Apple, Qualcomm spat intensifies, manufacturers drawn in

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The Sandiago based tech company said the defendants are continuing to pay Qualcomm royalties for use of Qualcomm's technology in non-Apple products, under the very same agreements that apply to the Apple products.

Qualcomm supplies the LTE modem in Apple's smartphone, stated the report. The chipmaker blamed Apple for dragging its contract manufacturers into the dispute, saying the decision not to give them money for royalties had stopped them from paying Qualcomm, according to the complaint. Qualcomm's lawsuit says those contractors are still paying royalties for non-Apple products.

"Our licence agreements with Apple's manufacturers remain valid and enforceable".

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Asked for comment, the company referred to an earnings call earlier this month in which Apple Chief Executive Officer Tim Cook said that the company is taking a "principled stand" because Qualcomm's "really great work" is only "one small part of what an iPhone is", so doesn't merit a cut of the entire price of the handset.

Apple sued Qualcomm in January in the US and later in China and the United Kingdom, claiming that Qualcomm abused its monopoly position in cellular chips to impose "onerous, unreasonable and costly" terms on customers and competitors. While the CMs, in theory, would be able to pay QCOM out of their cash balances, we note that the CMs operate on thin margins - Foxconn, Pegatron, Wistron and Compal had op. margins of 3.7%, 2.3%, 0.3% and 1.6%, resp.in Q1 2017 and their op. profits were $1,173MM, $179MM, $16MM and $95MM, resp. Following that, Apple launched a lawsuit of their own in which they alleged that Qualcomm had withheld payments to them as a form of "punishment" amongst other things.

Qualcomm was little changed at $55.89 at 12:45 p.m.in NY trading, while Apple dropped 2.2 percent to $152 as broader markets fell amid political turmoil in Washington. The companies make iPhones and iPads for Apple.

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Apple's manufacturers, like Foxconn, used to pay Qualcomm for the intellectual property rights to make chips that connect phones online. To deny the case would continue to impede the progression of the technology and drive up the cost of smartphones for consumers, it argued. "You are responsible for paying that".

Apple and regulators claim Qualcomm abuses its market power to overcharge for "standard-essential patents" and block competition.

Samsung and Intel are cheering on the Federal Trade Commission's lawsuit against smartphone chip maker Qualcomm, alleging the company's anticompetitive practices have created a monopoly, impeded smartphone innovation, and prevented them from competing fairly. Apple filed its suit in California in January.

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