Qualcomm refused to supply Apple with modems for the iPhone XS/XR

Qualcomm refused to supply Apple with modems for the iPhone XS/XR
The 2018 iPhone lineup

The FTC’s antitrust trial against Qualcomm is certainly providing some juicy details about goes on behind closed doors. And today, Apple’s Chief Operating Officer, Jeff Williams, shared some pretty surprising details about the Cupertino giant’s relationship with Qualcomm.

Despite the ongoing legal battle between the two companies, the executive in question revealed that Apple’s initial plan for 2018 was to once again “dual source” modems from both Qualcomm and Intel. In fact, he went on to state that Apple would have loved continued “access to Qualcomm’s tech.” In the end, though, it seems Qualcomm ultimately chose to not “support” Apple or sell it any chips, hence why only Intel modems are used in 2018 iPhones.

This news is especially interesting considering Qualcomm has openly stated in the past that it hoped the legal battle between the two wouldn’t affect its business with Apple. 

UPDATE: Qualcomm has provided us with a highlight from a 92-page transcript involving CEO Steve Mollenkopf:


In addition to detailing more recent decisions, Williams also shed some light on the past agreements between Qualcomm and Apple. Back in 2011, when Apple was in need of CDMA-compatible modems, the two companies negotiated a significant discount as part of a “marketing incentives agreement.”

This particular deal lowered Qualcomm’s royalty fees down to $7.50 per phone in exchange for speaking out against the WiMax standard. However, if Apple ever chose to use a rival’s chip, the discounted amount would need to be repaid.

Two years after this initial agreement was struck, the two American companies proceeded to renegotiate the terms. But this time around, Qualcomm wished to hike its original $7.50 by between $8 and $10. In order to avoid these increased costs, the chipmaker required an exclusivity agreement from Apple, a deal which was too good to refuse because their chip supply was “needed.”

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25 Comments

1. KingSam

Posts: 1400; Member since: Mar 13, 2016

So Qualcomm has been playing dirty from the beginning. That's what Monopoly does.

3. cncrim

Posts: 1585; Member since: Aug 15, 2011

Not jump too early to conclusion yet, from what i can see Apple doesn’t want to pay that much and Qualcomm want to squeeze every dollar/penny out every OEM want to sell mobile phone NA.

4. toukale

Posts: 617; Member since: Jun 10, 2015

@cncrim - Qualcomm would be right to do so, had they not elected to do so with FRAND patents. That's the reason why patents are accepted into a standard body in the first place. When you submit your patent to be included into the standard, you agree to the FRAND term/licensing. Its like agreeing to the rule of a club just to get in, then change your tunes after you are accepted into the club. Qualcomm is going to lose this case for that reason alone. Apple will pay a licensing fee that is a lot less then they current do and they will also be forced to licensed to Intel and Samsung etc... At the end of the day, Apple would have accomplish a great deal of good for the industry. What a lot of people are losing sight of is this "FRAND." Everyone keeps glossing over this because of their Apple bias.

5. cncrim

Posts: 1585; Member since: Aug 15, 2011

See the problem we have with patent is how will you put a value on a patent? And what is qualifications for FRAND is all up to human interpretation, complex to simple. The only that win the most at the is lawyer and that’s reason why it never get fix.

6. toukale

Posts: 617; Member since: Jun 10, 2015

It's not that hard really. You can charge whatever you want for your patents and the government can't stop you. However, if you want to include your patents as part of the standard then, there are certain rules you must follow and that's where "FRAND" comes into play. Basically, you are given a monopoly for that part in return. Otherwise the standard body could have rejected Qualcomm contributions and they would have zero in return. It's simply to help everyone to play nice and move things forward. Once in a while greed gets in the way and the courts have to step in. That is exactly what Qualcomm is doing now. They are taking advantage of that monopoly the standard body afforded them because they know their part is crucial.

8. Atechguy0

Posts: 918; Member since: Aug 03, 2018

Does everyone forget that Apple is the one that started by refusing to pay Qualcomm for anything until these matters were settled in court. So Apple is much to blame as anyone here. Only an iDiot would allow Apple to continue to use Qualcomms chips without any funds. Come on guys think.

9. toukale

Posts: 617; Member since: Jun 10, 2015

Again, you are treating this as normal patent. This is FRAND patents and what Apple is doing is legal. Actually Qualcomm's money is seating in escrow. They will get their money if the courts decides Qualcomm is right and Apple is wrong. It's not like Qualcomm is not going to get their money. What Qualcomm is doing however is not legal based on them agreeing to the FRAND rules. This is the difference between the two companies in this case.

14. Finalflash

Posts: 4063; Member since: Jul 23, 2013

No it isn't FRAND, it isn't sitting in Escrow and it is basically just BS. Please provide sources for all of that crap. Apple is asserting that the patents should be licensed as FRAND because they AREN'T in any way considered FRAND yet. If a court rules it, then they will, but otherwise, please keep your Apple shilling for somewhere else. Also, no money is sitting in Escrow. Apple told its partners not to pay and also has not paid the fees themselves. They have repeatedly refused to pay it and there is no evidence any money is sitting in any Escrow for this purpose.

