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Businesses The Almighty Buck The Courts Apple Hardware

Qualcomm Sues Apple Contract Manufacturers (reuters.com) 56

Qualcomm on Wednesday sued the manufacturers that make iPhones for Apple for failing to pay royalties on the chip maker's technology, widening its legal battle with the world's most valuable company. Qualcomm's lawsuit, filed Wednesday in a federal district court in San Diego, accuses Compal, Foxconn, Pegatron, and Wistron of breaching longstanding patent-licensing agreements with Qualcomm by halting royalty payments on Qualcomm technology used in iPhones and iPads. From a report: Apple sued Qualcomm in January, accusing it of overcharging for chips and refusing to pay some $1 billion in promised rebates. Qualcomm said in the complaint that Apple is trying to force the company to agree to a "unreasonable demand for a below-market direct license." Qualcomm said last month that Apple had decided to withhold royalty payments to its contract manufacturers that are owed to the chipmaker, for sales made in the first quarter of 2017, until the dispute is resolved in court. "While not disputing their contractual obligations to pay for the use of Qualcomm's inventions, the manufacturers say they must follow Apple's instructions not to pay," Qualcomm said in a statement on Wednesday.
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Qualcomm Sues Apple Contract Manufacturers

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  • by known_coward_69 ( 4151743 ) on Wednesday May 17, 2017 @10:13AM (#54433633)

    Apple is playing hardball by not paying them. Hard to run a business with no money coming in.

    Why can't Qualcomm simply refuse to sell to Apple until the lawsuit is done? Kind of hard to build iPhones with no radio chips in them. And I bet it's just as hard for Intel to ramp up production to cover the shortfall.

    • Qualcomm isn't making anything here. They are just licensing patents.
      • "Qualcomm isn't making anything here. They are just licensing patents."

        The same can be said of Apple. Compal, Foxconn, Pegatron, and Wistron do all the manufacturing and just licence designs from Apple. Does Apple have their own Fab to make chips?

        • by kdubb1 ( 930778 )

          The same can be said of Apple. Compal, Foxconn, Pegatron, and Wistron do all the manufacturing and just licence designs from Apple.

          They absolutely do not license the designs from Apple. They are employed by Apple and operate at Apple's discretion building products solely for Apple using proprietary designs and materials provided by Apple. None of these companies has any right to produce these phones without Apple's involvement and resources.

          Qualcomm licenses knowledge to Apple (i.w. the patented information) who then incorporates that knowledge into its proprietary designs. They have nothing to do with the manufacturing of the final c

    • by UnknowingFool ( 672806 ) on Wednesday May 17, 2017 @10:35AM (#54433849)
      Because Qualcomm, like ARM, does not actually manufacture chips to sell to the likes of Apple or Samsung. Their business is to sell the design that companies like TSMC manufactures for Apple. They make a small number of them for demo/prototype purposes but not for general sale.
      • by jonsmirl ( 114798 ) on Wednesday May 17, 2017 @10:51AM (#54433969) Homepage

        Qualcomm certainly makes the Snapdragon line of SOCs which are used by the millions in many phones. But in this case Apple is not using the Snapdragon instead they have their own in-house SOC.

        • Qualcomm certainly makes the Snapdragon line of SOCs which are used by the millions in many phones. But in this case Apple is not using the Snapdragon instead they have their own in-house SOC.

          No Qualcomm does not. Qualcomm has no chip fabs. They, like ARM, contracts foundries to actually manufacture the chips. Qualcomm sells the design. Now for certain models, Qualcomm can designate a company to be the exclusive foundry. For example, Samsung is the exclusive manufacturer of the Snapdragon 820. [fortune.com] So if you are LG and you want to use the 820, you have to license the 820 from Qualcomm and then contract with Samsung and not TSMC.

          • You are confused about fabbing and who owns the products that the fab makes. That is like saying Foxconn makes the iPhone. Foxconn assembles it, but Apple definitely owns the output from that manufacturing line, not Foxconn.

            ARM is different. ARM licenses chip IP to a company like Qualcomm. Qualcomm then integrates that IP with their own and turns it into masks for chip production. Qualcomm then pays Samsung or TMSC to use those masks to make chips. Those chips are then given back to Qualcomm for sale, they

            • You are confused about fabbing and who owns the products that the fab makes.

              No I am not. I clearly said "manufacture". Qualcomm does not manufacture, but only licenses LTE modems.

              That is like saying Foxconn makes the iPhone. Foxconn assembles it, but Apple definitely owns the output from that manufacturing line, not Foxconn.

