The European Commission says the world’s largest supplier of LTE chipsets abused its dominant position in the marketplace to keep phone makers from using chips from rival companies. As a result, the EU has issued a €997 million ($1.23 billion) fine against Qualcomm.
Qualcomm says it will appeal the decision.
At issue is an agreement Qualcomm had with Apple. From 2011 through 2016 Apple had agreed to exclusively use Qualcomm’s LTE chips for its iPhone and Pad devices. Under the agreement, if Apple released a device with an LTE chip from another company, such as Intel, Qualcomm would stop making those payments and Apple would have been required to pay back some of the money it had already received.
While Apple agreed to that deal, the European Commission says it violates the European Union’s antitrust rules by effectively denying other chip makers a level playing field when competing for Apple’s business and any associated opportunities that might have arisen from having Apple as a customer.
In addition to issuing a fine, the European Commission has basically told Qualcomm not to do it again.
For its part, the chip maker says it’s seeking judicial review of the ruling, since company officials believe the agreement “did not violate EU competition rules or adversely affect market competition or European consumers.”
As Engadget points out, this isn’t the first time Qualcomm has run afoul of antitrust regulations. Over the past few years the company has also been issued large fines by China, Korea, and Taiwan.
This entire incident is a joke.
Basically, Apple was buying the LTE radio (or the rights to it) from Qualcomm at the market price. And this is an inflated Qualcomm price. In return for buying bulk from Qualcomm, they’ve agreed to essentially a “loyalty program” like you get from your coffee-shop. This isn’t illegal, but its a questionable tactic from both the buyers and the sellers. So after Apple buys from Qualcomm, and sticks with them, Qualcomm then pays Apple back money afterwards (depending on units sold per quarter). The net effect is that Apple is buying LTE radio/rights cheaper than Qualcomm’s other competitors (Samsung, LG, HTC, Sony, etc etc), below the inflated market amount, and at a reasonable price. So Apple obviously signed the contract. They then have sourced Qualcomm’s LTE chips from the iPad3/iPhone 5 to the iPhone 6S Plus/iPad Pro2, effectively around 3 years, at something like $30-$40 for each device, and probably later discounted to around $15-$25 with the reimbursement. Now that’s money between $5-$30 for each unit that Qualcomm needs to pay back to Apple. Supposedly they have “loyalty paid” Apple for all the iPhones, except Q3 (and maybe Q2) of 2016, for around 40 – 90 Million devices. So that’s around $450 Million – $2.7 Billion dollars owing to Apple from Qualcomm, which Qualcomm refused to process the payment in Q4 2016, because the new Apple devices were dual-sourcing the LTE radios from Qualcomm and Intel, which was against their contract. However, Apple isn’t claiming fees for Q4 when the contract was breached, but rather Q2-Q3 when the contract was valid.
Now, the EU Antitrust committee says the whole thing was a violation of their law.
Which effectively means Qualcomm does not need to backpay Apple that amount, but it also means, Apple should get fined for agreeing to violating the rules. Which explains why Apple was so hesitant to cooperate with the EU and US regulators. They probably decided to effectively end Qualcomm’s monopoly on the industry, which would’ve lead to an increased LTE price in the longterm, however, this made Qualcomm angry who refused to pay the amount owing to Apple. It probably coincided with a looming new contract from Qualcomm, and a promisingly low-asking price from Intel. Now that both parties were being greedy, they’ve effectively spoiled it for both of them, since now Apple cannot get cheap Qualcomm radios, and Qualcomm cannot suffocate Intel and other LTE providers to form a monopoly. This is great news for Intel (SoFIA), Samsung (Exynos), Huawei (Kirin), MediaTek (Helio) and possibly Xiaomi (future Pinecone SoC)!
The joke part is that Apple is still suing Qualcomm about unpaid royalty rebates (in excess of $1 Billion), while said rebates are officially deemed illegal by the US and EU regulators.
Shouldn’t that read “the world’s largest supplier of LTE chipsets abused its dominant position”?
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