18. toukale

Posts: 617; Member since: Jun 10, 2015

Obviously you have no idea what you are talking about. I think you are confusing the different court cases. This current case in question is all about "FRAND." The one in Germany, where the iPhone 7&8 are blocked and Qualcomm needed to put $1.5 billion in escrow is not "Frand." The one is China is also not "FRAND," but a software patent purchase by Qualcomm to sue Apple. Keep up, or read up before posting.,

20. Atechguy0

Posts: 918; Member since: Aug 03, 2018

https://www.forbes.com/sites/aarontilley/2017/04/28/apple-withholding-qualcomm-royalty Apple basically told Foxcon and Pegatron it's not paying any royalties until things get settled in court. Apple has recently informed the San Diego, California-based chipmaker that it plans on not paying the royalties owed to those contract manufacturers until the current legal dispute between the two companies is settled. You could have did web search yourself to find this information. Instead you look like a fool.

21. Atechguy0

Posts: 918; Member since: Aug 03, 2018

At the end of the day, Apple has to pay, period. The real question is how much.

23. shm224

Posts: 276; Member since: Mar 19, 2015

sounds like a lot of nonsense. FRAND doesn't require SEP holders to license their SEPs at a deep discount. In a recent ruling in the ED Texas, HTC v Ericsson, judge Gilstrap decided that FRAND doesn't require SEP holders to license their patents at component level (or baseband OEMs). This is in addition to China's antitrust regulator, who fined Qualcomm ~$1B in 2015, came out in support of Qualcomm's licensing model. If Qualcomm loses this case, it would be because the FTC/Apple's hometown judge Koh, not the actual merits of the case.

24. shm224

Posts: 276; Member since: Mar 19, 2015

FRAND doesn't mean "free" or "cheap" as Apple would have you believe. FRAND merely restrictly SEP holders from doing crazy unreasonable stuff like Motorola tried against Microsoft (see Robart's decision). Qualcomm's royalty basis and rates are widely accepted industry customary practices and upheld around the world. Contrary to your nonsense, FRAND commitment is a contract under French law and the ETSI IPR does not require component level licensing as Apple brainwashed trolls would have us believe. While there are some untested (legally) areas in FRAND, "French law may imply certain terms into the contract based on, among other things, "customary practices in a particular field" -- in this case the wireless industry's practice of royalty basis and rates.

22. shm224

Posts: 276; Member since: Mar 19, 2015

I don't get it. Apple stopped paying Qualcomm for IPs. Why would Qualcomm supply chips to non-paying customers?

2. Peaceboy

Posts: 640; Member since: Oct 11, 2018

Time for apple to develop their own chips. Tired of this kind of suits.

7. lyndon420

Posts: 6599; Member since: Jul 11, 2012

I agree. It's about time apple actually built something - (besides a building that looks like a giant sized cheerio).

15. Leo_MC

Posts: 6935; Member since: Dec 02, 2011

Apple builds phones, they don’t have to build the parts too.

10. Subie

Posts: 2324; Member since: Aug 01, 2015

They'd still have to licence the needed patents.

11. monkeyb

Posts: 404; Member since: Jan 17, 2018

“However, if Apple ever chose to use a rival’s chip, the discounted amount would need to be repaid.” I am very confused with this. Are they saying you have to use our Chips for life? I can understand they making an agreement for X number of years but this statement is very vague.

16. joshuaswingle

Posts: 508; Member since: Apr 03, 2018

Essentially, as part of the 2011 agreement, Qualcomm offered Apple royalty rebates for each iPhone sold. However, this came on the condition that no rival chips were used between 2011 and 2013, which was when this particular agreement was in force. Apple could still use rival chips if it wished to but from a financial point of view, it simply didn't make sense – they'd need to repay the rebated amount offered throughout the two-year period if they did so.

12. monkeyb

Posts: 404; Member since: Jan 17, 2018

“continued to compete" for Apple's business and "bid" on multiple Apple projects. Again a very vague statement to confuse everyone. QC wanted to be an exclusive chip provider “again” while demanding the 7 billion from Apple. They did not want to send Apple samples without Apple signing a full fledged license agreement. Trying something does not mean competing or negotiating fairly.

13. monkeyb

Posts: 404; Member since: Jan 17, 2018

“Qualcomm has contacted us directly with a transcript.” I have no doubt that PA is a great website. But QC sending transcripts while legal battles are going on is very weird. I can only think that this is damage control when they lose this case.

17. joshuaswingle

Posts: 508; Member since: Apr 03, 2018

The 92-page transcript was sent over within 30 minutes of publishing and they specifically highlighted those comments. So yes, I believe it is damage control. I personally spent around 1 hour reading 25 pages of the entire transcript – it's extremely long and detailed – and Qualcomm doesn't appear to be a fair company. One thing I found particularly interesting was the fact that Qualcomm refused to send over modem samples for the original iPhone. They first required a licensing agreement from Apple. If they didn't sign, they wouldn't receive any samples or anything. Ultimately that's why Qualcomm chips weren't used in the first few iPhones. And when the CDMA chips were eventually needed Apple was essentially forced into signing this agreement because they had no other option.

19. toukale

Posts: 617; Member since: Jun 10, 2015

@monkeyb - It's all part of their mob mentality. It's the reason they hired definers in the first place, to spread "fake news" and pushed a certain agenda, to smear Apple's name. We all know how anything with Apple's name in it sells. At the end of the day, Qualcomm will win a few battles, but they will lose the war.

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