Apple files $1 billion lawsuit against chip supplier Qualcomm

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By Diane Bartz and Stephen Nellis

<span class="articleLocation”>Apple Inc filed a $1 billion lawsuit
against supplier Qualcomm Inc on Friday, days after the
U.S. government filed a lawsuit that accused the chip maker of
resorting to anticompetitive tactics to maintain a monopoly over
key semiconductors in mobile phones.

Qualcomm is a major supplier to both Apple and Samsung
Electronics Co Ltd for “modem” chips that connect
phones to wireless networks. The two companies together
accounted for 40 percent of Qualcomm’s $23.5 billion in revenue
in its most recent fiscal year.

In the lawsuit filed in U.S. District Court for the Southern
District of California, Apple accused Qualcomm of overcharging
for chips and refusing to pay some $1 billion in promised
rebates. Apple said in its complaint that Qualcomm withheld the
rebates because of Apple’s discussions with South Korea’s
antitrust regulator, the Korea Fair Trade Commission.

“If that were not enough, Qualcomm then attempted to extort
Apple into changing its responses and providing false
information to the KFTC in exchange for Qualcomm’s release of
those payments to Apple. Apple refused,” Apple said in its
lawsuit.

Qualcomm did not immediately respond to requests for
comment.

Qualcomm has patents for chips which include standard
essential patents, a term used to describe technology that is
required to be licensed broadly and on “reasonable” terms.

In its lawsuit, Apple accused Qualcomm of refusing to
license the technology to other manufacturers to prevent them
from making the chips.

It also accused Qualcomm of selling chips while requiring
Apple to pay a separate licensing fee for the same chips, in a “no license, no chip” policy.

In addition, Qualcomm pressured network carriers to not sell
or support Apple devices made with Intel chipsets Apple said.

The KFTC fined Qualcomm $854 million in December for what it
called unfair patent licensing practices.

In February 2015, Qualcomm paid a $975 million fine in
China, while the European Union in December 2015 accused it of
abusing its market power to thwart rivals.

On Tuesday, the U.S. Federal Trade Commission filed a
lawsuit against Qualcomm, saying the San Diego-based company
used its dominant position as a supplier of certain phone chips
to impose “onerous” supply and licensing terms on cellphone
manufacturers. Qualcomm said it would contest the
FTC complaint.

Qualcomm was the sole supplier of modem chips for Apple’s
phones until the release of the iPhone 7 in September. Intel Corp supplied about half of the
modem chips for the newest models, said Stacy Rasgon, a senior
analyst at Bernstein Research.

Apple made the move around the same time that Samsung, which
had switched to using its own internal chips for its Galaxy S6
phones, returned to Qualcomm for the Galaxy S7.

Qualcomm “has been able to manage through (the Apple
contract loss) pretty well because they got back Samsung at the
same time,” Rasgon said.

Apple is known for seeking multiple suppliers to keep prices
down, said Jim Morrison, vice president of technical
intelligence for TechInsights, which tears down devices to
analyze their parts.



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