Apple required a $1bn 'incentive payment' for iPhone contract, Qualcomm CEO claims – The INQUIRER

Apple required a $1bn 'incentive payment' for iPhone contract, Qualcomm CEO claims

Apple vs Qualcomm isn’t ending any time soon…

THE LATEST IN the ‘he-said, she-said’ saga between Apple and Qualcomm is the extraordinary revelation from Qualcomm CEO Steve Mollenkopf that Apple charged $1bn to the company for the work required to make modem chips work with Apple products.

This, the court heard, is the root of the reason why other suppliers weren’t supplying modem technology for Apple products. As a result of the $1bn payment, Qualcomm offered Apple a rebate – the size of which hasn’t been revealed – under the condition that it would only apply if Qualcomm chips were exclusively used.

This, Mollenkopf claimed at the federal courthouse in San Jose, wasn’t an anti-competitive measure, but a way of ensuring Qualcomm could recoup the costs of the initial payment to Apple. “The risk was, what would the volume be? Would we get everything we wanted, given that we paid so much in incentive?” he testified.

Apple’s own testimony on the matter seems to back up this reasoning, though no doubt the specifics will vary. The company’s supply chain executive Tony Blevins told the court that generally Apple would use at least two suppliers, but it abandoned plans to put an Intel modem chip in the iPad Mini 2 as it would result in the loss of the Qualcomm rebate everywhere, resulting in higher costs overall.   

“They made it very unattractive for us to use another chip supplier,” Blevins said, according to Reuters. “These rebates were very, very large.”

Antitrust regulators argue that Qualcomm’s deal with Apple is symptomatic of the way Qualcomm behaves more generally, with anticompetitive practices designed to block out rival chipmakers.

Not that this will be a problem in future Apple products. The companies are far from being besties, thanks to the fallout of the exclusivity period. Back in 2017, Apple accused Qualcomm of charging more than it should on patents “for technologies they have nothing to do with.”

This, it turned out, was just the opening shot in a legal back and forth that continues to this day. Apple has tried to get Qualcomm patents invalidated, while Qualcomm has attempted to block sales of iPhones around the world.

Qualcomm also claims Apple owes it $5.5bn in royalties and stole technology to make Intel chips better. It’s a pity the court can’t make a ‘kiss and make up’ order, legally binding, really. µ

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