Qualcomm and Apple abruptly drop all litigation

The immediate loser in this settlement is probably Intel. (Getty Images)

Qualcomm and Apple today reached an agreement to dismiss all their litigation against each other, worldwide, including with Apple’s contract manufacturers. The settlement includes a payment from Apple to Qualcomm, although the companies did not specify the amount. 

Apple and Qualcomm also reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.

Qualcomm stock rose more than 20% on the news, while Apple stock was flat.

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The settlement was reached just one day after the two companies’ antitrust trial began in federal court in San Diego. The case was originally filed by Apple in January 2017, but the litigation became complicated with Qualcomm countersuing. The trial was expected to last at least two weeks, with both parties asking for billions of dollars in damages.

RELATED: Apple files $1B lawsuit against Qualcomm over royalties

The two-year legal fight centered around Apple’s purchase of modem chips from Qualcomm. Apple claimed Qualcomm abused its position as the primary supplier of cellular chips and was overcharging for chips, using anti-competitive and monopolistic practices. Qualcomm countered that Apple reneged on its contracts.

RELATED: Apple countersues Qualcomm, escalating massive patent war

It’s unknown why the parties so abruptly halted their litigation today. Certainly, Apple has an incentive to move forward with 5G phones as soon as possible, without the specter of patent disputes hanging over its technology. And Qualcomm probably prefers to not expose its business practices to anti-trust scrutiny.

Bad news for Intel

At one point, the dispute looked like a boon for Intel. New iPhone models released by Apple in 2018 used Intel modem chips instead of Qualcomm chips. And Intel had announced a new 5G chip for smartphones, which the company plans to ship in commercial devices starting in 2020.

RELATED: Intel’s new multimode 5G modem—supporting 6 Gbps speeds—to be in phones by 2020

But now, it looks like Qualcomm modems will once again be designed into future iPhones. “Qualcomm is the leader in cellular modems, and using Qualcomm silicon greatly accelerates Apple's ability to field a 5G iPhone,” writes Techsponential analyst Avi Greengart in a blog post today. “That is still not likely until 2020 in the U.S., but it shouldn't slip beyond that.”

While Intel is the immediate loser in the deal between Qualcomm and Apple, Greengart said, “Realistically, Intel had to assume that Apple was going to build its own modem at some point. Apple has been aggressively hiring RF engineers in San Diego, where Qualcomm is located. Apple’s new agreement with Qualcomm accelerates the move off of Intel, and takes the pressure off of Apple's internal modem development group. Apple is unlikely to shutter that group; Apple still has strong strategic reasons to vertically integrate this piece of its supply chain if it can.”
 

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