October 5th 2017
By Mike Flaminio
Bloomberg has an in-depth report on the ongoing patent litigation between Apple and Qualcomm. Qualcomm reportedly generates $7.7 billion a year in royalties and Apple supplies $2 billion of that. The center of these fees is the CDMA patent that operates the cellular voice and data features. Apple recently has challenged the fees publically and behind the scenes arguing the cellular features are no longer special among the many components driving features of modern smartphones. As a result, the fee structure is anti-competitive and should be restructured.
Because Qualcomm spends more on R&D than any of its peers, its modems are the most advanced. For years, Apple considered Qualcomm's to be the only modems good enough for the iPhone. That, Sewell says, is why Apple put up with Qualcomm's licensing scheme for years. If Apple refused to pay the royalty, Qualcomm could cut off its modem supply, forcing Apple to rely on inferior chips. That calculation changed in 2015, when Apple began working with Intel Corp. to develop a modem that was used in some versions of the iPhone 7. "What prompted us to bring the case now as opposed to five years ago is simple," Sewell says. "It's the availability of a second source."