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Apple Trying to Drop Qualcomm – Report

Dan Jones
10/31/2017
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After months of legal wrangling, it is reported that Apple is now trying to design iPhones and iPads that don't use Qualcomm modems, but equivalents from rivals Intel and -- potentially -- MediaTek instead.

The Wall Street Journal Tuesday cited people familiar with Apple's motives in making the potential change. The WSJ reports that these sources say that Qualcomm has withheld testing software for the next generation of iPhones and iPads being designed now. For its part, Qualcomm Inc. (Nasdaq: QCOM) told the WSJ this morning that it is "committed to supporting Apple’s new devices."

Apple Inc. (Nasdaq: AAPL) and Qualcomm's legal fight started in January of this year, with the vendor suing the chipmaker for $1 billion, claiming that Qualcomm was overcharging on patent licensing fees. The latest salvo coming from Qualcomm this month tries to stop Apple building devices in China. (See Qualcomm Sues to Stop Apple Making, Selling iPhone in China.)

Apple has used Qualcomm modems in its devices since the launch of the first iPhone in 2007. But since the launch of the iPhone 7 in 2016, Apple has also added Intel Corp. (Nasdaq: INTC) modems to the mix.

In its latest iPhone 8 and iPhone X Apple is also rumored to have rate-limited modems to 600 Mbit/s. The company has not publicly commented on this. (See Apple's New iPhones: No Gigabit LTE for You! and When Is a Gig Not a Gig? When It's Gigabit LTE!)

Qualcomm reported that in July that its fiscal third-quarter revenue fell 11% and net income dropped 40% to $900 million, as a result of Apple withholding royalties. Qualcomm supplies the vast majority of smartphone makers globally -- but Apple still sits at the number one spot for share in the US, with 47% of the market according to Parks Associates , even as its latest iPhone X model is just coming to market.

Qualcomm, however, is generally considered the leading supplier of the latest "Gigabit LTE"-capable modems, with its forthcoming silicon, which Apple would likely be using for its latest prototpyes, aiming at peak speeds of 1.2 Gbit/s. Qualcomm has also just unveiled its first X50 single-chip 5G silicon, and a 5G smartphone based on its own reference design. Even as Apple is designing what is likely to be among its last pure 4G LTE devices, it will need silicon to prototype dual-mode 4G and 5G devices for the next decade. (See A 5G Apple iPhone? Don't Hold Your Breath!, Qualcomm: The First 5G Smartphone on Display? and Qualcomm Claims 5G Data Call First.)

— Dan Jones, Mobile Editor, Light Reading

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kq4ym
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kq4ym,
User Rank: Light Sabre
11/13/2017 | 12:44:33 PM
Re: Rivals
But all the feuding certainly keep the lawyers busy while each party is convinced it's in the right on the issues. The withholding of fees to Qualcomm by Apple is really hurting those financial numbers each quarter though.
DanJones
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DanJones,
User Rank: Blogger
11/2/2017 | 1:44:34 PM
Re: Rivals
just old people, don't know if that holds up empirically!
lanbrown
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lanbrown,
User Rank: Light Sabre
10/31/2017 | 7:53:17 PM
Re: Rivals
I don't know if I would say that they have cornered the market.  Sure their modems are used quite often, but that is also because their CPU is as well.  Think of it being bundled together.

 

Every few years you hear about Qualcomm being sued because of their business practices.  This dates back to the 90's; so over 20 years later and they still keep doing the same exact things over and over.

 

Samsung also uses Intel for the modem when Samsung typically uses their own CPU instead of a Qualcomm.  The biggest issue that Intel has had...they didn't make ARM processors and why buy from Intel when you can buy a packaged soultion from Qualcomm.  If Samsung went strictly with their own processor and used Intel and Apple did the same, Intel would put a lot of resources behind it.
mhui0
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mhui0,
User Rank: Lightning
10/31/2017 | 6:30:42 PM
Re: Rivals
Only older folks buy Apple's phones nowadays.

So, in that sense, you're right: those folks don't care for hardware performance.
DanJones
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DanJones,
User Rank: Blogger
10/31/2017 | 3:58:26 PM
Re: Rivals
since when has Apple cared about hardware performance? Since never in fact.
bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
10/31/2017 | 3:18:20 PM
Re: Rivals
Daniel,

Us tech folks - ok, i shouldn't speak for others, me as an ex-tech person :) - should know better: no one is indispensible!

We should also learn the lesson from the many VHS v. Betamax B-school cases, the best is not necessarily the winner.

While Apple is a tough negotiator - it only allows its suppliers a pretty thin margin compensated by volumes - chances are QCOM has far more enemies. This kind of reminds me of Cicso and Cabletron. 

The real mistake, IMHO, is the Jacobses made the mistake of giving CEO his job. I am not an  insider (would love to hear from ex QCOM folks); but if memory serves, they worried he would jump ship and decided to promote him. Look at his tenure and judge for yourself. QCOM might be able to throw its weight around with smaller guys; but look at what happened to folks like Imagination who tried that to Apple. They really asked for it. On the other hand, once Skyworks was rumored to lose Apple's contracts and its CEO pulled out all the stops - and it has gained quite a bit of contents instead
danielcawrey
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danielcawrey,
User Rank: Light Sabre
10/31/2017 | 2:59:44 PM
Rivals
Intel? MediaTek? Come on guys. 

Look, Qualcomm has cornered this market. These other suppliers are likely to be inferior. Apple is playing a dangerous game, given that 5G is coming and performance will be paramount. 
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