Qualcomm Says Apple Suppliers are Underpaying Royalties Amid Legal Dispute

by

Qualcomm today reported earnings for the second fiscal quarter of 2017, and in its report, the company says Apple suppliers are withholding royalty payments amid Apple's ongoing legal dispute with Qualcomm. [PDF]

According to Qualcomm, Apple's contract manufacturers underpaid royalties in Q2 2017 in an amount equal to that which Qualcomm has not paid Apple. Qualcomm says this hasn't had a negative impact on revenue, but it could be an issue next quarter if manufacturers continue to underpay.

Apple's contract manufacturers reported, but underpaid, royalties in the second quarter of fiscal 2017. However, our revenues were not negatively impacted as the contract manufacturers acknowledged the amounts are due and the underpayment was equal to the amounts that Qualcomm has not paid Apple under our Cooperation Agreement that are currently in dispute. The Cooperation Agreement expired December 31, 2016.

It is not clear whether Apple's contract manufacturers will underpay royalties owed under their contracts with us in the third quarter of fiscal 2017, which could have a negative impact on our financial results. Our guidance range for fiscal third quarter EPS is wider than our typical practice primarily due to this uncertainty. We have considered a variety of scenarios within this range, but have not included a scenario where no payment is made by the contract manufacturers. We will update our guidance if we subsequently learn of any action that would take us outside of the announced guidance range.

Qualcomm and Apple are embroiled in an ongoing legal dispute that dates back to an FTC complaint alleging Qualcomm engaged in anticompetitive patent licensing practices. Shortly after the FTC filed its complaint, Apple levied a lawsuit against Qualcomm, accusing the company of charging unfair royalties for "technologies they have nothing to do with."

Apple claims that Qualcomm "reinforces its dominance" through exclusionary tactics and high patent licensing fees, charging Apple "at least five times more" in payments than other cellular patent licensors.

Qualcomm has separately refused to pay Apple quarterly rebates due to Apple's participation in an antitrust lawsuit against Qualcomm in South Korea, which has led Apple to seek $1 billion in rebate repayments. Qualcomm has called Apple's claims "baseless" and has accused Apple of "encouraging regulatory attacks."

Earlier this month, Qualcomm filed a countersuit against Apple, claiming Apple has breached its licensing agreements, made false statements, and encouraged regulatory attacks on Qualcomm's business in multiple countries. According to Qualcomm, Apple "could not have built the incredible iPhone franchise" without relying on Qualcomm's "fundamental cellular technologies."

Top Rated Comments

(View all)
Avatar
42 months ago

I hope these guys go the way of BlackBerry!
HATE them.

Strong arming, sleazy scumbags.

Yeah, Apple has gone down hill soo much since the glory days
Score: 3 Votes (Like | Disagree)
Avatar
42 months ago
I hope these guys go the way of BlackBerry!
HATE them.

Strong arming, sleazy scumbags.
Score: 3 Votes (Like | Disagree)
Avatar
42 months ago

Tim is a very bad negotiator if Apple is paying 5 times what others pay.

First, you misread. Apple is paying five times more to Qualcomm for their slice of the LTE patents than what they are paying to NTT DoCoMo, for example.

It's not a negotiation issue to begin with. When you negotiate with a company to buy a product, you can say, "give me a better deal or I'll go take my business elsewhere". With this Qualcomm dispute and these "Standards Essential Patents", by their very nature there is no elsewhere. Qualcomm says pay up or else you're getting sued. The only way around it is to sue for anti-trust, which is what Apple participated in Korea.
Score: 2 Votes (Like | Disagree)
Avatar
42 months ago
Well well , I doubt either side are angels in this. Both use strong arm tactics and leverage. They got in bed with each other and it's about greed.... both will use PR spin to say they are the victims. Have pity for neither.
Score: 1 Votes (Like | Disagree)
Avatar
42 months ago

I hope these guys go the way of BlackBerry!
HATE them.

Strong arming, sleazy scumbags.

Yes. These guys, Qualcomm, have been strong arming Apple. Hence the lawsuit from Apple.

Once Apple moves more production in-house, Qualcomm can go under.
Score: 1 Votes (Like | Disagree)
Avatar
42 months ago
There are two sides to every story. A company with Apple's leverage probably isn't acting like a bunch of philanthropists either.
Score: 1 Votes (Like | Disagree)

Top Stories

Apple Officially Obsoletes First MacBook Pro With a Retina Display

Wednesday July 1, 2020 3:40 am PDT by
As expected, Apple's first MacBook Pro with a Retina display is now officially classed as "obsolete" worldwide, just over eight years after its release. In a support document, Apple notes that obsolete products are no longer eligible for hardware service, with "no exceptions." This means that any mid-2012 Retina MacBook Pro 15-inch models still out there that require a battery or other...

