Apple demanded $1 billion for chance to win iPhone chip contract, Qualcomm CEO testifies

Under the 2011 deal, Qualcomm was named Apple’s sole supplier of modem chips. (Reuters)
Updated 12 January 2019
0

Apple demanded $1 billion for chance to win iPhone chip contract, Qualcomm CEO testifies

  • The payment from Qualcomm to Apple was meant to ease the technical costs of swapping out the iPhone’s then-current Infineon chip with Qualcomm’s
  • While such a payment is common in the industry, the size of it was not

SAN JOSE, California: Qualcomm sought to become the sole supplier of modem chips for Apple’s iPhone to recoup a $1-billion “incentive payment” that Apple insisted on, not to block rivals from the market, Qualcomm’s chief executive testified on Friday.
The payment from Qualcomm to Apple — part of a 2011 deal between Apple and Qualcomm — was meant to ease the technical costs of swapping out the iPhone’s then-current Infineon chip with Qualcomm’s, CEO Steve Mollenkopf testified at a trial with the US Federal Trade Commission.
While such a payment is common in the industry, the size of it was not, Mollenkopf said.
Under the 2011 deal, Qualcomm was named Apple’s sole supplier of modem chips, which help mobile phones connect to wireless data networks, in exchange for which Qualcomm agreed to give Apple a rebate — the exact nature of which has not been disclosed. Apple could choose another supplier but it would lose the rebate, effectively increasing the cost of its chips.
Antitrust regulators have argued the deal with Apple was part of a pattern of anticompetitive conduct by Qualcomm to preserve its dominance in modem chips and exclude players like Intel.
At a federal courthouse in San Jose, California, Mollenkopf testified that Apple demanded the $1 billion without any assurance of how many chips it would buy, which pushed the chip supplier to pursue an exclusivity arrangement in order to ensure it sold enough chips to recover the payment.
Qualcomm was not aiming to block rivals like Intel, he said.
“The risk was, what would the volume be? Would we get everything we wanted, given that we paid so much in incentive?” Mollenkopf testified.
Earlier in the day, Apple supply chain executive Tony Blevins testified that it was Apple’s practice to pursue at least two suppliers and as many as six for each of the more than 1,000 components in the iPhone.
The company stopped trying to place an Intel modem chip in the iPad Mini 2 because losing the rebates on Qualcomm’s chips would have made the overall cost too high, he said.
“They made it very unattractive for us to use another chip supplier,” Blevins said of the rebates. “These rebates were very, very large.”


China’s Huawei books record sales in its smartphone business

Updated 24 January 2019
0

China’s Huawei books record sales in its smartphone business

  • Huawei last month flagged that total revenue in 2018 rose 21 percent to $109 billion without providing a breakdown of segment performance
  • Some countries such as the United States and its allies, including Australia and New Zealand, have restricted Huawei’s access to their markets

BEIJING/HONG KONG: China’s Huawei Technologies Co. Ltd. said on Thursday its consumer business sales exceeded a record $52 billion in 2018, on strong demand for its premium smartphones, even as it continued to face heightened global scrutiny of its activities.
The jump of around 50 percent in the technology giant’s consumer business revenue saw that unit replace its carrier business as its largest segment by sales, Richard Yu, the head of the consumer division, said in Beijing.
Huawei last month flagged that total revenue in 2018 rose 21 percent to $109 billion without providing a breakdown of segment performance.
Huawei on Thursday also unveiled its first 5G base station chipset called Tiangang as well as its 5G modem Balong 5000, which it described as the most powerful 5G modem in the world.
Yu said it was the world’s first 5G modem that fully supports both Non-Standalone (NSA) and Standalone (SA) 5G network architecture.
The firm has been using its chipsets in its high-end phones and server products, though it has said it has no intention to become a standalone semiconductor vendor that competes against the likes of Intel Corp. and Qualcomm Inc.
Huawei, the world’s biggest producer of telecommunications equipment, has been facing intense scrutiny in the past year over its relationship with China’s government and US-led allegations that its devices could be used by Beijing for spying. The firm has repeatedly denied the accusations.
Some countries such as the United States and its allies, including Australia and New Zealand, have restricted Huawei’s access to their markets.
The firm’s finance chief Sabrina Meng Wanzhou, also daughter of its founder, was arrested in Canada last month at the behest of the United States.
She has been released on bail but is still in Canada as the United States pursues her extradition on allegations she defrauded banks with Iran-related sanctions. Huawei has denied wrongdoing.