Qualcomm Revamps Patent Deal to Win Back Apple, Reduce Regulatory Tension

In a bid to resolve its legal dispute with Apple that could see Qualcomm lose one of its biggest clients, the San Diego-based chip maker has made some changes to the licensing process of its next generation of mobile chips. This could help Qualcomm not only win back orders from Apple but also reduce regulatory scrutiny.

Qualcomm offers two different types of patent suite up for licensing. The first one incurs a cost of 5 percent of the price of the device, while the second one called “standard essential patents” incurs a cost of 3.25 percent. The second suite contains the bare minimum patents needed to get mobile data to work on a device. Most OEMs end up licensing both sets of patents to avoid any lawsuits.

For its 5G patents, Qualcomm has bundled them into its ‘standard essential patents’ suite thereby giving OEMs more value for their money. This ensures that OEMs will not have to spend extra bucks on licensing the full suite of patents if they don’t wish to thereby reducing the overall price of the device.

“We have not lowered the rate. What we’re doing is including more technology, more (intellectual property) in the offering without increasing the price,” Alex Rogers, Qualcomm’s head of licensing division said.

Qualcomm hopes this new licensing structure will help it solve its ongoing dispute with Apple and another company which Rogers did not name. It is rumored that the second company is Huawei which uses its modems inside its smartphones.

Additionally, Qualcomm is going to charge this licensing fees on the first $400 of the net selling price of a device. The previous price cap was $500. A $100 reduction might not seem like much, but it easily ends up turning into millions of dollars in saving for a popular device.

Qualcomm hopes that its radically different approach to licensing its key 5G patents will help it in winning back key customers like Apple and Huawei and reduce friction with them.

Our Take

While its good that Qualcomm has taken a different approach to licensing its 5G patents, the company’s move is a bit too late in my opinion. Apple has already found an alternative supplier in Intel despite its modem being inferior to that of Apple. More importantly, the tiff with Qualcomm might have forced Apple to start building its own 5G modem which would provide it with a far greater control over the modems used inside its future devices and translate into significant cost saving over a long period of time.

[Via Reuters]