As rumored yesterday, the EU announced a 997 million euro fine to be imposed on Qualcomm, approximately $1.2 billion dollars, which makes cellular baseband chips inside most iPhones. The EU says Qualcomm bribed Apple with billions of dollars in rebate payments to make Apple not use chips from competing manufacturers, reducing competition from other manufacturers in the LTE baseband chip industry.
The fine is a hefty levy against Qualcomm’s bottom line, which recorded $20 billion in total revenue last year, although it is subject to appeal so the final number might be less.
Apple still uses Qualcomm components in its iPhones and iPads to this day, but began diversifying with iPhone 7 in 2016. Approximately half of new iPhones feature LTE cellular baseband chips from Qualcomm.
The EU is particularly upset with terms in Qualcomm contracts that said if Apple made a single iPhone or iPad with a non-Qualcomm chip, it would forfeit billions of dollars in payments and Apple would also have to repay some portion of the payments it already received.
The EU commission deems this clause anti-competitive and has resulted in the billion euro fine.
Apple received Qualcomm’s payments for approximately 5 years. The payments totalled to several billion dollars, but the commission declined to disclose exact numbers. The EU said Apple explored alternative LTE chip makers in that time but was dissuaded for a long time because of the anti-competitive clauses.
The EU says Qualcomm abused its dominant position in LTE chips. There are no repercussions to levy against Apple in this case. The EU will release the full 130 pages of findings into the public domain in the coming weeks.
This ruling is independent from Apple’s own legal battle against Qualcomm. In that case, Apple argues that Qualcomm’s royalties are exorbitant and unfair.
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