According to reports by Qualcomm, the suppliers of the Cupertino-based iPhone making giant – Apple – were not being paid full royalties in the second fiscal quarter of 2017 around two weeks ago because the tech giant had apparently decided to regain the unpaid royalties owed by Qualcomm.
Apple will continue this behavior until the case is resolved: Qualcomm
The chip making giant was not sure at the time whether or not the tech company would continue to pay royalties at all and now the chip manufacturer has said that the tech giant will not pay its iPhone suppliers for royalties related to sales in Quarter 2017.
Further, Qualcomm said that the tech giant has indicated that it will “continue this behavior until its dispute with Qualcomm is resolved.” The cut-offs in royalty hurts the chip making company because the licensing deals of the manufacturer are directly with the suppliers of the iPhone.
The chip making company estimated the total loss of royalty revenue to be nearly $500 million. This large amount is anticipated to hit the chip making company hard in terms of share prices and also hurt investors who are witnessing the battle between the two companies, notes MacRumors. The previous estimate of the chip maker – in its report adjusting the financial guidance for the Q3 of 2017 – has been marked down from $5.3 billion – $6.1 billion in revenue to $4.8 billion – $5.6 billion amid the continuing legal battle taking place between the tech giant and the chip making giant.
Don Rosenberg, Qualcomm general counsel, said in a statement that the chip making giant will continue to defend its business model “vigorously” as the legal dispute continues.
Apple confirms that it will not make further payments to Qualcomm
Rosenberg added, “Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees. These license agreements remain valid and enforceable. While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts.”
The legal battle between the two companies comes after a complaint filed by the Federal Trade Commission, which said that the chip making company used anticompetitive tactics to stay on top of the LTE modem supply chain for smartphones. The tech giant said that the chip maker was charging unfair royalties for tech that they have nothing to do with. In its lawsuit, the Silicon Valley company said, “Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined.”
However, the tech giant confirmed in a statement to Axios that it will not make any more royalty payments to the chip maker until a court steps in to figure out how much is owed.