Apple, Qualcomm reach deal on lawsuits

Agreement over technology licensing fees includes Apple making a one-time payment

Apple and Qualcomm agreed to end a two-year legal battle over billions of dollars of technology licensing fees that had threatened to jeopardize the chipmaker’s most profitable line of business. Qualcomm’s shares jumped 23 percent on the announcement.

Apple will make a one-time payment to Qualcomm and the two entered into a multiyear-chip supply and licensing agreement, effective April 1, in which the iPhone maker will pay royalties to Qualcomm, the companies said Tuesday in a statement. Litigation between the companies around the world will be dismissed, according to the statement. No amounts related to the payments or fees were given.

The deal for Qualcomm modems will keep Apple from falling behind in smartphone technology. The industry is poised to move to fifth generation, or 5G, wireless systems that bring the promise of faster download speeds and a host of new services. Apple’s current modem supplier, Intel, won’t have its 5G chip in phones until next year, it has said — about the time Qualcomm expects to have an updated 5G modem available.

Apple’s biggest rival, Samsung Electronics, already has a phone on the market that will support that new technology based on a Qualcomm chip.

“There were worries that this was going to be a nasty court battle, and I think that Apple realized, despite wanting to make a statement, that it was in their best interest, based on 5G and licensing issues, to settle,” said Dan Ives, an analyst at Wedbush Securities. “Apple and Qual

comm both had more to lose in trial than if they just settled.”

Qualcomm said it anticipates the agreement to add $2 per share to its earnings when it begins shipments of chips to Apple. While it’s not clear how much Qualcomm gave up in concessions in terms of payments and rates, the settlement lets it continue one of the most profitable businesses in the $400 billion semiconductor industry. Apple was the remaining holdout from a licensing practice that allows the San Diegobased chipmaker to charge patent royalties on technology that underpins all modern smartphones.

The two sides began a jury trial Monday in San Diego that was to decide whether Apple owed Qualcomm unpaid royalties or the iPhone maker was right to argue that it was the victim of unfairly inflated charges.

Qualcomm’s stock, which had underperformed this year, jumped to $70.45 at the close in New York. Apple was little changed at $199.25. Representatives for Apple and Qualcomm declined to comment beyond the statement. Qualcomm is scheduled to report earnings May 1, when it will likely give more financial details.

Qualcomm is still waiting for a federal judge’s ruling on claims by the U.S. Federal Trade Commission that the company’s licensing practices are anti-competitive. The regulator accused Qualcomm in a 2017 lawsuit of using its dominance in the smartphone technology market to thwart competitors’ growth and force companies including Apple and Huawei Technologies Co. to pay inflated patent royalties. A nonjury trial in San Jose was held in January.