back to article Factories counter-punch Qualcomm in the gut as Apple eggs them on

The four electronics factories sued by Qualcomm for not paying licensing fees have lodged their own countersuit with the backing of Apple. In a counter-complaint [PDF] lodged Tuesday in California, Taiwanese manufacturers Pegatron, Compal, Hon Hai, and Wistron allege Qualcomm is trying to force them to pay excessive royalties …

  1. Steve Davies 3 Silver badge

    The key is this:-

    "In the past two years alone, three separate foreign antitrust enforcers have declared Qualcomm a monopolist and collectively have fined the company over $1 billion."

    QC does seem to a bit suspect with its business practices if three separate AT enforcers have found them to be in the wrong.

    Will a US court follow suit? They tend to ignore precident set outside their very narrow jurisdiction.

    This one will probably run and run as IMHO, the very survival of QC as we know it depends on it. If Apple win a host of other users of their chips will file suit against them as well.

    1. Anonymous Coward
      Anonymous Coward

      Re: The key is this:-

      The FTC doesn't care about precedent set in other countries, because the laws aren't the same. Even if the FTC decides to bring a case, they take years to make it through our courts - antitrust cases take even longer than patent cases. Even if Apple/Qualcomm's cases go to court, they'll be long decided and Apple will have long dropped Qualcomm's cellular chips in favor of Intel's by the time any FTC punishment comes to pass.

      The writing is already on the wall for Qualcomm. CDMA allowed them a strangehold on the industry for years, but now that it is being phased out in favor of LTE where Qualcomm's IP position is much less strong. They will shrink even if no one challenged them in court. If they see a likelihood of getting hit with huge multi billion dollar fines, they can just leverage up the debt, pass every penny they can to shareholders via dividends or buybacks (and executive bonuses, natch) and leave nothing for the vultures. Apple is smart to move early so they can get their $1 billion back, those who wait may find nothing left by the time the cases make it through court.

  2. Anonymous Coward
    Anonymous Coward

    Evil

    Making us have to choose between two such odious rent-seeking oligopolists is probably the most conflicting IP dilemma of all time.

    1. SuccessCase

      Re: Evil

      How are Apple rent seeking? They don't ask other companies to pay license fees. They don't join patent pools such that the patents they own are subject to FRAND terms (FRAND terms are available to other members of the pool). Qualcomm have put their patents into patent pools where they are deemed essential to a new standard that Qualcomm wanted to see adopted and therefore were prepared for their patents to be subject to FRAND terms. Apple simply don't want other companies to use their patented tech and aren't asking for royalties. Sure you can disagree with if they should have been granted the patents in the first place. But rent seeking no.

  3. Anonymous Coward
    Anonymous Coward

    Why would you license Processor IP ?

    In the Year of Our Lord 2017 A.D., there's nothing in Processor IP worth much more than $0.25 per chip; total. By way of example, remember that Apple switched their computers over to the Intel Processor ecosystem. It wasn't that traumatic.

    1. Anonymous Coward
      Anonymous Coward

      Re: Why would you license Processor IP ?

      You license it because the USPTO issues overly broad patents that make it impossible to design a modern CPU without infringing on some of those broad patents held by others. Qualcomm probably doesn't actually hold many such patents compared to Intel, IBM, Sun/Oracle, HP, AMD, and yes, even Apple, but it only needs one to sue.

      There's the thing, if Qualcomm can find some processor patents Apple is infringing on, the reverse is true, and Apple almost certainly has more such patents. However, Qualcomm may have an advantage there since of late they have backed away from designing custom cores towards using ARM cores. Apple's license with ARM may forbid them from suing other ARM licensees over Apple patents used in ARM designed cores like the A72.

    2. Anonymous Coward
      Anonymous Coward

      Re: Why would you license Processor IP ?

      Tell that to ARM - their whole revenue stream comes from licensing ARM core IP.

      $0.25 on sales of each core sold would make me smile.

  4. BobC

    Licensing as a Business

    I'm in San Diego, home to QC, and have been closely watching the company for three decades.

    For many reasons, QC consciously and explicitly chose to aggressively balance its fabless physical chip business against its patent portfolio. The mobile market was growing faster than QC could ever handle, and becoming a one-stop-shop for phone IP and premium chipsets would sustain QC's truly enormous R&D expenditures.

