Apple and Qualcomm agreed to end a two-year legal battle over billions of dollars of technology licensing fees that had threatened to reshape the chip maker’s business. Qualcomm’s shares jumped on the announcement.
Apple will make a one-time payment to Qualcomm and the two entered into a multiyear chip supply and licensing agreement, effective 1 April, in which the iPhone maker will pay royalties to Qualcomm, the companies said on Tuesday in a statement. All the litigation between the companies around the world will be dismissed, according to the statement. No amounts related to the payments or fees were given.
Qualcomm said it expects the agreement to add US$2/share to its earnings when it begins shipments of chips to Apple. While it’s not clear how much Qualcomm gave up in concessions to Apple in terms of payments and rates, the settlement lets it continue one of the most profitable businesses in the $400-billion semiconductor industry. Apple was the remaining holdout from a licensing practice that allows the San Diego-based chip maker to charge patent royalties on technology that underpins all modern smartphones.
The two sides began a jury trial Monday in San Diego that was to decide whether Apple owed Qualcomm unpaid royalties or the iPhone maker was right to argue that it was the victim of unfairly inflated charges.
Qualcomm’s stock rallied as much as 23% on the announcement. The shares, which had underperformed this year, jumped to $67.13 at 3.26pm in New York. Apple was little changed at $199.83.
Qualcomm is still waiting for a federal judge’s ruling on claims by the US Federal Trade Commission that the company’s licensing practices are anticompetitive. The regulator accused Qualcomm in a 2017 lawsuit of using its dominance in the smartphone technology market to thwart competitors’ growth and force companies including Apple and Huawei to pay inflated patent royalties. A non-jury trial in San Jose, California, was held in January. — Reported by Ian King, with assistance from Peter Blumberg, (c) 2019 Bloomberg LP
