Credit Suisse: Apple could end Qualcomm dispute with $8 billion payment

In the current dispute between Apple and Qualcomm, “we see merit in both parties’ arguments, and believe mutual self-interest will prevail, making it unlikely that this dispute will result in prolonged litigation or court trials,” Credit Suisse analysts Kulbinder Garcha, Philip Wang, and Syed Talha Saleem write via Barrons.

“Apple needs Qualcomm… Apple products will continue to leverage Qualcomm’s innovations, both for standard essential patents (SEP) and for IP in components, such as battery and screen technology, just to name a few,” Garcha, Wang, and Saleem write. “Qualcomm needs to resolve this. First, as the largest mobile OEM with hardware revenues of $190 billion, Apple is simply too large to ignore. Second, given that Apple is set to gain market share in a non-growing smartphone industry, Qualcomm will be eager to settle this matter. A lack of exposure for Qualcomm means a declining total available market (TAM) over the next few years. Third, taking this to trial could result in an outcome that affects Qualcomm’s other agreements.”

“Mutual self-interest will prevail, settlement is possible. We believe, as in the agreements between Qualcomm-Nokia and Qualcomm-Samsung in 2008 and 2009, respectively, that an amenable settlement for both parties is possible. This would likely result in a major upfront payment and a heavily discounted royalty rate,” Garcha, Wang, and Saleem write. “Apple could digest a payment given its cash balances and would welcome a minimal hit to its gross margin, while Qualcomm would welcome upfront revenues. We see an upfront payment at $8 billion and ongoing rate of $5.90 per phone as possibly being acceptable to both parties.”

Read more in the full article here.

MacDailyNews Take: All along, this has been a dance over royalties, with Apple seeking more amenable terms to Qualcomm’s highway robbery to date. We expect a settlement as well, eventually (once Qualcomm is sufficiently worn down) – a settlement that benefits Apple vs. the old agreement.

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Apple uses Supreme Court decision to escalate war against Qualcomm – June 20, 2017
Apple’s amended San Diego complaint against Qualcomm leaves no doubt: many billions at stake – June 20, 2017
Apple rejects Qualcomm’s allegation of throttling iPhones, says ‘study’ is ‘methodologically unsound’ – June 20, 2017
Apple just poached one of Qualcomm’s top guys – May 31, 2017
Supreme Court rules against Lexmark strengthening FTC/Apple cases against Qualcomm – May 30, 2017
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FTC says Qualcomm is a monopoly; Samsung agrees – May 13, 2017
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Apple’s dispute with Qualcomm could last two years – March 3, 2017
Apple widens global patent war, files lawsuit against Qualcomm in the United Kingdom – March 2, 2017
Apple may have paid Qualcomm $40 per iPhone; accounting for 1/3rd of Qualcomm’s revenue – February 10, 2017
Conservative groups ask President Trump to terminate FCC lawsuit over Qualcomm patent licensing – January 27, 2016
Qualcomm CEO fires back at Apple: Bring it on – January 26, 2017
Apple sues Qualcomm in China seeking 1 billion yuan – January 25, 2017
Qualcomm comments on Apple’s lawsuits in China – January 25, 2017
Apple’s rebellion against the ‘Qualcomm Tax’ – January 24, 2017
Despite lawsuit, Qualcomm wants to keep doing business – January 24, 2017
Why Apple, the FTC, and others are attacking Qualcomm’s royalty model – January 24, 2017
Here are the most damning parts of Apple’s blockbuster lawsuit against Qualcomm – January 23, 2017
Apple’s legal assault on Qualcomm part of iPhone margin grab – January 23, 2017
Qualcomm says Apple’s claims are ‘baseless’ in response to Cupertino’s $1 billion lawsuit – January 21, 2017
Apple sues Qualcomm for $1 billion over onerous licensing practices – January 20, 2017
Qualcomm exec says FTC ‘rushed’ antitrust lawsuit before President-elect Trump’s inauguration – January 19, 2017
FTC alleges Qualcomm forced Apple into iPhone LTE chip deals – January 18, 2017
FTC charges Qualcomm with monopolizing key smartphone chip; alleges extracted exclusivity from Apple in exchange for reduced patent royalties – January 17, 2017


  1. This dispute isn’t only between Apple and Qualcomm. Intel has its own lawsuit with Qualcomm about the same tech. Also, Qualcomm has shown zero interest in doing anything but adding fuel to the fire, acting (IMHO) entirely unreasonably, essentially in the mold (mould) of a monopolist. This bodes poorly for Qualcomm in court. Unless Qualcomm relents, I see no chance of a settlement before court proceedings commence.

