Negotiations were halted as Qualcomm and Apple discussed a deal. Last week, the iPhones maker gave in and got a licensing agreement, in addition to signing a chipset supply contract for several years.
With agreement among rivals, Intel has given up manufacturing 5G modems for smartphones. The company had planned to launch the technology for the second half of 2019. “In the light of the announcement from Apple and Qualcomm, we evaluated the prospects of making money by creating this technology for smartphones and concluded at the time that there simply was not a path, “Intel CEO Bob Swan told the WSJ.
According to the publication, Intel seeks alternatives to the modem business: an agreement could result in a few billion dollars for the company. A possible sale to Apple or another company has not yet been ruled out, by the way. Buying the chip business from Intel’s modems would be one of Apple’s biggest acquisitions so far, at a level similar to that of Beats Electronics’s $ 3 billion purchase in 2014.
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According to TF International Securities analyst Ming-Chi Kuo, Apple is expected to launch an iPhone with a 5G modem only in 2020. According to CNBC, the analyst, who often makes predictions about new Apple products, said that Qualcomm was one of the only companies that could provide the modems.
Shortly before the joint announcement by Apple and Qualcomm, CNBC reported that Chinese smartphone giant Huawei also announced that it would be “open” to selling 5G chips to Apple. However, if Apple were to buy Intel’s 5G modem business, it could conduct the manufacturing process internally – it’s no secret that Apple prefers to control as much of its iPhones process as possible.
The 5G modems will revolutionize the market. They will be the first to recognize all existing 5G frequencies, as well as supporting 4G, 3G and 2G networks, making it the first chip in the world to support all these networks in a single package.
Disputes between Qualcomm and Apple
In March, one of the court cases between Qualcomm and Apple came to an end when the US court ruled that Apple violated three patents by the chipset maker.
The three patents in question included: a function that allows a smartphone to connect quickly to the internet after it is turned on; the integration process between a modem and processor so that they work together to handle the download of applications; and, finally, one that covers the graphics processing and battery life.
Qualcomm, which filed suit in July 2017, claimed that Apple used its technology without permission on some versions of its popular iPhones. The company got Apple to pay Apple an amount of $ 31 million for the use of patents.
This was not the only dispute between the companies, but both companies decided to close them with an agreement this month. Market analysts saw the deal as another win for Qualcomm because it predicts not only the payment of an undisclosed sum for debenture licensing by Apple but also the companies have signed a six-year contract (extended to two) involving licensing and supply of Qualcomm chips to Apple.
With the agreement agreed, one of the main doubts was how this new licensing agreement would be, as it was exactly the license fees that made Qualcomm sue Apple. That’s because in the companies’ previous contract, a percentage was set to be paid as licensing, but Apple paid that percentage based on the price of the modem chip that Qualcomm provided for it ($ 20 each chip) and which Qualcomm expected to receive was a percentage above the final price of the iPhone.
According to people involved in the lawsuit, Qualcomm was requiring Apple to pay a $ 7.50 per iPhone license fee, and Apple was paying something well below that and the exact figure was not revealed – but one simple calculation lets you determine that the amount paid by Apple was only $ .24 per iPhone sold.
Despite the “defeat,” the agreement was the path Apple found not to lag behind the competition in the transition of its handsets to the 5G network: Qualcomm would not negotiate with it while the inter-company lawsuit was in progress, Intel until then the only supplier of modems for the iPhones) could possibly not be able to launch its 5G chip until 2021, and the other manufacturers that already possessed this technology also were not an existing option, since Samsung will use all the chips produced in its own devices, Huawei is prohibited from selling any telephone equipment to the United States under suspicion of espionage, and MediaTek chips do not have the quality required by an iPhone.
Thus, Apple “swallowed” pride and “lost” the dispute with Qualcomm, reaching an agreement that put the chip maker in a position of advantage.