Qualcomm Accused of Fresh Antitrust Violations by 4 Apple Contractors

Qualcomm Accused of Fresh Antitrust Violations by 4 Apple Contractors

HIGHLIGHTS

  • Contractors alleged that Qualcomm violated 2 sections of the Sherman Act
  • The allegations are part of broader dispute between Apple and Qualcomm
  • The lost licence revenue from Apple has been a hit to Qualcomm’s sales

iPhone chip supplier Qualcomm faces a fresh set of antitrust allegations from a group of four companies that assemble the iPhone and other products on behalf of Apple.

Foxconn parent Hon Hai Precision Industry Co, Wistron, Compal Electronics and Pegatron alleged that Qualcomm violated two sections of the Sherman Act, a US antitrust law.

The accusations, made in a filing late Tuesday in US District Court for the Southern District of California, are counterclaims to a Qualcomm lawsuit filed in May seeking to force the contractors to pay Qualcomm licence fees that Apple directed them to stop paying.

“Qualcomm has confirmed publicly that this lawsuit against our clients is intended to make a point about Apple and punish our clients for working with Apple,” Theodore J. Boutrous, a lawyer for the four companies, said in a statement. “The companies are bringing their own claims and defenses against Qualcomm.”

ALSO SEEQualcomm CEO Says Settlement Likely in Apple Dispute

The allegations are part of broader dispute between Apple and Qualcomm, which supplies so-called modem chip technology that lets iPhones connect to cellular data networks, over the nature of Qualcomm’s business model of linking the sale of chips and patent licences, which has come under scrutiny by regulators in South Korea, the United States and several other countries.

In January, Apple sued Qualcomm alleging that the company had withheld nearly $1 billion of patent licence rebates it owed Apple in retaliation for Apple’s cooperation with South Korean regulators. Apple told its contract manufacturers to withhold licence payments from Qualcomm while the dispute played out, which prompted Qualcomm to sue them in May.

“Despite Apple’s claims against Qualcomm, Apple suppliers remain contractually obligated to pay royalties to Qualcomm under their licence agreements with us, including for sales of iPhones to Apple,” Qualcomm President Derek Aberle said of the dispute on the company’s conference call in April.

Much of the language in the contractors’ allegations mirror Apple’s objections to Qualcomm’s business model. A senior Apple official confirmed that the company is helping to fund the contractors’ legal defense as part of an indemnification agreement among the firms. Apple has also formally joined the contractor case as a defendant.

The lost licence revenue from Apple has been a hit to Qualcomm’s sales. Analysts expect $5.2 billion (roughly Rs. 33,453 crores) in revenue for the June quarter, down from $6 billion a year earlier.

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Qualcomm CEO Says Settlement Likely in Apple Dispute

Qualcomm CEO Says Settlement Likely in Apple Dispute

HIGHLIGHTS

  • Mollenkopf says out of court settlement possible with Apple
  • Qualcomm asked US authorities to ban imports of some iPhone, iPad models
  • It has also accused iPhones, iPads of infringing 6 of its mobile patents

Global chip maker Qualcomm that recently filed a new patent infringement lawsuit against Apple now expects ‘out of court’ settlement with the Cupertino-based iPhone maker.

According to a Fortune report on Tuesday, Qualcomm CEO Steve Mollenkopf said during the Brainstorm Tech conference in Aspen, Colorado, that “those things tend to get resolved out of court and there’s no reason why I wouldn’t expect that to be the case here.”

He was comparing the dispute with Apple to earlier fights Qualcomm has had with other tech companies that were settled out of court.

Mollenkopf, however, added he didn’t have any specific news announcing a settlement was on the way.

“I don’t have an announcement or anything so please don’t ask,” he told the gathering.

Earlier in July, Qualcomm asked the US authorities to ban imports of some iPhone and iPad models.

Qualcomm filed a complaint with the US International Trade Commission, accusing Apple’s iPhones and iPads of infringing six of its mobile patents.

Qualcomm said all iPhones and iPads that contain competing mobile communications chips should be barred from the country.

Apple responded to this, saying that the company had tried to negotiate before suing and that Qualcomm is abusing its position.

In April, Apple stopped paying royalties to contract manufacturers for phone patents owned by Qualcomm over an “unresolved issue”.

Apple reportedly stopped paying royalties starting with devices sold during the March quarter.

Qualcomm is one of the world’s biggest provider of mobile chips and derives revenue majorly from licensing that technology to hundreds of handset manufacturers and others.

The US chip manufacturer had lambasted Apple for breaching deals between the two companies and urged that the lawsuit filed in January against them by the iPhone maker should be rejected.

Qualcomm also accused Apple of harming its business and sought unspecified damages.

Apple sued Qualcomm in January for nearly one billion dollars over royalties, with the Cupertino-based tech giant alleging the wireless chipmaker that it did not give fair licensing terms for its processor technology.

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Feds Sue Qualcomm for Forcing Chips on Apple

Feds Sue Qualcomm for Forcing Chips on Apple
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By Shirley Siluk. Updated January 18, 2017 10:21AM

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Chip-making giant Qualcomm is using unfair and anti-competitive practices to force cellphone companies to use its processors, according to a complaint filed yesterday in U.S. District Court in the Northern District of California by the Federal Trade Commission (FTC).Among the FTC’s allegations is that Qualcomm forced Apple into an exclusive arrangement to use its baseband processors to prevent competitors from boosting sales through Apple’s strong position in the global smartphone market. In return, Qualcomm cut the amount Apple had to pay in patent royalties, according to the FTC.