    I note from previous comment threads on this subject that many people don’t understand the lawsuit. This article may be helpful:

    Why did Apple Sue Qualcomm in the US and Now in China? [FAQ]

  2. Credit Suisse is ignoring the Favored Nation clause in large scale purchase agreements. Paraphrased it reads: the vendor shall not offer lower pricing to another. If it does that pricing will be offered to the buyer.

    If Qualcomm gave Apple ‘special’ pricing in suit settlement it would have to offer the same terms to the rest of Qualcomm’s major customers. This is exactly what Qualcomm wants to avoid.

    1. Technically true, but if Qualcomm shifted from a “percentage of device price” to “flat licensing fee” model, it could offer the same terms to all its customers without violating the Most Favored Nation clause in their existing agreements. The other customers would pay no more for their licenses than they do now, but Apple would pay the same amount rather than a huge premium because their average retail price is so much higher than the Android makers.

  3. “This article may be helpful:

    Why did Apple Sue Qualcomm in the US and Now in China? [FAQ]

    Not so much. Apple’s primary complaint is that Qualcomm’s pricing is a sliding scale based on the price of the completed product sold.

    In other words, Apple could be (and most likely is) paying 2X to 3X more for Qualcomm licensing than does Apple’s competitors. This is a violation of FRAND (which is NOT voluntary).

    F = Fair, not exorbitant
    R = Reasonable, allows patent holder make a profit on its IP
    AND = And Non-Discrimnatory, as in everyone licensing the technology pays the same

    Qualcomm is violating each of these Standard Essential tenets. In court Qualcomm will lose big as not only are Qualcomm’s customers balking at Qualcomm’s pricing tactics, so too are government trade and anti-trust regulators.

    1. I see your point. Could it also be looked at this way?

      F, agreed, but what is ‘exorbitant’ to one OEM may not be to another.
      R, agreed, Qualcomm makes a profit (may be less or ‘loss’ for smaller OEMs)
      AND = And Non-Discriminatory, everyone paying the same rate (percentage). A percentage may be more ‘fair’ to smaller OEMs than a ‘flat’ amount per unit.

      IMO, the current payment model dispute seems similar to the ‘fairness’ of flat vs. bracketed income tax rates.

  4. It’s missing punctuation marks. Its bad grammar makes it comprehensible only in the mind of the writer.

    However, this sentence is clear and revealing:
    “The FRAND (fair, reasonable, and non-discriminatory terms) is a voluntary agreement between the standard organization and the holder of the standard-essential patents.”

    The agreement to abide by FRAND is voluntary so it should mean that Qualcomm does not have to comply.

    1. I’m not sure and tried to find a definitive answer to this.
      I have heard that Qualcomm “did agree” to FRAND. But searching for that pulls up a ton of hits about the this case with too much info.
      Don’t have time to wade thru that much data right now.

    2. It is voluntary, in the sense that Qualcomm could have chosen not to offer its patents for use in the standard and enter into the agreement. Compliance with the agreement thereafter is NOT voluntary. It is enforceable like any other contract that is supported by the mutual exchange of valuable consideration. Since Qualcomm benefits from the inclusion of its patents in the standard, it is bound to live up to its side of the bargain.

      Again, nobody is claiming that Apple and Intel have the right to use Qualcomm’s intellectual property for free, but they do have the right to use the standard-essential patents with the payment of fair and reasonable compensation. FRAND is an objective standard, not just one party’s subjective judgment of what it can get away with.

  5. I can already hear the analyst shills telling everyone to buy Qualcomm for the $8B payday Apple is going to provide them. Apple should give Qualcomm $2B and then give them the boot. Why the heck does Apple always end up on the short end of the stick. I bet Qualcomm makes out like a bandit yet again.

  6. We’re about to go to nuclear war with N. Korea because of $1 billion in sanctions? And you guys are in court over 8? Apple! Qualcomm! Settle in the middle. And figure out a way to save the world!

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