              I think the term you are not understanding is that Foxconn manufactures for Apple; however, Foxconn does not have to pay Apple a royalty for licenses. Anyone who makes Qualcomm chips has to pay Qualcomm a royalty for the design even if Qualcomm never had any input in any part of the manufacture of the chip. That's the difference.

              ARM is different. ARM licenses chip IP to a company like Qualcomm. Qualcomm then integrates that IP with their own and turns it into masks for chip production. Qualcomm then pays Samsung or TMSC to use those masks to make chips.

              I think your confusion is that you are focusing ONLY on what Qualcomm does wi

              • by bws111 ( 1216812 )

                You contradict yourself. First you say "Quallcomm does not manufacture, but only licenses LTE modems". Then you say "Yes they do (license) for IP other than Snapdragon".

                So if Snapdragon is not licensed, but all they do is license, then what the hell is Snapdragon?

                They don't FAB. But they do everything else, and their name is on the product. They are the only ones who can sell said product. They are the ones who warrantee said product.

                • You contradict yourself. First you say "Quallcomm does not manufacture, but only licenses LTE modems". Then you say "Yes they do (license) for IP other than Snapdragon".

                  Er, what? I said Qualcomm does not not manufacture LTE modems but licenses them. Then you said Qualcomm does not license IP designs which I linked to an article that says they clearly says that have recently licensed 3G/4G IP to Smartron. I fail to see any contradiction.

                  Do you understand that Snapdragon is not 3G/4G/LTE but a variant of ARM technology?

              • You are confused about fabbing and who owns the products that the fab makes.

                No I am not. I clearly said "manufacture". Qualcomm does not manufacture, but only licenses LTE modems.

                That is like saying Foxconn makes the iPhone. Foxconn assembles it, but Apple definitely owns the output from that manufacturing line, not Foxconn.

                I think the term you are not understanding is that Foxconn manufactures for Apple; however, Foxconn does not have to pay Apple a royalty for licenses. Anyone who makes Qualcomm chips has to pay Qualcomm a royalty for the design even if Qualcomm never had any input in any part of the manufacture of the chip. That's the difference.

                You very confused. Foxconn does not pay Apple a royalty because they don't own the iPhones, Apple does.

                AFAIK Qualcomm does not license chip IP (ie chip designs like ARM does). The article you quote is for a patent license, not a chip manufacturing license. AKAIK Qualcomm only contracts with Samsung and TMSC to make their chips and then take possession of those chips after they are made. Qualcomm then sells those chips. Qualcomm does not have any second source supplier agreements.

                ARM is different. ARM licenses chip IP to a company like Qualcomm. Qualcomm then integrates that IP with their own and turns it into masks for chip production. Qualcomm then pays Samsung or TMSC to use those masks to make chips.

                I think your confusion is that you are focusing ONLY on what Qualcomm does with ARM type processors. While Qualcomm might have that process for Snapdragons, in the context of the story, Qualcomm isn't going after Apple's vendors for Snapdragon chips. They are going after them for Qualcomm chips like 3G/4G/LTE modems. That process is entirely different in that Qualcomm sells the design and others make the mask, incorporate it into their SoCs, etc. Qualcomm has less involvement with those chips.

                There are two other places to get cell modem IP - Intel and Mediatek. That cell modem design IP is not coming from Qualcomm. The fight here is over Qualcomm demanding a rumored $10 a chip royalty for patent licenses from OEM who use the Intel and Mediatek IP.

                As far as I know Qualcomm does not license chip IP.

                Yes they do [yahoo.com] for IP other than Snapdragon.

                That is a patent license which is very different than the IP license to produce a piece of silicon.

                • You very confused. Foxconn does not pay Apple a royalty because they don't own the iPhones, Apple does.

                  No I was showing how flawed your Foxconn analogy is. There is a huge difference between direct contract manufacturer and 3rd party manufacturing. Who owns the designs for Qualcomm chips? Qualcomm. That's the major difference. Apple can license an Qualcomm LTE modem and then contract with TSMC to manufacture the chip. Or TSMC can also license the LTE modem from Qualcomm to manufacture for anyone. For smaller phone makers like OnePlus, this means they don't have to enter in separate licenses with Qualcomm esp

          • by bws111 ( 1216812 )
            Licensing IP and contract manufacturing are not the same thing at all. If you license the IP, then a manufacturer can use that IP to make his OWN products, with his name on them. The manufacturer pays you to use your IP. On the other hand, if you contract out your manufacturing, you pay the manufacturer for the use of his facilities. Probably the only IP involvement is in the form of NDAs that say the manufacturer can't use your IP for anything EXCEPT manufacturing YOUR chips.
            • Licensing IP and contract manufacturing are not the same thing at all. If you license the IP, then a manufacturer can use that IP to make his OWN products, with his name on them.