The FTC voted 2-1 to file the lawsuit, with Commissioner Maureen Ohlhausen dissenting. Ohlhausen said the decision to file the complaint was based on “a flawed legal theory.” Qualcomm yesterday expressed the same opinion, noting in a statement that it has “never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms.”

FTC: Qualcomm Forced Apple into Exclusive Arrangement

The FTC’s complaint centers on Qualcomm’s patents for modem chip technologies that make it possible for mobile phones to connect with cellular networks. Those technologies were incorporated into telecom industry standards, making them essential for 3G and 4G communications.

In exchange for becoming part of such standards, Qualcomm committed to licensing those patented technologies to other companies on “FRAND” (fair, reasonable and non-discriminatory) terms, the FTC noted. However, Qualcomm instead “consistently refused to license its cellular standard-essential patents to its competitors,” violating its FRAND commitments, according to the FTC’s complaint.

When Apple sought to reduce its royalty payments, Qualcomm “conditioned partial relief on Apple’s exclusive use of Qualcomm baseband processors from 2011 to 2016,” according to the FTC. “Qualcomm’s exclusive supply arrangement with Apple denied other baseband processor suppliers the benefits of working with a particularly important cell phone manufacturer and hampered their development into effective competitors.”

Apple recently began using modem chips from Intel instead of Qualcomm’s processors in some versions of the iPhone 7 and iPhone 7 Plus, which came out last year.

Qualcomm Also Facing Complaints in Korea, EU

In a rare dissenting statement, Ohlhausen questioned the basis for the complaint against Qualcomm. In addition to lacking “economic and evidentiary support,” the FTC filing was questionably timed, arriving on “the eve of a new presidential administration,” she noted. Ohlhausen also said the complaint would undermine U.S. intellectual property rights around the world.

Qualcomm noted in its response that the FTC complaint was filed while the commission has just three of its five required members in place. It also pointed out that FTC chairwoman Edith Ramirez has said she plans to resign as part of the transition to a new administration.

“We have grave concerns about the two Commissioners’ decision to bring this case despite a lack of evidence supporting the allegations and theories in the complaint,” Qualcomm executive vice president and general counsel Don Rosenberg said in a statement. “The intellectual-property-rights policies of the cellular standards organizations do not require licensing at the component level, and the FTC does not have the authority to rewrite industry policy. That is for the industry, not a regulator, to decide.”

The U.S. is not the only region in which Qualcomm has been facing complaints about anti-competitive behavior. In December, for example, the Korea Fair Trade Commission imposed a fine of 1.03 trillion won ($880 million) for what it called an “unfair business model” that licenses Qualcomm technology at the handset rather than chip level.

In July 2015, the European Commission, the European Union’s merger and anti-trust watchdog, also launched two antitrust investigations into “possible abusive [behavior]” by Qualcomm in connection with its pricing and licensing practices for modem chipsets.

[“source-ndtv”]

Qualcomm Reports Better-Than-Expected Quarterly Revenue

Qualcomm Reports Better-Than-Expected Quarterly Revenue

Smartphone chipmaker Qualcomm Inc, which agreed to buy NXP Semiconductors NV for about $38 billion last week, reported a better-than-expected 13.3 percent rise in quarterly revenue, helped by strong demand, particularly in China.

The company’s shares were marginally higher in after-hours trading on Wednesday.

The San Diego-based company, which supplies chips to Android smartphone makers and Apple, reported mobile chip shipments of 211 million for the quarter compared with its own forecast of 195 million-215 million.

Analysts on average had expected shipment of 206.1 million in the quarter, according to research firm FactSet StreetAccount.

“Our chipset business is also benefiting from a strong new product ramp across tiers, particularly with fast growing OEMs in China,” said Qualcomm Chief Executive Officer Steve Mollenkopf.

Qualcomm gets the bulk of its revenue from chip sales but most of its profit comes from wireless patents it licenses to the mobile industry.

The NXP deal – the largest-ever in the semiconductor industry – would make Qualcomm the leading supplier to the fast-growing automotive chips market.Qualcomm said it expects revenue of $5.7 billion-$6.5 billion (roughly Rs. 38,006 crores to Rs. 43,344 crores) for the current quarter. Analysts had expected $6.15 billion, according to Thomson Reuters.

Net income attributable to Qualcomm rose to $1.60 billion, or $1.07 per share, in the fourth quarter ended September 25, from $1.06 billion, or 67 cents per share, a year earlier.

Revenue rose to $6.18 billion (roughly Rs. 41,211 crores) from $5.46 billion.

Excluding items, Qualcomm earned $1.28 per share, beating the average analyst estimate of $1.22.

Up to Wednesday’s close of $67.09, Qualcomm’s shares had risen 34.2 percent this year, handily outperforming the 22.2 percent gain in the Philadelphia Semiconductor index.

© Thomson Reuters 2016

Tags: Qualcomm, Qualcomm Earnings, Mobiles, Tablets, Telecom
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