What did Apple and Qualcomm agree on?
Apple will pay Qualcomm a one-time lump sum amount. The number was not made public, but Qualcomm noted there will be $2.00 per share additional earnings for the year (as products ramp). It is a sizeable payment as Apple and its contract manufacturers have not paid Qualcomm for two years during this running dispute.
The companies also agreed upon a six-year licensing agreement. These terms were also not made public. The agreement clears the path for Apple to buy Qualcomm modems again. Qualcomm modems were designed out of the latest Apple launches in the Fall of 2018. This is a big win for Qualcomm.
Will Apple exclusively use Qualcomm modems for 5G smartphones?
Yes. The companies announced Apple will purchase Qualcomm 5G modems. Just after the deal was inked, Intel announced they are exiting the 5G modem business. This is probably because Intel had a couple of false starts and problems getting an integrated 5G modem out to their one main customer—Apple. Intel’s modem business faced many challenges and splitting Apple volumes with Qualcomm made the business unit expendable. Look for Apple to swoop in and pick up some of this team as Apple looks to vertically integrate over the coming years. It probably will not end at the modem.
Is there remaining litigation?
Yes. There are a few cases remaining. The most important remaining litigation is the Federal Trade Commission case versus Qualcomm.
Does the Apple-Qualcomm agreement affect the Federal Trade Commission’s case against Qualcomm and its licensing practice?
The FTC case against Qualcomm for predatory pricing is still waiting Judge Koh’s decision from the trial which ended in January. It is unlikely Judge Koh will make a ruling which would conflict with the agreement Apple and Qualcomm have agreed upon. However, it is still an unknown and a risk for Qualcomm. Things look much better today than before the agreement with Apple.
Could we see an Apple 5G smartphone in 2019?
No. The companies were not working together on 5G and there is not enough time to get one out this year. The earliest we could see an Apple 5G smartphone is 2020. It would be possible for Apple to push forward a 5G smartphone earlier than its usual September cadence. A Spring 2020 5G device would be possible if work begins immediately.
Will this help 5G ramp globally?
Maybe. It is not known when Intel would have been able to deliver a 5G modem to Apple. Rumors were the timing continued to slip. Working with Qualcomm assures Apple will be able to deliver 5G modems in volume in 2020. Qualcomm is working with all global carriers launching 5G and has a head start on its modem competition. This could potentially help 5G ramp with fewer hiccups.