EU Regulator Fines Qualcomm $1.2 Billion for Paying Apple to Use Its Mobile Chips

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Qualcomm has been hit with a 997 million euro ($1.2 billion) fine by EU antitrust regulators for paying Apple to use its LTE chips in iOS devices, Reuters reported on Wednesday. According to the European Commission's investigation, the payments to Apple occurred from 2011 to 2016, and were made with the sole aim of blocking Qualcomm's LTE chipset market rivals, such as Intel.

"Qualcomm paid billions of U.S. dollars to a key customer, Apple, so that it would not buy from rivals. These payments were not just reductions in price – they were made on the condition that Apple would exclusively use Qualcomm's baseband chipsets in all its iPhones and iPads," European Competition Commissioner Margrethe Vestager said in a statement.

"This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were," she said.

The EU fine – said to represent 4.9 percent of Qualcomm's 2017 turnover – is particularly bad news for the company, as it could put it at increased risk of a $103 billion hostile takeover bid by rival U.S. chipmaker Broadcom. Separately, Qualcomm is also in an ongoing legal battle with Apple over smartphone chips.

The troubles began for Qualcomm in January 2017 when the Federal Trade Commission complained that it had engaged in anticompetitive patent licensing practices. Soon after, Apple sued the chipmaker for $1 billion, accusing it of charging unfair royalties for "technologies they have nothing to do with" and refusing to pay quarterly rebates. A Qualcomm countersuit followed in April, and the dispute escalated throughout the year with expanded lawsuits and claims lodged by both sides.

The last legal volley between the two came in November, when Apple countersued Qualcomm with a patent infringement claim, after the latter company sought iPhone and iPad import bans in the United States last summer.

Top Rated Comments

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33 months ago
In case anyone is wondering why Apple isn’t being faulted for accepting what might be construed as a bribe, at the time Qualcomm demanded these terms of Apple, there were no other LTE modems for Apple to buy, so the choice for Apple was to either go with the contract Qualcomm offered, or not make any phones. The whole point of Qualcomm’s restrictive practices was to stop companies like Intel from developing LTE modems by restricting who Intel could strike a deal with for supply.

Apple is as much a victim here.
Score: 16 Votes (Like | Disagree)
Avatar
33 months ago

In case anyone is wondering why Apple isn’t being faulted for accepting what might be construed as a bribe, at the time Qualcomm demanded these terms of Apple, there were no other LTE modems for Apple to buy, so the choice for Apple was to either go with the contract Qualcomm offered, or not make any phones. The whole point of Qualcomm’s restrictive practices was to stop companies like Intel from developing LTE modems by restricting who Intel could strike a deal with for supply.

Apple is as much a victim here.

Maybe... but I'd like to be that kind of victim..

Qualcomm: Take this 'discount', and never buy these chips from anyone else!
Apple: Err, there isn't anyone else to buy from...
Qualcomm: We don't care. Take the discount anyway!
Apple: Ok...
Score: 8 Votes (Like | Disagree)
Avatar
33 months ago

Apple didn't buy exclusively from Qualcomm, they also bought Intel's chips creating both fast and slow LTE iPhone devices for their consumers.

As far as I understand this happened only after the “exclusivity” deals were not renewed after the EU investigation started.

http://europa.eu/rapid/press-release_IP-18-421_en.htm

In fact, internal documents show that Apple gave serious consideration to switching part of its baseband chipset requirements to Intel. Qualcomm's exclusivity condition was a material factor why Apple decided against doing so, until the agreement came to an end.

Score: 5 Votes (Like | Disagree)
Avatar
33 months ago

In case anyone is wondering why Apple isn’t being faulted for accepting what might be construed as a bribe, at the time Qualcomm demanded these terms of Apple, there were no other LTE modems for Apple to buy, so the choice for Apple was to either go with the contract Qualcomm offered, or not make any phones. The whole point of Qualcomm’s restrictive practices was to stop companies like Intel from developing LTE modems by restricting who Intel could strike a deal with for supply.

Apple is as much a victim here.

No. Just no. No. That's not how strong-arming works.
If Apple had no choice but to use Qualcomm... you know where the question is going don't you... why in heck would Qualcomm offer Apple rebates? As you said, it was either go with Qualcomm or make no phones.


Apple is a victim here? Ha! I think you misspelled complicit.
Score: 5 Votes (Like | Disagree)
Avatar
33 months ago



Qualcomm: Take this 'discount', and never buy these chips from anyone else!
Apple: Err, there isn't anyone else to buy from...
Qualcomm: We don't care. Take the discount or no deal!
Apple: Ok...

Fixed for you.
Score: 4 Votes (Like | Disagree)
Avatar
33 months ago

You're jumping around the timeline to try to make your point valid. Apple's hand wasn't forced when they signed the contract. I agree, it was a deal with the devil. A deal they willingly made. This was a deal between two tech behemoths where they both benefited tremendously.

The contract being less attractive in the later years doesn't negate Apple's part in the deal. There were no victims in this. Apple being bound by a contract - one they willingly signed and benefited from for years - doesn't make them victims. There is no circumstance in this situation that makes Apple a victim. I'm honestly not sure how you see a victim here.

At the time Apple signed the contact, it was either agree to Qualcomm’s terms or have no modems to manufacture iPhones. What were you expecting Apple to do? Walk away and jeopardise the entire company?
Score: 4 Votes (Like | Disagree)

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