The news yesterday that the massive, multi-billion dollar legal fight between Apple and chip maker Qualcommhas come to an end has big-time ramifications for Apple - and for the rest of us who use smartphones every day (heck, nearly every minute of every day).
Apple and Qualcomm have settled their royalty dispute, the companies announcedin a press release. Now that Apple will be standardizing on Qualcomm modems going forward, Intel's hopes of growing (or even maintaining) its mobile modem business were effectively reduced to zero.
Ben Wood, chief of research at CCS Insight said the settlement was "a huge vindication for Qualcomm".
Apple had already lost an earlier battle with Qualcomm last month when a federal court jury in San Diego decided the iPhone maker owed Qualcomm $31 million for infringing on three of its patents.
Qualcomm Inc. shares rose $4.25 (+6.03%) in after-hours trading Tuesday. As a result, the face of the cellular modem market is changing in an instant, as Apple's shift in allegiances will have repercussions throughout the industry.
At the heart of the battle are the royalties Qualcomm charges for its patented chips, which enable smartphones to connect to mobile networks.
Apple has an experience of working with a number of modem manufacturers for its iPhone handsets for LTE and 4G connectivity.
"In the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns", said Intel CEO Bob Swan.
On the other hand, Qualcomm has talked about the settlement of all litigation against Apple in a blog post. No matter the cost, at least Apple has made sure that won't be a problem.
Apple this year also moved its modem engineering efforts into the same group that makes its proprietary chips, signaling that the iPhone maker is also seriously pursuing its own modem.
FILE PHOTO: An employee of German Apple retailer Gravis displays an iPhone 7 and 8 in a store in Berlin, Germany, January 3, 2019.
The agreement between the two companies includes a global patent license agreement. With Apple and Qualcomm no reaching a settlement agreement, there should now be no doubt that Apple's 2020 iPhone lineup will boast support for 5G networking technologies.
The settlement could also have an impact on China's Huawei Technologies Co Ltd, which is also in a licensing dispute with Qualcomm. And the chip maker is still on pins and needles awaiting Judge Lucy Koh's decision related to the FTC v. Qualcomm case heard earlier this year.
The deal requires Apple to pay Qualcomm an undisclosed amount.