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Apple 'demanded $1bn' for Qualcomm to get iPhone deal

14 January 2019

According to a report from Reuters, based on testimony provided by Apple supply chain executive Tony Blevins during the ongoing trial between the Federal Trade Commission (FTC) and Qualcomm, Apple went to Qualcomm initially due to the rebates in place for patent licensing costs.

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 split orders between Intel and Qualcomm in 2016 and moved all of its orders to Intel previous year for its new iPhones.

Court findings may show that Qualcomm took advantage of its exclusivity for a time - a Qualcomm executive reportedly strong-armed an Apple exec into paying its prices by saying "I'm your only choice, and I know Apple can afford to pay it". Qualcomm's argument for the court is that a $1 billion of incentive payments to switch suppliers is an unusually high amount, so it had to ensure cost recuperation somehow, hence demanding that future iPhones come with its modems inside only.

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Qualcomm was not aiming to block rivals like Intel, he said.

"The entire concept of Project Antique was to find a second supplier. Would we get everything we wanted, given that we paid so much in incentive?" But Apple's lawsuit against Qualcomm filed in early 2017 caused their business relationship to change "in a very profound and negative manner", leading to using only Intel's modems for the phones released a year ago.

Blevins said that talking with Samsung, whose Galaxy and Note devices compete against the iPhone, is "not an ideal environment" for Apple, but that Samsung is now the largest component supplier to Apple. In this case, Apple was in early discussions to put the chips in the 2019 iPhone lineup.

Apple 'demanded $1bn' for Qualcomm to get iPhone deal