Apple Vs. Qualcomm: Accusing Qualcomm Of Overcharging For Modem Chips

Jan 24, 2017 06:10 AM EST | Carl Anthony Teves

Apple Inc just filed a $1 billion lawsuit against the California chipmaker Qualcomm, last Friday, alleges that Qualcomm has unfairly used the power of its patents, which covers the fundamentals of phone systems, and its chip business to bring up its dominant position in the industry. The tech giant's legal actions follow regulatory investigations and fines on three continents, and that includes a lawsuit filed by the Federal Trade Commission last week.

Qualcomm has been a major supplier to both Apple and Samsung Electronics Co Ltd for modem chips that keeps smartphones connected to wireless networks. Both companies together accounted for 40 percent of Qualcomm's total revenue of a staggering $23 billion in its most recent fiscal year.

JPMorgan analyst Rod Hall, released a researched note on January 23, describing the earnings impact on Qualcomm will be severe if the tech giant company withholds payments. The complaint states that the terms of its agreement with Qualcomm called for it to pay a percentage of the average selling price to the chip maker as licensing fees.

In addition, the iPhone maker stated that it received the quarterly rebates from the chip maker according to their agreement. But Qualcomm started to withheld the rebates because of the discussion that was made with South Korea's antitrust regulator, the Korea Fair Trade Commission.

Last December of 2016, KFTC fined Qualcomm US$854 million for unfair patent licensing practices. The company also paid China a whopping US$975 million last February 2015 and EU in December 2015 accused the company of abusing its market power to thwart rivals.

Senior analyst at Bernstein Research, Stacy Rasgon, said that Qualcomm was the only supplier of modem chips for Apple's phones until the release of the new iPhone 7 in September. However, Intel Corp provided about half of the modem chips for the newest models.


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