Intel says Qualcomm's illegal licensing practices cost it billions

Intel says Qualcomm's illegal licensing practices cost it billions
At the beginning of this year, it appeared as though Apple would be forced to use Intel's newly developed 5G modem chips on the first 5G iPhone models expected to be released next year. Apple preferred to use 5G modem chips from Qualcomm, but the two firms were on the outs; the only times the two companies spoke with each other was in court. Ironically, both were just entering the closing arguments stage of a trial with billions at stake when a settlement was announced. Apple paid the chipmaker an unknown sum later reported to be $4.5 billion and received a six-year license (remember Qualcomm's infamous ''no license, no chips" policy) and a multi-year agreement for chips.  

But Apple felt desperate for much of the year and it certainly doesn't want to feel like that again. So the company plans on designing its own 5G modem chips, and to make that task a bit easier it spent $1 billion to buy Intel's smartphone modem chip business. Apple was said to have internally discussed having its first-generation 5G modem chip ready to be included inside a 2021 offering of the iPad Pro tablet. The next year, a second-gen 5G modem chip would be placed inside the 2022 iPhones (iPhone 14 and iPhone 14 Pro).

Intel says Qualcomm's illegal policies forced it to sell its smartphone modem chip business to Apple at a huge loss


According to Reuters, Intel claims that when it sold its smartphone modem chip business to Apple, it took a multi-billion loss on the transaction. Intel says that it was forced to exit the business because of what it described as Qualcomm's illegal licensing requirements. Earlier this year, the Federal Trade Commission (FTC) and Qualcomm met in court for a 10-day non-jury trial presided over by Judge Lucy Koh (yes, that's the same Judge Lucy Koh who was on the bench for the Apple v. Samsung patent suit). The FTC put on testimony that tried to show how Qualcomm's chip selling policies are anti-competitive. In addition, the FTC brought up the firm's practice of charging royalties based on the price of an entire phone instead of just the Qualcomm component, and Qualcomm's policy not to license its standards-essential patents (SEP). These are patents that rivals need to license to make sure that their products meet technical standards. As a result, they are licensed on a fair, reasonable and non-discriminatory (FRAND) basis.


Judge Koh later in the year ruled in favor of the FTC; however, Qualcomm has received a stay from the ninth circuit court of appeals that will remain in place until the case reaches its final disposition. This makes sense since Koh's decision does force the chipmaker to renegotiate current contracts with phone manufacturers. That is a lot of work and if Qualcomm does triumph on appeal, it would then have to return the contracts to the pre-trial conditions. No, it probably is much better for everyone involved to wait for a final decision.

Meanwhile, trade groups that represent the U.S. units of several automobile makers and suppliers have filed documents against Qualcomm's licensing practices with the ninth circuit court of appeals located in San Francisco. German automobile brake manufacturer Continental AG told the appeals court that it had to give up working with Samsung and MediaTek because of Qualcomm's licensing practices. Continental claims that Qualcomm and other patent holders refused to license their technology to chipmakers and instead licensed their patents to carmakers who sell vehicles for tens of thousands of dollars (think bigger royalties) and are "less motivated to fight for every dollar."

The automobile suppliers say that consumers are the ones ultimately hurt by Qualcomm's licensing policies. "The resulting inefficiency is ultimately borne by consumers in the form of higher prices," the trade group wrote. The suppliers and other opponents of Qualcomm's licensing policies are requesting that the original decision by Judge Koh stand.

FEATURED VIDEO

20 Comments

1. Subie

Posts: 2424; Member since: Aug 01, 2015

What cost Intel Billions was their own inferior product. Only Apple was keeping their mobile modem business afloat. And that was only out of spite toward Qualcomm. Once Qualcomm and Apple made up, that spelled the end for Intel's modem business.

17. sgodsell

Posts: 7570; Member since: Mar 16, 2013

No it's more than that. For instance Alan didn't get into the real truth, which is 5G modems are going to be built into SoCs. Qualcomm is going to have the first 5G modem built into their Snapdragon 865 SoC. Samsung is looking to do the same thing with their Exynos SoCs, MediaTek, Huawei and others are looking to do the same thing. So the modem will not be a separate chips for a number of future SoCs. Why do you think Apple spent billions to buy Intel's modem business? So Apple can do the same thing with their Ax SoCs. The writing was on the wall. For the near future separate modem chips are still needed, but for all the future and high end chips, a separate and external modem is not needed, especially since it will be built into the future SoCs. I can't wait till we see RAM embedded into future SoCs as well. That will be a great day when that happens. It will even lower the overall price of SoCs further. Not to mention it would stop the strangle hold and control over RAM on the market.

22. Zrtsg

Posts: 12; Member since: May 09, 2019

I just want to point out that qualcomm is not the first one to use built in modems. Huawei already has one in mate 30 5g. Exynos and mediateck announced their soc with built in 5g modem. But it's not available yet in any smartphone.

24. shm224

Posts: 303; Member since: Mar 19, 2015

Not sure what point you are making here. Yes, most SOCs now have integrated wireless modems, but QCOM for years have made separate modem chips for one notable customer, Apple. That isn't why Apple bought Intel.

2. User123456789

Posts: 1145; Member since: Feb 22, 2019

Qualcomm has best tech. You can pay royalties, buy their products or do your own without their tech. When you have patents, you can charge as much as you want.

5. Dr.Phil

Posts: 2487; Member since: Feb 14, 2011

That’s actually not entirely true. The argument in this case was whether the patents were considered FRAND or not which would indeed put restrictions on how much you can charge or dictate control over. Also, the idea that if you have the patents you can charge as much as you want don’t necessarily jive well with people when you say you can charge a million dollars for a cancer drug or can raise other prescription drug costs because you hold the patents to it. Just saying, it’s that way of thinking that turns people off.

