Thursday, 21 February, 2019

Chip maker Qualcomm smashed by European Union mega fine

Chip maker Qualcomm smashed by European Union mega fine Chip maker Qualcomm smashed by European Union mega fine
Nellie Chapman | 25 January, 2018, 02:15

Smartphone chip manufacturer Qualcomm has been fined $1.2bn by the European Union for paying Apple "billions of dollars" to use only its chipsets in iPhones and iPads. Qualcomm's high-profile spat with Apple, for example, which was uncovered past year in a US Federal Trade Commission (FTC) investigation, showed that Qualcomm had paid Apple royalty rebates to ensure the iPhone maker would exclusively source the chip maker's LTE modems.

Margrethe Vestager, European commissioner for competition, said the deal prevented Apple from possibly switching to other suppliers of baseband chipsets.

As Reuters reports, the Commission found that, between 2011 and 2016 Qualcomm agreed a deal whereby it would pay Apple in return for Apple exclusively using Qualcomm's LTE baseband chips, which allow for 4G connectivity. The commission concluded in its ruling that Qualcomm had abused its power because it made "significant payments to a key customer on condition that it would exclusively use Qualcomm chipsets".

Apple and Qualcomm have been waging legal battles over the world about the fees Qualcomm charges for its chip designs. That, commissioners concluded, was more than sufficient to deem the chip company holder of the dominant position in the segment, a position that was only cemented by the breadth of Qualcomm's patent portfolio. While the precise infraction has varied some from fine to fine, in all cases regulators have cited Qualcomm for abusing its position in the cellular modem market in order to freeze out any competition. In other words, Qualcomm paid Apple to shun it rivals, the European Commission determined.

The huge fine represents 4.9 per cent of Qualcomm's 2017 turnover.

The EU commission deems this clause anti-competitive and has resulted in the billion euro fine. "Qualcomm strongly disagrees with the decision and will immediately appeal it to the General Court of the European Union", the company asserted in a statement this afternoon.

Qualcomm and Apple have a complicated past. Alternative suppliers like Intel couldn't possibly hope to get a piece of the action for themselves, at least until September 2016, when the unlawful partnership came to an end at "limited" costs, and Apple started to "source part of its baseband chipset requirements from Intel". "I don't see any new competitive impacts as Apple is already dual-sourcing Intel and Qualcomm modems in the iPhone", said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy.