[notafraudster]

Almost ten years ago now, Qualcomm and Apple began suing each other. Apple's position was Qualcomm was playing hardball with patents that ought have a FRAND license. Qualcomm's position was Apple was being mean, and then also to sue various downstream part contractors for not paying royalties they claimed were owed to them but that Apple was contesting. In general Apple won more of the litigation than they lost (but not all), and the litigation eventually ended in a large settlement. But Apple said at the time of the settlement, that it was untenable to have to source all of their LTE stuff from Qualcomm and they planned to secure their supply chain in the coming years. This is that statement now coming to fruition.

So in toto, my impression is that this isn't fundamentally about seeking any particular cost savings or technical difference, so much as it Apple trying to disentangle themselves from external suppliers who they view as hostile or undependable.

[tooltalk]

First, Apple is known to squeeze every penny from their suppliers to improve their bottom line.

Second, likewise, Apple sued every single wireless patent holders (eg, Nokia, Ericsson, Qualcomm, etc) to negotiate better licensing terms -- but, to be fair, it's not uncommon for other smartphone OEMs to do so in court.

Third, Apple's legal argument was always that Qualcomm's per-device (ie, final product) royalty basis licensing offer was not FRAND. Apple believes that the royalty should be based on the cost of Qualcomm's chips instead. But, of course, there is no legal basis or industry practice to support Apple's unfounded claim and, consequently, LOST EVERY lawsuit based on this claim for past 10+ years.

Fourth, "... then also to sue various downstream part contractors ..." No, you don't sue everyone in supply-chain. The wireless patent holders collect their royalty only once and at the top of the supply-chain, ie, smartphone OEMs, to maximize their profit. and that's been the industry practice for much of the past 25+ years (possibly even longer).

Fifth, "... it was untenable to have to source all of their LTE stuff from Qualcomm ..." Umm.. Stop, stop, stop!

So in conclusion, it's all about saving Apple's margin, that's all. I don't blame any company for trying to minize their cost, but the recent event with Qualcomm, ie, FTC's attack on Qualcomm with Apple orchestrating behind the curtain, was highly unethical and abuse of their political power.

PS. insulting languages removed

[doix]

> First, Apple is known to squeeze every penny from their suppliers to improve their bottom line.

This is just unequivocally false. I used to work for a semiconductor company that was a supplier for Apple. Apple would pay a premium compared to other companies.

The semiconductor game is kind of rigged, assuming you don't have your own fab, everyone knows your costs. They know how much a wafer costs and they know the size of your device, so they have a pretty good idea of what it costs you per device (they don't know your yield, but can guess a range).

Everyone uses that information to keep your profit margins fairly low. Apple would pay a premium compared to other manufacturers. You could probably look at the financial reports of various apple suppliers and reverse engineer that information.

Apple is extremely risk averse, them making their own modems is almost certainly about reducing supply chain risk.

Profit margins will be lower down on the priority list. They can just increase the price of the phone to improve those.

For the record, I am not an Apple fan, I disliked working for one of their suppliers and dislike their products. But they do pay their suppliers a premium.

[daniel_reetz]

Some suppliers are paid a premium. Some get absolutely squeezed. Just depends. I'm glad you were on the premium side.

[j16sdiz]

> Third, Apple's legal argument was always that Qualcomm's per-device (ie, final product) royalty basis licensing offer was not FRAND. Apple believes that the royalty should be based on the cost of Qualcomm's chips instead. But, of course, there is no legal basis or industry practice to support Apple's unfounded claim and, consequently, LOST EVERY lawsuit based on this claim for past 10+ years.

Did you check FTC v Qualcomm antitrust case? Can you stop your lies?

[tooltalk]

>> Did you check FTC v Qualcomm antitrust case? Can you stop your lies?

Sure, isn't that the case Qualcomm reversed and won? Sure, most legal analysts had expected Apple's sweetheart judge Lucy Koh to hand a victory to FTC as it was no coincidence how the case ended up on her desk in the first place. This was however unanimously reversed due to its flawed constrution of Qualcomm's monopoly in premium LTE market and Judge Koh's expansive interpretation (in favor of Apple/FTC).

But wrt Apple's claim on royalty basis? Not so much.

[tooltalk]

>>Can you stop your lies?

When are you going to stop spreading misinformation?

[kevin_thibedeau]

> Apple believes that the royalty should be based on the cost of Qualcomm's chips instead

Sounds great. Apple should also base their app store tax on the cost of hosting.

[jboydyhacker]

Solid response.

[sonofhans]

You know, you can disagree without including the insulting language. That will lead to more and better discussion.

[izacus]

There's nothing seriously insulting in that post. Calling out biased Apple defenders for their misleading claims isn't an insult no matter how much some would want it.

[GeekyBear]

> Apple's legal argument was always that Qualcomm's per-device (ie, final product) royalty basis licensing offer was not FRAND. Apple believes that the royalty should be based on the cost of Qualcomm's chips instead. But, of course, there is no legal basis or industry practice to support Apple's unfounded claim and, consequently, LOST EVERY lawsuit based on this claim for past 10+ years.

Qualcomm demanded a percentage of the retail selling price of phones using it's modems.

Similarly, Google bought Motorola for it's patent portfolio and famously lost a lawsuit against Microsoft after demanding a 2.5% cut of the retail cost of Microsoft hardware (estimated to be about 4 Billion dollars a year) using it's standards essential patents.

> Motorola sent a letter to Microsoft asking it to pay as much as $4 billion per year to license patents relating to the 802.11 standard that underpins Wi-Fi and the H.264 video encoding standard.

https://www.computerworld.com/article/2955773/microsoft-best...

Google lost the case and the appeal, and the courts imposed a flat 3 million dollar per year licensing fee instead of the ~4 Billion a year that Google demanded.

https://www.vox.com/2015/7/30/11615248/google-loses-bid-to-o...

So, this is hardly an unfounded claim.

[tooltalk]

>> " ... Qualcomm demanded a percentage of the retail selling price of phones using it's modems. ..."

No, that's not how it works. Apple does NOT have licensing agreement with Qualcomm. Apple's contract manufacturer, or CM's -- such as Foxconn -- are the primary licensees of Qualcomm's wireless portfolio. Apple's royalty -- or indirect payment to Qualcomm via CM's -- likewise is based on Foxconn's pre-existing licensing agreement with Qualcomm (which even predates Apple's first iPhone) and on Foxconn's manufacturing/wholesale price, which is typically 1/3 or 1/4 of Apple's retail price (often under $400 -- not surprisingly Qualcomm's licensing fee maxes out at $400).

>> Similarly, ... ( using it's standards essential patents. ... So, this is hardly an unfounded claim.

The Motorola case does not support Apple's royalty-basis theory at all, First, Judge Robart does not invalidate end-user device as royalty-basis, or favors SSPPU promoted by Apple. Second, his decision was based on two critical considerations: merits/value contribution/significance of the patents asserted against Microsoft. And, in order to determine an appropriate price/range, if there existed any comparable RAND licensing practice adapted by other patent holders in the industry. In Motorola's case, their patents were relatively frivolous and insignificant in value/merit contributed, and their royalty rates were simply out of whack -- certainly 1000x out of common industry practice in the video encoding/802.11 wireless business.

Qualcomm is an industry pioneer with numerous seminal contribution under their belt. Their licensing practice also conforms with long-held de facto industry practices; though there are some aspects of their licensing business that are bit quite anticompetitive -- royalty-basis is not among them however.

[GeekyBear]

> No, that's not how it works.

No, that's exactly what Qualcomm demanded. The fact that they have changed their demands over time after various court losses does not change the past.

[tooltalk]

>>No, that's exactly what Qualcomm demanded. The fact that they have changed their demands over time after various court losses does not change the past.

Sure, that's a fig of your imagination. You simply don't know how Qualcomm's, or the industry's, licensing model works. I also suspect that you didn't even bother to read the court case you cited, the Motorola case.

Let me just say again for one last time: Apple lost or settled every lawsuit involving wireless patent royalty basis claim. If Apple ever prevailed in one case cracking the industry's per-device royalty-basis model, they wouldn't have bought Intel's failing wireless business out of desperation after losing the last legal battle with Qualcomm in 2019, which Apple settled just one day after the trial started.

