Apple/Qualcomm Settlement Benefits Both Companies
May 06, 2019
Given that Apple and Qualcomm settled their dispute and Apple now has access to Qualcomm’s 5G chips, while paying Qualcomm a one-time lump sum that was not made public, Qualcomm noted there will be $2.00 per share additional earnings for the year. It is a sizeable payment as Apple and its contract manufacturers have not paid Qualcomm for two years during this running dispute. The companies also agreed upon a six-year licensing agreement. These terms were also not made public. The agreement clears the path for Apple to buy Qualcomm modems again. Qualcomm modems were designed out of the latest Apple launches in the Fall of 2018, so it is a big win for Qualcomm. There are a few cases remaining. The most important remaining litigation is the Federal Trade Commission case versus Qualcomm. The FTC case against Qualcomm for predatory pricing is still waiting Judge Koh’s decision from the trial which ended in January. It is unlikely Judge Koh will make a ruling which would conflict with the agreement Apple and Qualcomm have agreed upon, but still an unknown. Even with the agreement, there is not enough time to get a 5G iPhone out this year. An Apple 5G smartphone could be available as early as Spring 2020 if work begins immediately. Working with Qualcomm assures Apple will be able to deliver 5G modems in volume in 2020. Qualcomm is working with all global carriers launching 5G and has a head start on its modem competition. This could potentially help 5G ramp with fewer hiccups.
Intel said it was abandoning making modems for 5G phones after news of the Apple-Qualcomm settlement. Intel was never able to meet Apple’s needs and their lack of performance was likely one of the reasons for the Apple/Qualcomm settlement. Perhaps Apple know much earlier of Intel’s issues with 5G modem development as the company held talks with Intellast year about acquiring parts of the latter's smartphone modem chip business, which started around last summer and only halted recently. But it shows Apple warming up to the idea of bigger deals. Intel's now exploring strategic alternatives for its modem chips and has hired Goldman Sachs to manage a process that could result in a sale for a few billion dollars. Other than Apple, interested buyers might be Broadcom, ON Semiconductor, Samsung or China's Unisoc Communications. A sale could mean unloading an Intel business that was losing about $1B per year. From:The Wall Street Journal reports.