Despite day one of the trial not having wrapped up yet, Qualcomm and Apple have reached a settlement in their royalty dispute. CNBC first cited sources in saying that the two companies have reached an agreement. Apple has now published a press release detailing the agreement.
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Apple says it has reached a deal with Qualcomm that will see it make a settlement payment to the chipmaker. Further, the two have reached a six-year license agreement effective as of April 1, 2019. There is a two-year option to extend the agreement, as well as a multiyear “chipset supply agreement.”
Qualcomm and Apple today announced an agreement to dismiss all litigation between the two companies worldwide. The settlement includes a payment from Apple to Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement
The payment from Apple to Qualcomm likely relates to the some $7 billion Apple and its suppliers withheld in royalty payments. Exact details of the settlement are unknown, but it likely means that we will once again see Qualcomm modems inside iPhones. Due to this legal case, Apple switched entirely to Intel with the 2018 iPhone lineup.
The two companies reaching an agreement is rather remarkable as the jury for their trial was just set yesterday and Apple only finished presenting opening arguments hours ago. Qualcomm is up 20 percent on the news of a settlement and AAPL is up less than half a percent.
Going into the trial, it seemed highly unlikely that Apple and Qualcomm would reach a settlement. Reports had suggested that the two companies had not even discussed such an outcome in months. Just a few days ago, a report detailed the icy relationship between Qualcomm CEO Steve Mollenkopf and Apple CEO Tim Cook.
The trial, which kicked off in a federal court in San Diego on Monday, was expected to run through May.
What this means for Apple’s 5G iPhone plans is unknown, but it’s likely good news. The company was reportedly waiting until 2020 to add 5G to the iPhone. Recent reports suggested that Intel was struggling to meet 5G modem deadlines, potentially delaying Apple’s 5G plans. Qualcomm, however, has been a leader in 5G modems.
Apple has also been ramping up its own in-house modem efforts. What exactly this settlement and chipset supply agreement means for that initiative is also unclear.
Apple and Qualcomm opening arguments
As recapped by CNET, Apple’s opening argument centered on Qualcomm’s so-called “double-dipping.” Apple’s lawyers attempted to explain to the jury that Qualcomm effectively charged Apple twice for use of its patents and modem chips. Qualcomm used its monopoly to stifle competition and dictate unfair terms, lawyers said.
In total, Apple paid Qualcomm $16.1 billion for its modem chips between 2010 and 2016. On top of that, Apple paid $7.23 billion in licensing fees. Apple’s argument is that those numbers should be a lot lower without the double dipping.
Tim Cook was expected testify about the history of the iPhone, as well as the history between Apple and Qualcomm. Apple COO Jeff Williams was to testify about negotiations between Apple and Qualcomm. Tony Blevins, Apple’s VP of Procurement, was slated to testify his observations from being “on the front line of trying to deal with Qualcomm.”
Now that Qualcomm and Apple have reached an agreement, we won’t get to see those testimonies.