New Mac Ransomware Found in Pirated Mac Apps

Tuesday June 30, 2020 11:44 am PDT by
There's a new 'EvilQuest' Mac ransomware variant that's spreading through pirated Mac apps, according to a new report shared today by Malwarebytes. The new ransomware was found in pirated download for the Little Snitch app found on a Russian forum. Right from the point of download, it was clear that something was wrong with the illicit version of Little Snitch, as it had a generic installer...

Unreleased iMac With 10-Core Comet Lake-S Chip and Radeon Pro 5300 GPU Shows Up in Geekbench

Wednesday July 1, 2020 10:48 am PDT by
Benchmarks for an unreleased iMac equipped with a 10th-generation Core i9 Intel Comet Lake-S chip and an AMD Radeon Pro 5300 graphics card have surfaced, giving us an idea of what we can expect from a refreshed 2020 iMac. The Geekbench benchmarks, which appear to be legit, were found on Twitter and shared this morning by Tom's Hardware. The iMac in the benchmarks would be a successor to the...

Leaker: Future iPhone Models to Come in 'Exquisite' Thinner Box

Wednesday July 1, 2020 1:57 am PDT by
Leaker L0vetodream this morning posted a tweet corroborating recent rumors that Apple's "iPhone 12" lineup won't come with EarPods or a charger in the box, adding that this will also eventually apply to the existing second-generation iPhone SE. L0vetodream also claims that future iPhone packaging will be "thinner" and "exquisite," which would make sense if Apple's handsets are set to come in ...

Apple's A12Z Under Rosetta Outperforms Microsoft's Native Arm-Based Surface Pro X

Monday June 29, 2020 10:31 am PDT by
Apple's Developer Transition Kit equipped with an A12Z iPad Pro chip began arriving in the hands of developers this morning to help them get their apps ready for Macs running Apple Silicon, and though forbidden, the first thing some developers did was benchmark the machine. Multiple Geekbench results have indicated that the Developer Transition Kit, which is a Mac mini with an iPad Pro chip, ...

Kuo: iPhone 12 Models Won't Include Charger in Box, 20W Power Adapter Will Be Sold Separately

Sunday June 28, 2020 7:56 am PDT by
iPhone 12 models will not include EarPods or a power adapter in the box, analyst Ming-Chi Kuo said today in a research note obtained by MacRumors. This lines up with a prediction shared by analysts at Barclays earlier this week. Kuo said that Apple will instead release a new 20W power adapter as an optional accessory for iPhones and end production of its existing 5W and 18W power adapters...

Rosetta 2 Benchmarks Surface From Mac Mini With A12Z Chip

Monday June 29, 2020 7:48 am PDT by
While the terms and conditions for Apple's new "Developer Transition Kit" forbid developers from running benchmarks on the modified Mac mini with an A12Z chip, it appears that results are beginning to surface anyhow. Image Credit: Radek Pietruszewski Geekbench results uploaded so far suggest that the A12Z-based Mac mini has average single-core and multi-core scores of 811 and 2,781...

Display Analyst Once Again Says No 120Hz ProMotion Display Coming to iPhone 12 Pro

Wednesday July 1, 2020 11:29 am PDT by
Apple's iPhone 12 models will not feature an upgraded 120Hz ProMotion display, according to display analyst Ross Young. Young previously said that Apple would not implement ProMotion technology until it adopted low-power LTPO display technology, a move Apple is not expected to make until 2021. In a tweet shared this morning, Young said that the none of his contacts have been able to...

Apple Seeds Third Betas of iOS and iPadOS 13.6 to Developers [Update: Public Beta Available]

Tuesday June 30, 2020 10:06 am PDT by
Apple today seeded the third betas of upcoming iOS and iPadOS 13.6 updates to developers, three weeks after seeding the second betas and over a month after releasing iOS/iPadOS 13.5 with Exposure Notification API, Face ID updates, Group FaceTime changes, and more. iOS and iPadOS 13.6 can be downloaded from the Apple Developer Center or over the air once the proper developer profile has been...

The New York Times Ends Apple News Partnership and Pulls All Articles

Monday June 29, 2020 11:17 am PDT by
The New York Times today announced that it is pulling out of Apple News, as the service does not "align with its strategy of building direct relationships with paying readers." Starting today, articles from The New York Times will no longer show up in the Apple News app. The news site says that Apple has given it "little in the way of direct relationships with readers" and "little control...