Chip company Qualcomm, the manufacturer of the wildly popular Snapdragon lineup of smartphone and tablet chipsets, among other technologies, may end up having to renegotiate licensing and royalty fees with a number of key Android manufacturers that currently use and pay for its technologies, according to “industry sources.” Qualcomm, at a recent conference, indicated that at least one major Android manufacturer from China has already followed Apple’s lead and suspended royalty payments to the company pending new negotiations. Anonymous sources that spoke to DigiTimes about the matter say that the partner in question is likely Huawei, one of Qualcomm’s largest licensees. Royalty payments from Huawei reportedly account for somewhere in the area of 5% to 10% of Qualcomm’s total receivable royalties.
While any further discussion of the matter would be purely speculative in nature, if the Chinese Android partner that has put its foot down and demanded renegotiation from Qualcomm is indeed Huawei, it could set a dangerous precedent that could see Qualcomm ending up receiving vastly smaller royalty payments from Android device manufacturers going forward. There are a good number of Android OEMs that use Qualcomm’s technologies in one form or another, and some of the larger ones may even be unafraid to separate entirely from Qualcomm if it comes down to it. Samsung is one of the best examples; the company has already shipped some phones in the US with its own Exynos chipsets, such as the Galaxy S6 family, and taking Snapdragon chips out of Samsung phones would eliminate a very large part of the payment due to Qualcomm from Samsung on an ongoing basis.
Qualcomm holds patents for many technologies that are outright essential to build a mobile device, so any company that has not found ways around these has to pay Qualcomm something. The company has repeatedly come under fire for the way it handles licensing and royalty payments. Qualcomm has been known to negotiate licenses based on device value in the past, and has allegedly overcharged for licenses according to some companies, especially when it comes to essential patents. A major defection among Android OEMs could mark a turning point for the company’s business model, and could mean significantly lower total revenue in the future.