Apple filed lawsuits against Qualcomm last week in the U.S. and China. This has left Qualcomm’s executives furious, and on Wednesday, they seemed to challenge the iPhone maker to bring it on.
Apple wants to make money off them: Qualcomm
Steve Mollenkopf and Derek Aberle, the CEO and head of Qualcomm’s wireless licensing business, respectively, fired back at the lawsuits. The executives alleged that Apple is trying to make a massive amount of money through the cases, notes CNET.
While discussing their quarterly earnings report with the analysts, Mollenkopf said, “Apple’s complaint contains a lot of assertions, but in the end, this is a commercial dispute over the price of intellectual property.”
Mollenkopf added that even though tangible and meaningful increases have been seen in the value of Qualcomm’s patents over time, it never raised its royalty rates. Aberle said that Apple’s arguments are without merit, adding that the iPhone maker wants to pay less for the technology it is using, and hence, the issue.
Qualcomm plans to continue supplying its chips to Apple even while it is battling it in court. The U.S. Federal Trade Commission has also accused the chip maker of forcing the iPhone maker to use its chips exclusively in exchange for lower licensing fees.
Apple told CNET that it is a firm believer in innovation and has always been willing to pay fair and reasonable rates for the patents it uses. The Cupertino-based company said it is disappointed by the way Qualcomm conducts its business, and the reason they turned to the courts was that they have both disagreed about what constitutes a fair and reasonable royalty for many years now.
Licensing model is the root cause of conflict
Qualcomm’s licensing model is the root cause of the trouble. The company is the leader in modem chips that enable connectivity between phones and cellular networks, but it has a huge licensing business as well. Almost all the modern phones are required to pay Qualcomm licensing fees, notes Forbes.
Qualcomm gets most of its revenue from selling chips, but licensing is a dominant source of its profits. The chip maker licenses at the device level, where phone makers are required to pay royalties as a percentage of the whole phone. According to Forbes, it doesn’t charge licensing fees for specific components. This is exactly what Apple wants. It only wants to be charged royalties for the price of the modem chip.