Apple steps up the pressure on Qualcomm: stops licensing payments
In a succinct press release, Qualcomm says it has been informed by Apple that the company had decided to withhold payments to its contract manufacturers for the royalties those contract manufacturers owe under their licenses with Qualcomm, for sales during the quarter ended March 31, 2017.
And Apple also indicated it was determined to not pay any such royalties until its dispute with Qualcomm would be resolved. Although iPhone maker began shipping smartphones without Qualcomm’s wireless modem chips inside, the chip maker nevertheless seeks royalties under the assumption that any wireless modem chip (including from competition) is relying on many of its related patents.
“Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees”, said Don Rosenberg, executive vice president and general counsel of Qualcomm.
“These license agreements remain valid and enforceable. While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts. Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade. Apple’s continued interference with Qualcomm’s agreements to which Apple is not a party is wrongful and the latest step in Apple’s global attack on Qualcomm. We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.”
Bloomberg reported that announcement forced Qualcomm, as a precautionary measure, to lower forecasts it gave just a week ago, from an upper estimated revenue in its fiscal third quarter (ending June) of $6.1 billion down to $5.6 billion (for the upper estimation). The company also forecast lower earnings per share (almost 30% less) which had an immediate impact on the shares’ price, losing 4.1 percent to $51.05 on the stock exchange in New York Friday morning.
The dispute could escalate into losses of billions of dollars for Qualcomm which is under regulatory investigations in the U.S., South Korea, Taiwan and Europe. Qualcomm accuses Apple of instigating those investigations by making false claims to government agencies.
In its initial lawsuit, Apple is claiming back billions of dollars that it estimates were overcharged by Qualcomm and wants a court order to change how Qualcomm charges for its technology. Patents controlled by Qualcomm cover the basics of all high-speed data capable mobile phone systems. It charges a percentage of the total selling price of the phone regardless of whether the device uses a Qualcomm chip or not.