It was the surprise of the beginning of the week: Apple and Qualcomm were burying the hatchet that the Cupertino manufacturer initially drawn in January 2017. As a result, the two partners ended all lawsuits against each other and vice versa around the world.
Neither of the two companies, of course, specified the amount of the payment that made it possible to settle the dispute. UBS is taking the risk of prognosis: the single payment made by Apple, which covers the total of royalties outstanding, would be between USD 5 and 6 billion.
The agreement also includes a six-year contract on patent licensing. In other words, Apple will pay Qualcomm a certain amount for each iPhone sold; UBS estimates the rights to be between $8 and $9 per device. At the beginning of the iPhone adventure, Qualcomm earned a commission of $7.50 per unit (at the time, Tim Cook fought, unsuccessfully, to lower this amount to only $1.50!). In a press release, Qualcomm confirms nothing, except that the agreement “reflects the value and strength of[its] intellectual property.”
As soon as Apple and Qualcomm signed the contract, Intel announced its withdrawal from the 5G smartphone chip market. Leaving only Qualcomm as the only credible supplier of 5G modems for the iPhone (Apple would still have tried to buy from Samsung or even MediaTek).
This agreement between Apple and Qualcomm also includes a chip supply component. Since the end of 2018, rumor has it that Apple has been developing its modem, under the guidance of Johny Srouji, the manufacturer’s ARM chip boss. But this type of component is not created on the corner of a table or by snapping your fingers: it requires massive investments and the involvement of an experienced team.
Such a chip must allow a smartphone to connect to a network (necessarily) anywhere in the world, taking into account local specificities and operators’ capabilities. Not to mention the constraints of autonomy and the complexity of managing 5G. Apple would have started developing its modem last year, it takes about two years to get something that holds up, plus a year and a half for testing, according to the schedule set by Bloomberg.
It makes it easier to understand why Apple has signed a six-year agreement with Qualcomm, with the possibility to extend it for two more years. Several hundred engineers are reportedly on the battlefield in Cupertino, San Diego, and Munich; these teams are also responsible for integrating Qualcomm’s 5G chip into the iPhone.