Apple and Qualcomm agree to stop suing each other

Apple chief executive Tim Cook

Save Save Apple chief executive Tim Cook Credit AP

It's Qualcomm's best day since 1999.

While lifting Qualcomm's shares, the settlement didn't help Apple's stock, which was largely unchanged at $199.25.

The fight centred on royalty payments that Apple made to Qualcomm for using the latter's modem chips, which provide smartphones with a means of accessing mobile data networks.

Apple licensed Qualcomm's technology for the iPhone early on, helping the phone maker break into the wireless industry. While Qualcomm and Apple can now work together, it doesnt mean that it will rely entirely on Qualcomm like the majority of Android smartphone makers do. It includes a one-time payment from Apple to Qualcomm. Apple's key iPhone suppliers wanted another $27 billion from Qualcomm.

Yesterday, Apple and Qualcomm kicked off a massive court case certain to range for years across their respective businesses. "I believe both Apple and Qualcomm got deeper into this than they wanted to - Apple was challenging Qualcomm's most profitable business model, licensing, and Qualcomm was accusing Apple of IP theft and lack of payment", said Patrick Moorhead, president and principal analyst at Moor Insights & Strrategy. This particular court battle was over unpaid royalty rebates, and was taking place in court in San Diego, California. Both sides were asking for billions in damages.

Also in early 2017, the US Federal Trade Commission sued Qualcomm for alleged antitrust law violations in the sale of certain components and licenses to smartphone makers, including Apple. While the judge has yet to rule, she has already said that Qualcomm would have to license its patents to other chipmakers-something it had previously declined to do.

Based on the decision in the FTC suit, Apple was assumed to have the edge in its case.

Qualcomm had also accused Apple of using the legal system as a way to pay less for its technologies.

That basically kills off its 5G modem efforts for phones, at least, while allowing Chipzilla to continue shipping Xeon server processor components to power the backend of next-gen cellular broadband networks. Furthermore, it shows how hamstrung Apple was without Qualcomm: Its agreement with Intel to supply mobile chipsets, especially for modems, has been a disaster.

The long-running legal dispute over how much in royalties Apple should pay for using Qualcomm's patented technology in iPhones came to an end on Tuesday when the two companies agreed to a settlement.

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As part of the surprise settlement, Apple has entered into a six-year supply agreement with Qualcomm with an option for another two.

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