Apple is suing supplier Qualcomm for $1 billion, accusing the company of overcharging for its wireless chips and engaging in monopolistic tactics, reports USA Today.
Most of Apple’s and Samsung Electronics’ modem chips are supplied by Qualcomm. These are devices needed o connect to wireless networks. Collectively, the two tech giants were responsible for 40% of Qualcomm’s $23.5 billion revenues in the previous fiscal year.
In this lawsuit filed by Apple in U.S. District Court for the Southern District of California, the iPhone maker is accusing Qualcomm for having overcharged the chips and failed to refund some $1 billion rebates. In the complaint, Apple says that the reason Qualcomm held onto the rebates is because the company’s discussions with the Korea Fair Trade Commission, a South Korea antitrust regulator.
Apple said: “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.”
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While responding to the claims, Don Rosenberg, Qualcomm General Counsel said that they are baseless.
He said that Apple has advocated for the regulator to attack Qualcomm as seen in jurisdiction worldwide as well as KFTC’s recent decision. He accuse the company for having “misrepresented facts and withheld information.”
“We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits.”
Upon the news of the lawsuit going public, Qualcomm’s stock was down 2.4 percent while Apple shares (AAPL) ended 0.2% higher.
The chip manufacturer holds patents for the chips including essential patents. This refers to technology that is licensed broadly basing on “reasonable” terms.
Apple has accused Qualcomm for having failed to license the technology so that other manufacturers are prevented from making the chips.
Apple further accused Qualcomm for the “no license, no chip” policy. With this policy, Apple pays licensing fee for the same chips already sold to other firms.
In December 2016, Qualcomm was fined $854 million by KFTC for “unfair patent licensing practices.”
Earlier on in 2015 February, the firm had been fined $975 million and later on in December the same year, the EU accused it for oppressing its competitors.
Qualcomm was the sole supplier of modem chips for Apple’s phones until early September when iPhone 7 was brought into the market. Close to half of the chips in iPhone 7 have been supplied by Intel Corp. Intel’s shares closed up 1 percent at $36.94 after announcement of the lawsuit.
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Apple has made the decision at almost the same time when Samsung, which had switched to its own modem chips in Galaxy S6, returned to Qualcomm for the Galaxy S7.
Rasgon said that Qualcomm’s ability to survive Apple’s contract loss pretty well is because of having Samsung still under its wings.
Apple is reputable for having worked with multiple partners so as to ensure the prices are kept down.