Courtesy of Apple, most of its chipmaker or designers seem to be having a rough start in 2017. One of these names will have to be the leading American chipmaker, Qualcomm, who Cupertino is presently embroiled in an ongoing patent royalties payment battle with.
For those unaware, Apple first took a stand against the chipmaker and lodged a billion lawsuit against them for being charged unfairly for the patents they had nothing to do with. This was followed by unfair trade practice charges across the globe — specifically in China and South Korea. Over the span of past three months, the chipmaker denied any of the charges levied against it and tried to resolve its long-standing relation with Apple.
But, it seems the talks didn’t pan out and Qualcomm decided to file a countersuit against the Cupertino giant saying it was hurting the company’s relation with other partners suppliers and manufacturers. It added that it was seeking damages for being wrongly accused of unfair trade practices, being harmful to its business and breaching their long-running contract. It then approached the U.S Federal Trade Commission (FTC) asking for a blockade on the import of iPhones and dismissal of an antitrust complaint lodged by Apple.
It, however, seems that the U.S FTC doesn’t seem to pay much heed to what Qualcomm currently has to say because the organization itself alleged the chipmaker of forcing Apple into an exclusive deal relating to baseband modems — which shouldn’t be covered under patent royalties. It mentions that the chipmaker implements a “no license – no chips” strategy, thus, violating the well-known FRAND (fair, reasonable and nondiscriminatory) terms of operation. It guzzles extra sums of capital by using its monopoly (or position in the market), charging them indifferent royalties.
With regards to the same, the FTC’s filing reads as under:
Beyond threatening all OEMs with the ‘stick’ of a supply disruption, Qualcomm offered some OEMs the ‘carrot’ of funds conditioned on their acceptance of inflated royalties that raise rivals’ costs.
On Friday, Intel and Samsung have both filed an Amicus Brief supporting the U.S FTC’s decision to continue its lawsuit against the leading chipmaker — Qualcomm. With this move, the company’s biggest arch-nemesis and its largest partner are standing shoulder to shoulder against its practices. They have joined the Cupertino giant to allege that Qualcomm does use monopolistic practices to push hardware makers into signing an unjust royalty payment agreement.
On its official website, Intel has released the following statement:
Intel is ready, willing, and able to compete on the merits in this market that Qualcomm has dominated for years. But Qualcomm has maintained an interlocking web of abusive patent and commercial practices that subverts competition on the merits. These practices have illegally coerced mobile phone manufacturers into purchasing the chipsets they need from Qualcomm and Qualcomm alone.
While Samsung, who supports Qualcomm’s chip design and development, is also hitting back at the company. This backlash could be stemming from the reports which surfaced earlier last month. It suggested that Qualcomm was unfairly blocking the Korean giant from selling its in-house manufactured Exynos chips to third-party smartphone makers. This is also because the chipmaker refuses to license the necessary technologies it needs to be able to sell its chips on a larger scale.
Thus, Samsung seems to have no other choice than to support the FTC’s assessment of the company’s practices. The Korean giant has also filed an Amicus Brief against the chipmaker, which reads as under:
This case presents a simple question: By excluding would-be competitors from making and selling licensed chipsets and cementing its market power by forcing downstream customers to accept onerous licensing terms, has Qualcomm harmed competition?
As the Complaint makes clear, the answer is yes–not only does this conduct violate Qualcomm’s FRAND commitments, but it also contravenes the Sherman Act by eliminating competition.
This building pressure on Qualcomm has pushed the chipmaker to warn investors that this interference could lead to multi-million dollar cuts in profit and sales figures over the coming years. The chipmaker alleges Apple of meddling in its association with partner suppliers and manufacturers, thus, leading them to cut the internal guidance by a massive $500 million dollars.
Qualcomm is now expecting total revenue in the range of $4.8 billion to $5.6 billion as compared to the previous $5.3 billion to $6.1 billion. The earning per share has also been reduced to a range of $0.52-$0.62, as compared to the previous $0.67-$0.92 guidance.