Qualcomm just pummeled Apple over patents and technology because, well, it appears the scales tipped in Qualcomm’s favor. SemiAccurate has been saying that Qualcomm would prevail and since we first started covering this suit and Apple’s tactics, and now they have.
If you read our last piece on the suits it was pretty obvious that Apple was in the wrong, allegedly caught red handed, and dug the hole deeper with their petty and vindictive reactions. Qualcomm claims to have multiple emails where Apple gave sensitive trade secrets to a competitor, then refused to allow Qualcomm to exercise their contractual audit rights. While there may be some more evidence not presented publicly, it sure looks like Apple was in the wrong.
So rather than fixing their alleged wrongs and making Qualcomm whole, they appear to have withheld legitimate royalty payments and launched a barrage of somewhat specious trade and patent related counter-suits along with lowball press sniping. Like several other non-public IP issues, Apple seemed to think bullying, threatening, and not paying Qualcomm would bring them to heel. We will skip the intervening legal and press posturing by Apple and suffice it to say they aren’t laughing at the moment.
So what was the result? Apple on their knees begging Qualcomm for mercy. Why do we say that? Read this. Seems pretty simple, right? Apple paid Qualcomm an undisclosed sum and licensed modems from Qualcomm, likely exclusively, for six years with an option for two more. What is the problem there? First start by looking at Apple’s claims over the past two or so years on the topic. Compare and contrast the wrongs that Qualcomm was said to have committed against the evidence Qualcomm presented. Then look at who paid whom and reflect on the fact that that the magnitude of the amount Apple shelled out started with a B.
Apple was trying to cut Qualcomm down to size and marginalize them to another supplier of commodity parts. They did this by trying to build up Intel modems and even allegedly handing Intel Qualcomm’s trade secrets when the Santa Clara company could not figure out how to make a working product. For the billions Apple dumped into this enterprise, they failed because Intel, the best of the non-Qualcomm modem makers, quite literally never made a single device that met their promised specs. No we are not joking, Intel’s modem business was a mess.
How bad was it? By the end they were showing multiple versions of the same fake chip photoshopped to ‘be’ a 5G modem. Really, you can’t make this stuff up. Intel claimed release dates, specs, and all sorts of numbers but never showed actual 5G silicon, functional or not. Worse yet they never got LTE modems even close to what they promised Apple. This is Intel’s problem not Apple’s, right?
Actually it was Apple’s problem more than Intel’s. Sure Intel was ‘selling’ Apple modems with a $10 bill wrapped around each one as SemiAccurate exclusively told you last year, but finances only go so far. Remember the iPhones with 600Mbps LTE modems? You know the ones where if you put that same Qualcomm part in any other device it was a 1Gb LTE modem? Then again if you put the same Intel modem in any other device it was a 600Mbps modem, not that there were any other customers dumb enough to use that device despite the contra-revenue pricing. Apple literally crippled their Qualcomm modem to match Intel’s so the finance set would put pressure on Qualcomm.
Although both devices were the same spec on paper, the Qualcomm iPhone had 30% more throughput at than the Intel one under the same conditions. What they didn’t say and that SemiAccurate has tested in the lab is that the Intel modems used about 30% more energy to be 30% slower, something that was pretty similar to previous generations. In short the efficiency of the Intel modem was horrific compared to Qualcomm’s and radio efficiency is the key to phone battery life and performance.
Apple was in a bind but they persisted bravely. No stupidly. OK we will give them credit for playing the long game but anyone who had an iPhone 7/8 with an Intel modem unquestionably got a second class device. Although it is out of the scope of this article, carriers who were forced to sell the Intel modem variant were none too pleased either, SemiAccurate learned a few new phrases talking to them, lets just say it hurt the carrier’s profitability too.
And Apple soldiered on desperately trying to break Qualcomm at the cost of their device’s performance and quality. And they carried on with their counter-suits. And Qualcomm held their ground. As things stand now, the fastest iPhone is the XS with a Cat 16 modem running at 1Gbps. The author has an LG G8 at his side with a Snapdragon 855 capable of 2Gbps LTE. Sadly we haven’t been able to pull power numbers on this generation yet but we would be shocked if the Intel part came close to Qualcomm’s efficiency.
Then there is 5G. Qualcomm has been demonstrating working 5G devices for years. Their X50 and X55 modems have been doing over-the-air demos for years and X50 is on sale now in several markets where 5G is lit up. Intel showed photoshopped chips. Then they canceled the XMM 8060 because our moles say that Apple rejected it because, “it didn’t work”. So enter the next gen XMM 8160, a product so real that Intel never showed it in public, device or demo, and Photoshopped the same picture for a second generation to prove they had real silicon. Hint: They didn’t. We will have more on this separately but suffice it to say Intel’s ability to make a functional 5G modem was predicated on their ability to make a fully functional LTE modem. They never were able to do that.
Then Apple suddenly caved. And paid Qualcomm handsomely for their troubles. And agreed to buy 5G modems from Qualcomm for the next 6-8 years. Qualcomm beat Apple like a drum because they were in the right and Apple was in the wrong. But why did Apple fold now? Why didn’t they drag things out for another few decades in court through appeals, delays, and the spurious tactics they deployed against Samsung?
There is a really good reason for that, Apple was screwed and would have lost the iPhone market if they had waited any longer. Qualcomm had Apple over a barrel and just had to wait. The longer Apple postured and threatened, the stronger Qualcomm’s position got, and likely the bigger the check Apple had to write was.
Why? And what of Apple’s rather large internal modem team? This is where things get really interesting.
Note: The following is analysis for professional level subscribers only.
Disclosures: Charlie Demerjian and Stone Arch Networking Services, Inc. have no consulting relationships, investment relationships, or hold any investment positions with any of the companies mentioned in this report.