American semiconductor designer, Qualcomm, has issued a statement saying Apple “intentionally mischaracterized [their] agreements and negotiations” as an initial defence to the news that Apple has filed a lawsuit. This lawsuit against Qualcomm is for more than $1 billion, which Apple claim has been withheld as punishment by Qualcomm because Apple collaborated with South Korean authorities in a recent anti-competitive case. Furthermore, Apple’s case is also that Qualcomm are insisting that they pay royalties for older technologies despite repeated attempts to negotiate new terms. Apple, of course, are no stranger to the courtroom but neither is Qualcomm. Both have taken an aggressive legal stance against the opposition. Apple and Qualcomm have both a customer and supplier relationship as well as being indirect competitors. Apple have used Qualcomm’s baseband or modem chips in number of products, but the two are indirect competitors in the chip design market. Apple design their own chips, which are only available for Apple devices, where Qualcomm’s designs are licensed for other manufacturers.
In full, Qualcomm’s statement is: “While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless. Apple has intentionally mischaracterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed and shared with all mobile device makers through our licensing program. Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits.”
Apple’s complaint seemed to echo sentiments from competition authorities from around the world, that Qualcomm’s licensing deals are unfair and penalise the customer. Qualcomm’s view is that they have designed and provided significant technology for the mobile sector and it is only fair that they are rewarded for this. Furthermore, Qualcomm have said that Apple have misrepresented facts and withheld information. Their statement comes with the promise that the company will be able to discover how Apple go about their business. Presumably, Apple would have anticipated this and are prepared to reveal their closely guarded secrets to Qualcomm representatives.
The Federal Trade Commission is separately suing Qualcomm for its contract with Apple to provide baseband chips, which it alleges is anti-competitive. Interestingly enough and perhaps anticipating ongoing legal battles with Qualcomm after years of using the one company’s product, Apple diversified the iPhone 7 components by introducing a new baseband chip into the smartphone, manufactured by Intel. iPhone 7s for the American carriers, Verizon Wireless and Sprint, use the Qualcomm modem where as devices for the AT&T and T-Mobile US carriers use the Intel baseband. The Qualcomm modem is shared with the Samsung Galaxy S7 family. Industry tests have showed that this Qualcomm modem allows considerably higher download speeds in the Galaxy S7 compared with the iPhone 7 and at up to twice the download speed of the Intel-modem equipped models. If Apple were to stop using Qualcomm modems, this could give the company a model performance headache.