11. User123456789

Posts: 1145; Member since: Feb 22, 2019

Whole thing behind all this is the fact Apple always want to pay the money they want , not the money the tech owner wants. You dont see news about law sue against Samsung Mobile, Sony Mobile, LG Mobile, Motorola etc .... Just against Apple.

16. vgking9699

Posts: 214; Member since: Mar 01, 2019

Cuz Apple is the only American company out of these manufacturers and it’s much more difficult to make those foreign companies to go by our American patent and copyright laws Where as so many foreign countries have very little protection for company’s products being ripped off That’s why China has the black market of smartphones where they sell all sorts of fake iPhones and fakes of androids as well and even have fake Apple physical stores that look legit enough to its employees but they don’t actually work for Apple

21. Dr.Phil

Posts: 2487; Member since: Feb 14, 2011

LG and Samsung were once a part of this lawsuit. In fact, last I checked LG was still a supporting member in favor of the FTC against Qualcomm. Obviously you aren’t up to date on your news. Samsung dropped out after signing a deal with Qualcomm. Apple did the same thing. Doesn’t change the merits of the lawsuit.

23. sgodsell

Posts: 7570; Member since: Mar 16, 2013

You are clearly not up to date as well. Because Intel was spending large amounts of money to try and catch up to Qualcomms modems, but it's constantly changing. Now SoC OEMs including Qualcomm, Samsung, MediaTek, Huawei, and a number of others are all starting to embed modems inside their SoCs. So why build a company around making and manufacturing standalone modems that will work with SoCs, when the future is going to see each and every OEM embed 5G modems. Intel saw that as well, and is making up an excuse to kill it's manufacturing of separate modems. Even Apple bought Intel business to get access to Intel 5G patents, and to embed a 5G modem for Apples future Ax SoCs. Oh, and btw, Intel still hold all the patents, and embed modems in their future processors as well.

29. mootu

Posts: 1541; Member since: Mar 16, 2017

"Oh, and btw, Intel still hold all the patents, and embed modems in their future processors as well." Actually Intel signed a deal last week with Mediatek for all it's future 5G modems. They won't be using any of their own designs, all Mediatek from now on.

25. shm224

Posts: 303; Member since: Mar 19, 2015

That's not what's being questioned here. The FTC's case does not question QCOM's SEP validity, but rather, if QCOM's FRAND obligation requires them to license their SEP's to "all," especially including QCOM's baseband competitors. Under ETSI however, the answer is NO (at least according to another trial, Ericsson vs HTC); Apple's hometown judge Koh predictably sided with Apple/FTC.

27. Cyberchum

Posts: 1107; Member since: Oct 24, 2012

What an asinine comment. No, they can't charge as much as they want. Corporate greed is a thing, and that's why regulations are put in place.

3. vincelongman

Posts: 5748; Member since: Feb 10, 2013

Lol ironic coming from Intel given the magnitude of their illegal practices against AMD Intel's modem divison was screwed since Intel lost versus Arm All phones use Arm SoCs And all the major Arm SoC make their own modems Except Apple, but Apple have started and dropped Intel because Intel fell behind with 5G Leaving Intel's modem divison stuck with making modems for PCs lol

15. IT-Engineer

Posts: 577; Member since: Feb 26, 2015

But thank God that AMD is wiping the floor with Intel through their latest ZEN processors.

18. sgodsell

Posts: 7570; Member since: Mar 16, 2013

You do know that Apple bought Intel's modem division? Why because Apple needs to catch up to the other OEMs that are going to have built in modems inside their SoCs. Qualcomm is the first to have a version of their latest Snapdragon 865 with a built in 5G modem. They will also sell one without a modem, and make separate modem chips for those that won't have a modem built into their SoCs. That's why Apple bought Intel's modem division. Because Apple wants to have a modem built into their future Ax SoCs as well. As a matter of fact Samsung, MediaTek, Huawei, and some others are also building modems into their future SoCs as well. So Intel saw the writing on the wall. Why invest more money into separate modem chips, if everyone is going to embed modems into their future SoCs.

26. shm224

Posts: 303; Member since: Mar 19, 2015

You have no idea what you are talking about. While there is some technical benefit to having an integrated modem, that isn't why Apple bought Intel. Apple doesn't want to depend on QCOM as sole modem supplier.

4. darkkjedii

Posts: 31597; Member since: Feb 05, 2011

Welp, Apple came crawling back to Qualcomm, soooooooo bye bye to even more billions. I kept saying Intel modems are crap, now look.

19. sgodsell

Posts: 7570; Member since: Mar 16, 2013

It's way more than that. Also Apple actually bought Intel's modem division and the use of it's patents. Qualcomm is going to have the first SoC on the market with a built in 5G modem on board. There is no separate modem chips needed, it's actually built into theit up and coming Snapdragon 865. However other OEMs are going to be doing this as well, like Samsung for their Exynos line, MediaTek, Huawei, and a number of others are going to be doing this to as well. So think about, why would any company like Intel invest more money into standalone modem chips, especially if future modems are going to be embedded into other companies SoCs. So future processors (Ax) from Apple will also have embedded modems as well. Alan never sees the real stories behind the scenes.

20. Vancetastic

Posts: 1754; Member since: May 17, 2017

Company loses money in a deal with Apple....shocking.

Latest Stories

This copy is for your personal, non-commercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers at https://www.parsintl.com/phonearena or use the Reprints & Permissions tool that appears at the bottom of each web page. Visit https://www.parsintl.com/ for samples and additional information.