Background: why Apple and Qualcomm quarreled, and then reconciled
Yesterday it became known that Apple and Qualcomm reached an agreement after several years of patent disputes . Apple had to pay a partner compensation, the size of which was not disclosed. But what caused the conflict and why were both parties forced to make peace?
How did it all start?
Apple lawsuit in the United States
On January 20, 2017, Apple sued their partner, Qualcomm , in the United States , demanding the latter claim $ 1 billion in damages. According to the leadership of Apple, it was that Qualcomm for several years overstated the sale value of its chips, making a profit illegally.
The lawsuit said Qualcomm claimed Apple royalties of a few percent of the value of every iPhone sold by the corporation. In response, Qualcomm allowed the partner to use its patent documentation. In addition, Qualcomm demanded that the Cupertians use only Qualcomm chips, without cooperating with other companies. A paper drawn up by Apple for the court said that this situation lasted several years - from 2011 to 2016.
Qualcomm, in turn, said Apple’s allegations were unfounded. “Apple intentionally incorrectly describes the agreements and arrangements with us, as well as the importance of the technology created by our company,” the response document said.. The company said it would challenge Apple’s lawsuit, and indeed did so, with the result that the trial dragged on for two long years.
Apple lawsuit in China
Just a few days after filing a lawsuit against Qualcomm in an American court, the Apple team went to court in China, demanding $ 145 million from the partner. The basis of this statement is similar to the claims from the lawsuit filed in the American court: Apple considered Qualcomm to violate the agreement and it requires more money for its products than it actually costs.
Qualcomm did not remain silent this time, saying that Apple was simply “trying to pay less for the technologies provided by Qualcomm”. According to the chip manufacturer, the agreement with Apple did not differ fundamentally from the agreements concluded with more than a hundred Chinese companies.
Qualcomm CEO Stephen Mollenkopf told CNET that Apple is suing because it wants to pay less for the company's patents. But at the same time, Qualcomm does not overestimate the price of its products or services - the company asks for a fair price for its intellectual property .
At the same time, the head of the chip manufacturer noted that he will continue to supply Apple products, despite lawsuits in two countries.
Apple lawsuit in the UK
In the spring of 2017, Apple filed another lawsuit against Qualcomm - this time in a UK court. The lawsuit was similar to those that Appleprovided the court of the United States and China .
Qualcomm filed a lawsuit
This time, the chip maker decided to file a lawsuit . The official reason is Apple’s refusal to disclose “the full potential of electronic components provided by Qualcomm in the then new iPhone 7 phones. According to the plaintiff, the reason that Apple uses only the basic chip functions in the desire to start working with Intel products, including modem ones microcircuits.
At that time, Apple released different versions of the iPhone 7, in some for the first time in several years, not Qualcomm chips were installed. This company began to accuse Apple of the fact that the Cupertians intentionally underestimate the results of tests of iPhone 7 with Qualcomm chips, saying that the performance of all models is "approximately the same".
Who lost how much?
After Apple decided to stop paying all royalties on contracts with Qualcomm, the latter had to cut back on expectations of future revenues.
“Pending the court’s decision, we suspended Qualcomm’s payments,” Apple said.
Well, Apple had to start installing slower modem chips from Intel in their smartphones. They reduced the potential bandwidth of LTE connections in new iPhone models . And this is not all - not wanting smartphones with Qualcomm chips to compare favorably with smartphones with Intel chips, Apple has artificially limited the network connection speed in all iPhone 7 . At the same time, competitors' phones, for example, Samsung Galaxy S8, showed higher speedsthan the iPhone 7, since Qualcomm chips were installed in them and there were no restrictions.
Accordingly, Samsung cited gigabit network connection speeds as an advantage, and the company probably managed to get a larger market share than it could get without Apple clashing with Qualcomm.
In the summer, Apple filed a lawsuit in San Diego (USA) demanding to punish Qualcomm for using the “illegal business model” . According to the Cupertino team, Qualcomm not only overestimated the cost of its products, but also forced partners to obtain a license for patents.
Two weeks after the lawsuit Apple Qualcomm has filed a lawsuit against its (so far) partner. The company demanded to ban the sale of some iPhone models in the United States, saying that their manufacturer violated a number of patent agreements. In particular, Apple was accused of violating just six patents related to reducing the power consumption of the device.
Then Qualcomm demanded to stop selling iPhone in China .
Serious losses for all
Financial sanctions followed. The San Jose Court (California, USA) forced Apple to pay a fine of $ 25,000 per day for failure to comply with a court order to provide evidence of Qualcomm's guilt. According to Apple, the reason for not meeting deadlines was the need to prepare "millions of documents."
Qualcomm in Europe fined $ 1.2 billion for violating antitrust laws. As it turned out, the chip maker paid Apple "billions of US dollars" for the partner to work only with this company.
In the summer of 2018, Apple completely switched to chips from Intel , completely abandoning Qualcomm products. At the same time, the latter provided the results of measurements of the bandwidth of the network connection established using Qualcomm and Intel modems.
A little later, a Chinese court declared Qualcomm a fair claimfollowed by a ban on the sale of iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus, iPhone X. These devices, according to the court, were made in violation of patent law, the technology that Apple used belonged to Qualcomm.
A German court in the winter of 2018 banned Apple from selling iPhone 7, 8, and X with Intel modems. But then it was allowed to sell the same device models with Qualcomm modems .
All this became the reason that the value of Apple shares from October to December 2018 fell by 34% (from $ 230 to $ 150). Apple's capitalization over the indicated period of time decreased from $ 1 trillion to $ 715 billion.
Over the same period, Qualcomm's share price fell by 28% - from $ 75 to $ 54.
How did it end?
Apple could not afford to continue to lose ground in the mobile device market, so it decided to make peace with Qualcomm . The companies entered into a six-year license agreement; it entered into force on April 1, 2019.
Apple has had to pay compensation to a partner, but nothing is known about its size.
The business community took the news of ending the conflict enthusiastically. Thus, Qualcomm shares rose in price immediately by 20%, due to which the company's capitalization increased to $ 85 billion.
Apple shares rose from $ 198 to $ 203 in a few days. The corporation's capitalization is slowly approaching $ 1 trillion, amounting to $ 958.62 billion at the time of publication of the article.