Qualcomm fined $1.2 billion for paying Apple to keep its LTE modems exclusive

Qualcomm fined $1.2 billion for paying Apple to keep its LTE modems exclusive
After rumors that the European Commission (EC) may fine Qualcomm $2 billion for paying out Apple to keep using its LTE modems, instead of turning to rivals, today's decision to fine it $1.2 billion was set up to seem like a bargain.

First, a bit of an overview. Apple entered agreements to exclusively use its baseband modems from 2011-2016, with the respective licensing and royalty fees attached, so Qualcomm certainly made out like a bandit on the whole setup. Most of its profit comes from fees on its intellectual property, rather than chip sales, and that is why it has one of the highest margins in the industry, amassing nearly $30 billion in cash and equivalents in the process.

Prior to the exclusivity agreement ending in 2016, however, the folks from Cupertino started wiggling Intel modems in their iPhones and iPads, prompting Qualcomm to enter a legal battle with Apple. The EC Commissioner Margrethe Vestager also reiterates that "As it got towards the end of the arrangement with Qualcomm - and as our investigation was going on - Apple did start to use Intel chips," denoting a breach of contract on part of Apple in its turn. Thus, while the fine is for clashing with anti-trust regulations, the legal consequences for Apple introducing Intel modems earlier than it signed up for, are still in flux, with the usual claims to potentially ban iPhone from sales in the US, and patent counterclaims by Apple.

The iPhone X may be the last one to use a Qualcomm LTE modem inside

The iPhone X may be the last one to use a Qualcomm LTE modem inside


The European Commission listed several arguments for its decision, chief among which is the practically monopolistic position of Qualcomm on the market of LTE modems in the US, the "significant amounts paid by Qualcomm in exchange for exclusivity," and the failure of the company to prove that there were any market efficiencies resulting from the deal with Apple. Commissioner Margrethe Vestager issued the following statement on why did they impose the $1.2 billion fine:




Apple is rumored to be working with Intel on a 5G modem, and will gradually be replacing all of its LTE chips with Intel and MediaTek ones, it seems. There are other big players in the market, too, like Samsung, or Huawei. The new Mate 10 Pro, for instance, can hit up to 1.2Gbps downloads, more than any other phone at the moment, and with a homebrew LTE modem at that, so Apple certainly has other options. Qualcomm, however, makes the gear that is most compatible with CDMA networks like Verizon's, and its LTE modems are faster and better than Intel's, so we'll see how it all pans out, but we wouldn't discount the connectivity chip giant just yet.

source: EC

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20 Comments

1. DolmioMan

Posts: 290; Member since: Jan 08, 2018

I wonder how the Apple haters here will defend Qualcomm this time.

2. bambamboogy02

Posts: 828; Member since: Jun 23, 2012

I don't understand why they both aren't at fault for a mutual agreement. So QC paid Apple to keep the agreement, Apple accepted the payments and agreement, court finds it unlawful, so QC has to pay Apple more? That doesn't really make sense. They are both at fault. If Apple wanted other chips in its devices why enter an agreement to not use them?

3. RebelwithoutaClue

Posts: 5474; Member since: Apr 05, 2013

QC doesn't have to pay Apple more. They are fined 1.2 billion which goes to the EU, not Apple.

5. worldpeace

Posts: 3077; Member since: Apr 15, 2016

Apple did take the bribe since 2011, they should get fined too..

11. RebelwithoutaClue

Posts: 5474; Member since: Apr 05, 2013

Getting paid to use someone's hardware isn't illegal. And since it's not illegal to get paid for this, it's not a bribe either.

12. SYSTEM_LORD

Posts: 1168; Member since: Oct 05, 2015

So getting paid in exchange for sex isn't illegal, while paying for it is?

16. kiko007

Posts: 7386; Member since: Feb 17, 2016

Those are two VERY different legal situations lol.

17. RebelwithoutaClue

Posts: 5474; Member since: Apr 05, 2013

Both are illegal in most countries (not mine though ;))

18. Leo_MC

Posts: 6153; Member since: Dec 02, 2011

That's the law in EU: we think one is a victim, while the other is the aggressor.

10. bambamboogy02

Posts: 828; Member since: Jun 23, 2012

Ah, paid to the EU. Thank you for the clarification.

8. monkeyb

Posts: 367; Member since: Jan 17, 2018

Agreed, the way the statements go, it does feel that both are at fault in this scenario. But from Apple's view, no other company had the essential CDMA patents that Qualcomm had. So maybe at that moment they felt "we are anyways paying a lot for standard essential patents, why not make some money by accepting this offer". All this said, if Apple did take a bribe, the EU should start a probe against them as well. (Which maybe happening and we just do not know yet)

14. Nexus4lifes

Posts: 285; Member since: Feb 13, 2014

HAHA in US apple can get away with pretty much anything and everything...coz if apple stop's paying taxes the economy will come down.

6. bucknassty

Posts: 1264; Member since: Mar 24, 2017

im guessing some cost cutting measures will be taken for the next SOC.... crapdragon

7. Trex95

Posts: 2315; Member since: Mar 03, 2013

Wondering when Samsung bring there own modem by next year what Qualcomm gonna do?

13. TerryD

Posts: 540; Member since: May 09, 2017

I have no tolerance for this kind of shady business practice. Looks similar to the Intel paying Dell to stay Intel exclusive and not sell any AMD machines. AMD won that case but the lower sales damaged their business to stop them being a real threat to Intels dominance.

20. southernzombie

Posts: 349; Member since: Jan 17, 2017

I don't claim to fully understand anti trust laws and things of that nature, but I can't understand what part of this is illegal. It seems as tho apple willingly entered into the agreement and it was a benefit to them for 5 years while making them profit as well as qualcomm who also profited greatly from the agreement. I get that the exclusivity agreement is detrimental to other manufacturers of modem chipsets but the early bird gets the worm so to speak. Maybe somebody who understands these things more can explain it better that what the article does since it uses the legal jargon that was used to justify the fine. How is that agreement different than say the agreement electronic arts had with the NFL to have exclusive rights to produce NFL video games?

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