[GeekyBear]

Let's just admit it. Now that the cellular industry in the States has transitioned past 3G, Qualcomm no longer has patents that are required for compatibility, but are not bound by commitments to license under FRAND terms.

The Google/Motorola/Microsoft case (and associated FTC order) shows that Qualcomm will not be able to pull the same price gouging shenanigans with patents that are encumbered by requirements to license under FRAND terms.

The standards essential 4G/5G patents are all encumbered by requirements to license to all comers on FRAND terms.

Which means Qualcomm is severely overvalued now that anyone with the means will be able to develop their own modems without anticompetitive interference. How long until Samsung starts selling their own in-house modem to others?

[kasabali]

Please disclose if you're invested in Qualcomm in any way.

[tooltalk]

Please disclose if you're invested in Apple in any way.

[bombcar]

Apple has enough cash on hand to buy 1/3 to half of Qualcomm but the government would likely shut that down quite quickly.

So they’ll roll their own. They built a CPU so a modem shouldn’t be incredibly difficult.

[nerdjon]

This isn't quite them just building their own. Or at least presumably.

in 2019 they bought the modem business from Intel.

[tnel77]

I feel like this is getting a little nuanced. “They bought a company to get a head start, thus they didn’t actually create their own modem.”

It’s been roughly four years since that purchase. Surely they’ve done some work since then that would justify labeling it as “Apple created their own modem.”

I feel like this would be comparable to me saying I cooked dinner and someone replying “you bought the food from Kroger and the cookbook from Barnes & Noble, so it doesn’t count” while I stare at a pile of dirty dishes like “sure feels like it counts.”

[joezydeco]

The PASemi team took two years from acquisition to first Apple silicon. I'm guessing the Intel stuff was a lot messier. It's not like Intel was a streamlined company that excelled at embedded SoCs.

[meepmorp]

At least a couple of those years were the pandemic, so that might've affected some timelines.

[nerdjon]

I agree with where you are going with that, but the person I responded too mentioned that they could buy a part part of qualcom but instead just made their own.

But instead they bought part of intel. It doesn't diminish what Apple is building, but I think given the context it is important.

[bombcar]

I was more emphasizing that if Apple was willing to "go it alone" on their CPUs (which they did by an acquisition, to be sure) then they probably have no issue at all "going alone" on the radio/modem, and I'm actually a bit surprised they didn't do that first - I guess modems are more complicated/difficult than CPUs.

[crazygringo]

Thank you! That's incredibly helpful context.

[mschuster91]

Interesting that no one talks about the elephant in the room - why are technologies for supposed public standards patentable in the first place?

IMO, all standards that are mandated to be used by a government or a regulatory agency should be patent and royalty free and accessible by everyone, alone to have a healthy competition space instead of (effectively) a Qualcomm monopoly on the vendor side.

[giantrobot]

> why are technologies for supposed public standards patentable in the first place

Because they were developed in private by the stakeholders and then submitted as part of the standardization process. Money did get spent. At the core of the situation is multiple private companies all contribute technology towards a standard that a larger group of companies can implement. Without the option of license fees there's little incentive for companies to invest in developing these technologies.

Part of the standardization process is making the patent licenses available at a "fair and reasonable" rate (FRAND). When the patent holders have large patent pools of their own they cross-license in lieu or in addition to paying actual license fees.

[mschuster91]

Governments could also push for these standards to be developed at universities or pay companies to develop them, to be then openly released.

[giantrobot]

Universities aren't always better than private companies with respect to patents and licensing. Sometimes they're much worse because there's no real reciprocity of licensing.

Governments could set up national labs to develop communication technologies but they're not going to be competitive with private companies pay wise. If you're a radio engineer you can be stuck on a government schedule salary or get a nice six figure "Tech Company" salary and fat stock options. Why work at the government lab when your same skills will get to twice as much at Apple or Qualcomm?

I'm not arguing for the status quo but the alternatives aren't necessarily better for the public nor the engineers doing the work.