Apple’s rebellion against the ‘Qualcomm Tax’

“The fact that Qualcomm Inc.’s business model has survived two decades is as much a marvel of modern lawyering as one of modern technology,” Tim Culpan writes for Bloomberg.

“That Qualcomm is the leading player in global mobile development is beyond doubt. What has irked authorities in China, South Korea, the U.S. and now Apple Inc. is what many see as the San Diego-based company’s strong-arm tactics in charging for that technology,” Culpan writes. “While Qualcomm designs and sells chips used in cellphones — Snapdragon being its most famous one — the real money comes from its huge portfolio of patents that offers up a complete system for wireless communications. Licensees pay for the technology, no matter how much of it they actually use or whether they even buy Qualcomm chips.”

“It’s a fantastic business model, one that Qualcomm is justifiably fighting to protect. While licensing accounts for only a third of revenue, behind the sale of chips, that business makes up almost three-quarters of its profit,” Culpan writes. “Qualcomm’s licensing model was simple. It charged a percentage of the total cost of all components in the phone. This approach had advantages for everyone involved. It meant licensees and Qualcomm didn’t have to scrap over which parts of the phone did or didn’t use Qualcomm technology, so they could just go ahead and focus on the more important task of developing and selling these hip new gadgets… Twenty years later, the industry has moved on. Qualcomm hasn’t. Displays, cameras, memory and even metal casings have become increasingly more expensive components of a phone, yet Qualcomm still expects to collect a ‘tax’ on all of it no matter how much it contributes.”

Read more in the full article here.

MacDailyNews Take: Qualcomm’s ridiculous licensing scheme simply has to go! It’s unbelievable it’s still in effect in 2017!

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