Qual­comm’s rev­enue pro­jec­tions take a hit

Chip­maker re­duces its third quar­ter pro­jec­tions in on­go­ing le­gal fight with Ap­ple over li­cens­ing rev­enue, re­veals Agam Shah

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The le­gal fight be­tween Ap­ple and Qual­comm on li­cens­ing mo­dem tech­nol­ogy is turn­ing uglier. Ap­ple has filed law­suits against Qual­comm in coun­tries like the US, UK, China and Ja­pan, ac­cus­ing the chip­maker of us­ing its dom­i­nant mar­ket po­si­tion to over­charge li­cens­ing fees.

The iPhone maker it­self doesn’t pay li­cens­ing fees di­rectly to Qual­comm. The fees are paid by part­ners like Fox­conn, which makes the iPhone and iPad for Ap­ple. Qual­comm is now ac­cus­ing Ap­ple of in­ter­fer­ing with the li­cens­ing pay­ments owed by those part­ners. Its rev­enue fore­casts for the third quar­ter are af­fected, Qual­comm said.

The chip­maker re­cently re­vised its rev­enue pro­jec­tions for the third fis­cal quar­ter. It is pro­ject­ing rev­enue to be be­tween $5.3 bil­lion and $6.1bn. That range runs be­tween a de­crease of 12 per­cent and an in­crease of 1 per­cent, com­pared to the same quar­ter last year. The forecast re­moves roy­alty rev­enues from Ap­ple’s con­tract man­u­fac­tur­ers.

In a sec­ond quar­ter earn­ings call, Qual­comm pres­i­dent Derek Aberle said the com­pany’s third quar­ter would be hurt by lower li­cens­ing rev­enue from Ap­ple’s part­ners, but he couldn’t pin­point an ex­act amount. Ap­ple is a big cus­tomer of the chip­maker.

In the most re­cent quar­ter, Ap­ple sup­pli­ers un­der­paid roy­al­ties to the tune of $1bn, Qual­comm said. But the chip­maker didn’t take a loss those un­der­pay­ments be­cause the amount was sim­i­lar to a sum held up by Qual­comm but owed to Ap­ple in a sep­a­rate agree­ment.

Ap­ple in Jan­uary filed a $1bn law­suit against Qual­comm in a Cal­i­for­nia court, claim­ing the chip­maker was over­charg­ing for roy­al­ties. Ap­ple said Qual­comm was charg­ing roy­al­ties for a port­fo­lio of tech­nolo­gies, and not for the price of the base­band chip used in mobile de­vices. Qual­comm coun­ter­sued Ap­ple ear­lier this month for breach of con­tract and fail­ure to ne­go­ti­ate li­cens­ing terms in good faith. Ap­ple’s law­suit came af­ter an in­ves­ti­ga­tion by the South Korean gov­ern­ment re­sulted in Qual­comm be­ing

fined $853 mil­lion for un­fair li­cens­ing prac­tices. Qual­comm ac­cused Ap­ple of co­op­er­at­ing with the South Korean gov­ern­ment in its in­ves­ti­ga­tion.

Ap­ple is one of Qual­comm’s largest cus­tomers, with the chip­maker’s modems used in iPhones. A small num­ber of iPhones have In­tel’s modems. In­tel is now ramp­ing up its mo­dem prod­uct and is mak­ing a run at 5G ra­dios, and Ap­ple could move more of its iPhones and iPads away from Qual­comm’s modems.

For now, Qual­comm has a lead in mo­dem tech­nol­ogy and was the first ven­dor to of­fer gi­ga­bit modems. Qual­comm has also said out­side of the law­suits, it will con­tinue to main­tain a strong sup­plier re­la­tion­ship with Ap­ple. Sam­sung con­tin­ued mak­ing chips for Ap­ple’s iPhones even though the com­pa­nies were pre­vi­ously em­broiled in law­suits.

Qual­comm’s Snap­dragon chips are a com­mon sight in today’s flag­ship smart­phones

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