Apple and Qualcomm Call Truce and Drop Patent Litigation

Apple and Qualcomm agreed to a new license agreement and announced they would dismiss all litigation worldwide between the two companies. The truce brings a close to an extended legal battle over royalties involving smartphone tech. Apple has agreed to pay Qualcomm an undisclosed amount and Qualcomm will supply modem chips to Apple as part of a new multiyear deal. Hours after the settlement between Apple and Qualcomm was announced, chip rival Intel revealed it would cancel its plans to manufacture modem chips for 5G smartphones.

“Intel said it wouldn’t launch 5G modem products that had been slated to go out next year, and would instead assess opportunities for 4G and 5G modems in personal computers and internet-of-things devices,” reports The Wall Street Journal.

“It has become apparent that there is no clear path to profitability and positive returns,” said Intel CEO Bob Swan about the 5G modem market, adding that next-gen wireless tech is still a strategic priority. Intel is “assessing our options to realize the value we have created” in 5G, he said.

Meanwhile, Apple and Qualcomm announced a six-year license agreement in addition to a deal that will bring Qualcomm chips to Apple devices. The two companies have been battling for more than two years in a series of high-profile lawsuits.

“Qualcomm had claimed Apple was violating its patents by withholding royalties, while Apple argued Qualcomm had been overcharging for those patents for years, abusing its dominant position in the market,” notes WSJ. “At stake was the future of Qualcomm’s licensing model and billions of dollars in royalties that Apple has either paid or kept.”

The emergence of 5G likely pushed the two companies to resolve their differences, as Qualcomm has been facing mounting pressure from Intel (which has been providing modem chips for the most recent iPhones), and Apple was facing the pressure of faster wireless devices from rivals such as Samsung. Deploying Qualcomm’s 5G chips in iPhones is critical for Apple to compete with mobile products running Android software.

Importantly, the settlement also cancels the threat to Qualcomm’s core licensing business that now represents roughly half the company’s profits.

“This is an enormous win for Qualcomm because the suit and related suits were life-threatening to the company,” said Endpoint Technologies Associates analyst Roger Kay. “For Apple, a loss would have been financially punishing, but for Qualcomm, this would have destroyed the business. This is like a new lease on life.”