear that the chipmaker made any major concessions to Apple in terms of the licensing rate per phone, said Kevin Cassidy, an analyst at Stifel Nicolaus & Co.
“It seems like they played chicken and won,” Cassidy said. The companies began a jury trial in San Diego that was to decide whether Apple owed unpaid royalties or the iPhone maker was right to argue that it was the victim of unfairly inflated charges.

Intel gives up on quest to break into mobile market
Bloomberg

Intel Corp., whose products dominate the world of computing, said it’s going to wind down a multibillion-dollar, multidecade effort to grab a viable stake of the mobile phone industry.
After its one significant customer, Apple Inc., said it will return to using Qualcomm Inc. chips, Intel announced it will exit the 5G smartphone business and complete an assessment of the opportunities for existing chips and fifth-generation modems in personal computers.
“The company will continue to meet current customer commitments for its existing 4G smartphone modem product line, but does not expect to launch 5G modem products in the smartphone space, including those originally planned for launches in 2020,” the Santa Clara, California-based company said in a statement.
Intel Chief Executive Officer Bob Swan, who stepped up from the chief financial officer role in January, is stopping an effort that his predecessors poured billions of dollars into over the years. With Apple as an exclusive customer, Intel still has struggled to make money in modem chips, even as its position in other markets has fueled revenue and profit growth.