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Why Apple objected so strongly



Licensing patents is a major source of revenue for Qualcomm. Patent licensing fees accounted for only 23% of Qualcomm's revenue in the 2018 fiscal year, but accounted for much of Qualcomm's operating income.

Qualcomm's QCT chip business, in particular, generated over $ 17 billion in revenue, but only $ 3 billion in operating income. Qualcomm's QTL licensing business generated $ 5.1 billion in revenue, with an operating margin of 68%, representing a profit of $ 3.5 billion.

A specialized United Nations agency, the International Telecommunication Union, ultimately defines what people in the industry call "standards" ̵

1; or the official technical specifications for telecommunications networks, to allow devices to operate across borders and through network operators. Qualcomm has many patents that fit in with these standards.

"Standards committees have been informed that we have patents that are essential to all 3G standards based on CDMA," Qualcomm wrote in a filing with the SEC in November. 19659002] Qualcomm has license agreements with over 300 companies through these patents.

Patentees should license the required patents to all at a fair price and on equal terms, or sometimes as fair, reasonable, and discriminatory (FRAND) licensing.

However, technology companies and governments often have different ideas about what is fair and reasonable.

Apple's main objection was that Qualcomm had to license these patents, although it was already a big customer for Qualcomm's chips.

"The problem we have with Qualcomm is that they have no license and no chips, which we believe is illegal," Apple CEO Tim Cook said in January. [19659002] Apple also disagreed with Qualcomm's pricing scheme, which used the total selling price of an entire device to find out what should be calculated rather than the selling price of a modem chip. Finally, the two companies agreed a license price of $ 7.50 per device, which Apple still considered too high.

As Cook said, "They are required to make their patent portfolio a fair, reasonable and non-discriminatory basis, and they do not." They charge exorbitant prices. "

Apple is not the only party that has problems with the Had business practices from Qualcomm.

In 2009, South Korea's antitrust agency, which protected local companies such as Samsung and LG, fined $ 200 million for Qualcomm for abusing its market position in high-frequency chips. Market position can not be tolerated. "Later, the KFTC re-sentenced Qualcomm to fines of $ 854 million for unfair business practices in 2016.

In 2015, Qualcomm paid a fine of $ 975 million in China for another difficult cartel dispute As part of this agreement, Qualcomm had to reduce its fee rates in China for mobile phone manufacturers such as Xiaomi and Huawei.

Perhaps the biggest threat to Qualcomm is a battle with the US Federal Trade Commission, previously in charge The trial has not yet been published.


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