              That depends on the license and the nature of the IP. I don't think Samsung can call an ARM Cortex-a53 whatever they want. Samsung can call the SoC that uses a Cortex-a53 something like Exynos 7 Octa 7870. Samsung also has an architectural license which allows to use ARM IP for chip design as well.

    • Why can't Qualcomm simply refuse to sell to Apple until the lawsuit is done?

      They don't sell them anything now. They just take a slice of the pie.

    • Re: (Score:2, Insightful)

      by Anonymous Coward
      A significant portion of their revenue comes from Apple.
    • by peragrin ( 659227 ) on Wednesday May 17, 2017 @11:18AM (#54434191)

      Because
      1 Qualcomm only designs not makes

      2) Qualcomm was getting paid royalties by tsmc and other manufactures that made Apple products but then wanted Apple to pay a second time for the same royalty because it was in the iPhone. They have spent years fighting this and Apple finally told their suppliers to stop paying those royalties too. That is to bring qualcom to the negotations table trying not to double and triple dip. Expect Apple to win but be forced to pay royalties up to the time those suppliers stopped. Which is only fair.

      Patent holding companies (qualcom) like isps want to get paid two three times on the same product. And are fighting very hard to do that. Htc and Motorola don't have to pay twice for the same chipset only Apple does.

      The whole point of net neutrality is to stop isps from charging content providers for delivering content that their customers asked for.

    • a) The products for which Apple has told manufacturers not to pay the royalties are not manufactured by Qualcomm or by manufacturers contracted to Qualcomm. If they were, then the royalties would just be in the price of the products and the dispute would be over direct payments.

      b) If there are other products that Apple is buying that do come from Qualcomm directly, then tying their delivery to a conflict over a different product would fall afoul of anti-trust legislation.

  • Ugh! Everyone buys their shitty chips to put them in consumer electronics and they never release any technical papers or specifications, making it extremely difficult to reverse-engineer the chip and program open-source drivers. Of course the company could release open-source drivers BUT THEY NEVER DO! After tons of complaining from the community they MIGHT release a 'blob' binary that will work with linux but we can't trust it cause that blob could contain malware! Ugh why won't this horrible company contr
    • by hackel ( 10452 )

      As if they are any better? Try to get open source drivers for a Qualcomm modem. Or any mobile device not stuffed full of binary blobs. They're all terrible.

  • So... what next? (Score:5, Insightful)

    by BronsCon ( 927697 ) <social@bronstrup.com> on Wednesday May 17, 2017 @01:12PM (#54435109) Journal
    Qualcomm seems to want to be paid every time one of their chips changes hands: when the chip is sold to the manufacturer, when the phone containing the chip is shipped to the company that contracted the manufacturing company, again when the phone designer ships the phone to a store...

    When the store sells the phone to the end user?

    When the end user sells the phone on Craigslist or eBay, or trades it in to their carrier?

    Where does it stop?

    I hope Apple and Foxconn absolutely crush them.
  • Has anyone compiled a list of phones that do NOT use any Qualcomm chips or patent-encumbered technology? If not, such a list is desperately needed. I don't have to indirectly support them in any way whatsoever. I'm more than willing to give up a little Snapdragon sexiness for something that isn't proprietary and patent-ridden. Now more than ever, we need truly Free, open-source, open-firmware portable computing devices.

    They are a truly vile corporation. As I've said in the past, they should have stuck

  • This case is pretty straightforward, no need for long legal battles.
    If it's in contract that Apple needs to pay for the licensed technology with no substantial unfair hike in prices and a fair comparison with competing technologies, then Apple has to pay, period.

    It's weird enough that Apple is the only company going after Qualcomm given that Snapdragon and other Qualcomm chips are on a whole metric ton of other brands. I'd figured that if Qualcomm was unfairly ramping up prices and charging more than the av

    • FTC alleges Qualcomm forced Apple into iPhone LTE chip deals [bgr.com]

      Basically, Qualcomm has thousands of patents that are required to implement basic wireless standards. They have a lot of key patents relating to CDMA, which Verizon and Sprint use in the US. For example, they made Apple agree to use their modems exclusively for years to get decent rates. For other manufacturers, they threatened to refuse giving Qualcomm's modems (required to work on the CDMA networks) unless the company also used the Snapdragon

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