Apple paying Qualcomm $4.5 billion to end legal war

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Qualcomm headquarters
Apple's giant payoff leaves Qualcomm sitting pretty.
Photo: Qualcomm

Apple will pay Qualcomm a lump sum of $4.5 billion to $4.7 billion as part of as legal settlement the two companies recently reached.

This is almost as much as Qualcomm’s entire revenue for its current quarter, showing Apple’s importance to the chipmaker.

Make iPhones not war

Apple wasn’t paying Qualcomm royalties for the 4G modem chips used in iPhones while the two companies were locked in a long-running court battle. Their fight was actually over how much those payments should be.

Payments stopped in mid-2017, even as iPhones with Qualcomm chips continued to be sold, so clearly there was time for a considerable total to pile up.

Billions with a ‘B’

When the two sides reached a settlement last month, both parties refused to disclose the terms of the agreement. However, Qualcomm’s just-released Q2 earnings report shows how much the company expects to get.

Its quarterly report says “Our financial guidance for the third quarter of fiscal 2019 includes estimated revenues of $4.5 billion to $4.7 billion resulting from the settlement (which will be excluded from our Non-GAAP results), consisting of a payment from Apple and the release of our obligations to pay or refund Apple and the contract manufacturers certain customer-related liabilities.”

For comparison, Qualcomm’s entire revenue for the January-to-March quarter was $4.9 billion.

iPhone + Qualcomm = 5G

Although Apple still sells iPhones designed before Apple and Qualcomm started their legal kerfuffle, 2018’s iPhone XS series and the iPhone XR only use Intel 4G modems.

Whether the upcoming 2019 models will come with Qualcomm chips remains unknown. The settlement between these two companies possibly came too late in the design process for that to happen.

However, it’s widely expected that Apple will release the first iPhone able to connect to 5G networks in 2020 with Qualcomm modems. Intel is out of that business.