    QC has created much of what makes today's mobile bleeding-edge possible. Not just the modem technology, but also all the other hardware and software needed to make it all work together as a seamless whole in the customer's hand. QC doesn't just sell parts and license patents, it provides entire solutions that help phone makers get the latest tech to market sooner.

    It is important to note that QC pushes prices this hard mainly for its bleeding-edge tech. Their prior-generation and lower-end solutions are competitive enough on a cost basis to keep other players fighting on the margins. The main complaints against QC center on this practice: Charging through the ceiling for the latest tech in order to subsidize the other stuff.

    Have you noticed the recent batch of mid-tier phones with QC chips? My own Moto G5 Plus is a splendid example of this, with its Snapdragon 635 providing 80% of the overall performance of a bleeding-edge phone for 1/3 the price. Why pay more?

    I'll bet this is what REALLY pisses Apple off. Killing QC, and it's entire approach to business, is the only way for Apple to maintain it's insane margins while also moving into the mid-market.

    This is a very intentional business practice on the part of QC, one that would instantly evaporate if their R&D ever fell behind. Every year they bet their entire future on their own continued ability to out-innovate the rest of the planet. And when they gain that edge, they cling to it using every available means.

    From one perspective, QC's chip business is simply convenient packaging for their IP, more than it is a desire to sell silicon.

    If Apple, or anyone else, was truly upset with QC's aggressive practices, they could, like any good Capitalist, choose to shop elsewhere. MediaTek and others make phone chipsets that are only slightly behind the bleeding-edge set by QC, and have less costly terms. But they are just parts, not complete solutions.

    Did you know QC has more Android engineers than Google? QC does major R&D at all levels of phone tech. QC doesn't have more IOS engineers than Apple, but it has plenty of them too.

    ALL first-tier phone makers repeatedly choose QC for their flagship phones. Because it's simply the best way to get the latest & greatest phone tech to market soonest.

    Apple simply wants to pay less for it. And rather than compete with QC on an R&D basis, they instead attack it on a financial/legal basis.

    Apple has made so much money shipping phones with QC chips that it seems insane for it to choose to do otherwise. So it clearly wants to "break" QC. And it needs to do so NOW, before QC IP gets established in 5G, and before the mid-tier hurts them any more.

    This is not "really" about FRAND or similar issues: It's about killing QC before 5G. This is a fairly narrow window.

    If you review history, this is not a new tactic. It seems QC attracts lawsuits whenever it prepares to roll out new IP. Right after the phone makers have a ton of cash from profits built on selling phones with QC chips.

    Strange pattern, that.

    QC has repeatedly proven itself to be the best at rapidly developing new phone tech and bringing it to market. Why isn't Apple, with it's QUARTER TRILLION dollars in cash, funding R&D competition itself?

    Why doesn't Apple simply buy QC and dictate the terms it wants?

    Or, more to the point, why doesn't Apple simply pass on the latest QC tech and stick with older and less expensive solutions?

    No, Apple has decided that the courts are the cheapest way for it to improve its bottom line.

    It's that simple.

    QC is not innocent in any of this: They are aggressive because they have done the R&D needed to stay in front of all competition, to set the bleeding edge. Their practices are illegal in many countries. But those countries don't create phone IP, and they don't make phone chips, so to QC they simply don't matter.

    Look at what happened in India when QC chips were (briefly) banned: The entire industry revolted, and the ban quickly was replaced with a fine that was never paid. QC knows how to leverage its tech, its customers, and its entire market.

    QC has encountered rough times before, and they've ALWAYS fought their way back by sustaining and leveraging their R&D prowess.

    If I were QC, I'd make their next-gen chips available to everyone BUT Apple, and see what happens to Apple's suit.

    Sure, QC will play hard in the courts. But they will also double-down on their R&D golden goose to get that next Golden Egg out there and into the hands of all the OTHER top-tier makers, probably right about when the iPhone 8 starts to ship. To make the iPhone 8 obsolete before it ships in volume.

    Apple's tactics are strictly short-term: QC has the better long-term vision, if they can survive the short-term squeeze.

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