Apple accuses Qualcomm of monopolistic practices in FTC trial

Apple’s antitrust trial against Qualcomm has shined a light on the companies’ long-standing partnership that reached a boiling point in 2017. After Apple sued the chipmaker in 2017, Qualcomm refused to provide cellular modems for Apple’s 2018 iPhone lineup, Apple Chief Operating Officer Jeff Williams testified Monday to the Federal Trade Commission, Bloomberg reports.

Apple alleges Qualcomm’s refusal to negotiate in good faith forced it to exclusively use Intel chips in the iPhone XS, iPhone XS Max and the iPhone XR. At issue are Qualcomm’s licensing practices and fees. Apple accuses the company of charging high royalty rates and refusing to license patents to other chipmakers, which contributed to a monopoly for Qualcomm.

During testimony at the trial, Williams said Apple originally negotiated a deal with Qualcomm in 2011 to buy and license CDMA modems. When the chipmaker tried to increase the fee in 2013, it eventually relented after Apple agreed to an exclusive arrangement and the iPhone maker said it would not challenge Qualcomm’s royalty rates, VentureBeat reports. Once Apple was able to source chips from Qualcomm and Intel, it filed a lawsuit over Qualcomm’s licensing fees and Qualcomm countersued, accusing Apple of illegally using its technology and sharing information with Intel.

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Apple wanted to continue using Qualcomm and Intel chips in its latest iPhones, but Qualcomm declined. “The strategy was to dual source in 2018 as well,” Williams said in testimony, according to VentureBeat. “We were working toward doing that with Qualcomm, but in the end they would not support us or sell us chips … We would have loved to continue to have access to Qualcomm’s tech.”

Qualcomm continues to provide chips for Apple’s older devices, but the ongoing dispute has left Apple without a clear path to a 5G-capable iPhone unless it strikes a deal with another chipmaker. Intel isn’t expected to release a 5G chipset until 2020, and its current LTE modems are widely considered slower than Qualcomm’s.

In October 2018, Qualcomm claimed Apple owed $7 billion in unpaid patent royalty fees in a federal court. The chipmaker has also taken the battle overseas, winning bans on older iPhones in Germany and China. Qualcomm is the world’s leading maker of smartphone chips and it holds critical patents for cellular technologies, particularly for CDMA devices. Qualcomm has been licensing technology for Apple’s iPhones since 2007, but the iPhone maker didn’t start using Qualcomm chips until it added support for CDMA networks in 2011.

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Williams accused Qualcomm of abusing its position by charging the company a licensing fee of $7.50 per device. “That may not sound like a lot, but we’re selling hundreds of millions of phones,” which computes to about “a billion dollars a year,” Williams said, according to Bloomberg. “We had a gun to our head.”