Coverage: Apple and Qualcomm have settled their dispute

Apple Inc. and Qualcomm Inc. agreed to dismiss all litigation between the two companies world-wide and forged a new license agreement, ending a long-brewing legal battle over how royalties are collected on innovations in smartphone technology.

Tripp Mickle and Asa Fitch of The Wall Street Journal had the news:

The settlement, which came hours after opening arguments in a trial between the companies started, includes an undisclosed payment from Apple to Qualcomm. The companies also said in a joint statement that they had reached a six-year license agreement and a multiyear deal for Qualcomm to supply Apple with modem chips.

Qualcomm had claimed Apple was violating its patents by withholding royalties, while Apple argued Qualcomm had been overcharging for those patents for years, abusing its dominant position in the market. At stake was the future of Qualcomm’s licensing model and billions of dollars in royalties that Apple has either paid or kept. Until the settlement was struck, Qualcomm had lost more than $25 billion in market value amid the looming threat.

The emergence of fifth-generation wireless speeds as a key component of coming devices likely drove the two companies to the table. Apple’s most recent iPhones have been using modem chips fromIntel Corp. , which has lagged behind Qualcomm in providing wireless features. Apple also faced falling behind rivals such as Samsung Electronics Co. in offering speedier wireless devices.

Shara Tibken of CNET reported that the settlement could affect your iPhone:

The settlement is the latest twist in a fight that could put your iPhone at risk. San Diego-based Qualcomm supplies network connectivity chips for Apple’s iPhones and is the world’s biggest provider of mobile chips. Its technology is essential for connecting phones to cellular networks. The company derives a significant portion of its revenue from licensing its inventions to hundreds of device makers, with the fee based on the value of the phone, not the components. Qualcomm owns patents related to 3G, 4G and 5G phones — as well as other features like software — so any handset makers building a device that connects to the networks has to pay it a licensing fee, even if they don’t use Qualcomm’s chips.

That includes Apple. The company makes its own applications processor — the brains of the iPhone — but it relies on third-party chips for network connectivity. From the iPhone 4S in 2011 to the iPhone 6S and 6S Plus in 2015, the sole supplier for those chips was Qualcomm. The following year, Apple started using Intel modems in some models of the iPhone 7 and 7 Plus, but it still used Qualcomm in versions for Verizon and Sprint.

It continued that trend in 2017, but Apple’s latest phones — the iPhone XS, XS Max and XR, only use Intel 4G chips. Apple blamed Qualcomm, though Qualcomm said it would like to supply to Apple. Still, Apple’s move to 5G could be held up by not working with Qualcomm.

Ari Levy of CNBC.com reported that Intel announced it was exiting the 5G smartphone market shortly after the settlement:

Intel said on Tuesday that it’s dropping out of the 5G smartphone market just hours after Qualcomm and Apple announced a six-year licensing agreement as part of a royalty settlement.

“The company will continue to meet current customer commitments for its existing 4G smartphone modem product line, but does not expect to launch 5G modem products in the smartphone space, including those originally planned for launches in 2020,” Intel said in a statement late Tuesday.

Intel shares rose about 4 percent to $58.97 in extended trading after the announcement. The company said it will provide additional details about its plans in its earnings report on April 25.