Apple, Qualcomm settle bitter dispute over iPhone technology

Viva Tung  CNET

Updated Apple and Qualcomm today settled out of court all of their various patent and licensing legal battles against one another around the world.

Intel announced late on Tuesday that it would no longer make 5G modem chips for phones. It establishes a six-year global patent license agreement, with a two-year option to extend, and multiyear, renewable chipset supply agreement, which could affect rival semiconductor slinger Intel. This means that the pair will stop any further litigation (as far as this particular matter is concerned).

The announcement follows Apple and Qualcomm reaching a settlement earlier in the day over their legal dispute regarding licensing royalties.

The surprise truce announced Tuesday came just as the former allies turned antagonists were facing off in a federal court trial that was supposed to unfold over the next month in San Diego. News of the surprise truce Tuesday sent Qualcomm stock soaring more than 23 percent, to almost $70.50 a share. Although that gave Apple a way to keep making iPhones there was a cost.

The ramifications for the settlement are momentous in light of the impending roll out of 5G and Qualcomm's status as the foremost supplier of 5G modems.

Qualcomm claimed that Apple was committing patent infringement by using Qualcomm's intellectual property related to thousands of patented technologies within iPhones without paying royalties. Intel, a Qualcomm competitor, sharply dipped on the news before recovering.

This fight forced Apple to use Intel modems for last year's iPhone models - the iPhone Xs, the iPhone Xs Max, and the iPhone Xr.

Qualcomm has an extensive patent portfolio covering numerous technologies used in smartphones and derives a significant amount of its annual revenue through licence payments from phone makers.

Apple filed a $1 billion lawsuit against Qualcomm in January 2017, accusing the chipmaker of overcharging for chips and refusing to pay some $1 billion in promised rebates. The company had been working on 5G chips for Apple, but the chips were not expected to arrive until 2020 at the earliest.

Perhaps now that Apple is well on its way to developing and manufacturing its own chipsets, it wont rely on Qualcomm as much as it had in the past.

Qualcomm said it expected a $2 increase in earnings per share and its stock rose over 20%. As a result, the face of the cellular modem market is changing in an instant, as Apple's shift in allegiances will have repercussions throughout the industry.

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