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Apple files $1 billion lawsuit against chip supplier Qualcomm

January 21, 2017
 
Apple files $1 billion lawsuit against chip supplier Qualcomm

People line up at an Apple store shortly before it opens in Beijing

Apple Inc filed a $1 billion lawsuit against supplier Qualcomm Inc on Friday, days after the U.S. government filed a lawsuit that accused the chip maker of resorting to anticompetitive tactics to maintain a monopoly over a key semiconductor in mobile phones.

Qualcomm is a major supplier to both Apple and Samsung Electronics Co Ltd for “modem” chips that help phones connect to wireless networks. The two companies together accounted for 40 percent of Qualcomm’s $23.5 billion in revenue in its most recent fiscal year.

In the lawsuit filed in U.S. District Court for the Southern District of California, Apple accused Qualcomm of overcharging for its chips and refusing to pay some $1 billion in promised rebates for chip purchases. Apple said in its complaint that Qualcomm withheld the rebates because of Apple’s discussions with South Korea’s antitrust regulator, the Korea Fair Trade Commission.

“If that were not enough, Qualcomm then attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm’s release of those payments to Apple. Apple refused,” Apple said in its lawsuit.

Qualcomm did not immediately respond to a request for comment on the Apple lawsuit.

The KFTC fined Qualcomm Inc 1.03 trillion won ($854 million) in December for what it called unfair practices in patent licensing, a decision the U.S. chipmaker said it will challenge in court.

In February 2015, Qualcomm paid a $975 million fine in China following a 14-month probe, while the European Union in December 2015 accused it of abusing its market power to thwart rivals.

A Qualcomm building in San Diego California

In Washington on Tuesday, the U.S. Federal Trade Commission filed a lawsuit against Qualcomm, saying the San Diego-based company used its dominant position as a supplier of certain phone chips to impose “onerous” supply and licensing terms on cellphone manufacturers like Apple and to weaken competitors.

Qualcomm said on Tuesday it would contest the FTC complaint.

Qualcomm was the sole supplier of modem chips for Apple’s phones until the release of the iPhone 7 in September. Intel Corp supplied about half of the modem chips for the newest models, said Stacy Rasgon, a senior analyst at Bernstein Research.

Apple made the move around the same time that Samsung, which had switched to using its own internal chips for its Galaxy S6 phones, returned to Qualcomm for the Galaxy S7.

Qualcomm “has been able to manage through (the Apple contract loss) pretty well because they got back Samsung at the same time,” Rasgon said.

Apple is known for seeking multiple suppliers to keep prices down, said Jim Morrison, vice president of technical intelligence for TechInsights, which tears down devices to analyze their parts.

“It promotes competition in the supply chain because everybody wants to be the dominant supplier to Apple,” Morrison said. – Reuters

 
 
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