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
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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.”


UAE’s Network International shrugs off Brexit to list shares in London

Updated 15 min 56 sec ago
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UAE’s Network International shrugs off Brexit to list shares in London

SEAN CRONIN DUBAI: Network International, the UAE payments processor, has committed to a London IPO next month in what would be the UK’s first big share sale of the year.
The company intends to have a free float of at least 25 percent and admission to the London Stock Exchange is expected to take place in April, Network International said in a regulatory filing on Thursday.
The planned share sale comes at an uncertain time in the UK where there is still no clarity around whether Britain will leave the EU or not at the end of the month.
VPS Healthcare, the Abu Dhabi-based hospital operator, is reconsidering plans to list in London due to uncertainty surrounding Brexit, Bloomberg reported on Thursday citing a person familiar with the matter.
The company, which operates hospitals in the Middle East, was said to be also considering listing in the US or Singapore.
Emirates NBD, Dubai’s biggest bank, owns 51 percent of Network International while Warburg Pincus and General Atlantic jointly own the rest.
The share sale will be a key test of investor demand for new listings in London after a subdued 2018 across most European markets.
“Volatility has continued in recent months, driven by the uncertainty around trade between the US and China, the wider geopolitical climate and the potential end of the current bull run,” said Peter Whelan, partner and UK IPO Lead at PwC in a recent report.
“We are seeing a healthy number of companies preparing for an IPO in 2019 despite the ongoing Brexit negotiations which have clearly impacted IPO activity on the London market.”
The payment processor reported earnings of $298 million last year according to its website, up from $262 million a year earlier. It does not disclose net income figures.
The company handles digital payments across the Middle East, which generate three quarters of its total earnings.
Last year it processed some $40 billion in payments for more than 65,000 merchants.
Its key markets in the region include the UAE and Jordan it says that Saudi Arabia offers “significant opportunities.” It also offers services in 40 African countries with Egypt, Nigeria and South Africa being its most important segments on the continent.