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QCOM vs Apple and Everyone Else!

QCOM vs Apple and Everyone Else!
by Daniel Nenni on 09-11-2017 at 7:00 am

Having worked with Qualcomm in many different capacities during my career I can tell you there are some amazing people in and around that company. I am always positive when people I know are considering working there and QCOM people who leave are an easy reference for other jobs. Unfortunately, I lost respect for the QCOM higher ups a few years back and am not surprised a bit by their current troubles.

Just one of my personal experiences that I can talk about openly where QCOM fumbled: When writing the book “Mobile Unleashed” we did all research independently with detailed footnotes and sent the first draft of the respective chapters to ARM, Apple, QCOM, and Samsung. All of the chapters included embarrassing moments which is the natural course of business. The responses were quite diverse. ARM accepted the draft without question and even submitted the foreword to the book. This was not surprising since the British are known for their self-depreciating humor and ARM is very British. Apple proofed the text privately and offered factual corrections only. Samsung corporate didn’t respond. QCOM requested that we remove certain embarrassing sections and even hinted at legal repercussions. The most embarrassing one was their idiotic reaction to Apple’s first 64-Bit SoC (“64-bit Apple A7 processor is a “marketing gimmick” says QUALCOMM exec“) and we left that in of course.

The root of the QCOM problem, in my opinion, was their early dominant market position and the resulting chip on their shoulder. Intel has the same issue (“Our transistors are the best in the world!”) which, in my opinion, has doomed them in markets other than their core business. Intel Custom Foundry is the most glaring example but I digress…

Unfortunately for QCOM there are other companies and Governments with even bigger egos and much deeper pockets and that is where QCOM’s problems began. In 2015 QCOM agreed to pay $975M to end the Chinese government’s antitrust investigation. At the time I viewed this as a serious bullet dodged up until Apple and partners joined in the fray. Junko Yoshida did an interesting article which sums up very nicely: Apple vs QCOM: Who Extorted Who? With this handy timeline graphic:

And the latest ruling comes from a court in QCOM’s backyard (San Diego):

Qualcomm Loses Bid to Force Apple Manufacturers to Pay Royalties. Judge’s ruling allows manufacturers to withhold payments to chip supplier as case continues

Bottom line: QCOM gets a royalty on the entire smartphone versus just the chip(s) with the IP which is the industry standard. When I started in IP we would charge an upfront licensing fee with NRE but no royalty. That was followed by a hybrid upfront fee/royalty model based on chip sales. Getting a percentage of the entire device is every IP company’s fantasy but QCOM is the only case I know of where it became a reality. In fact, IP companies are now hard pressed to get chip royalties in addition to licensing fees but some still do of course (ARM).

I have no idea if Apple directly participated in the antitrust actions against QCOM or if they pushed suppliers to halt royalty payments to QCOM. What I do know is that Apple has experience with legal action against partners (Apple v Samsung) where Samsung not only lost millions, they lost their biggest customer so my bet is on Apple to win this one, and it will cost QCOM dearly, absolutely.

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