Apple demanded $1 billion for chance to win iPhone: Qualcomm CEO

Antitrust regulators have argued the deal with Apple was part of a pattern of anticompetitive conduct by Qualcomm to preserve its dominance in modem chips and exclude players like Intel

Apple demanded $1 billion for chance to win iPhone: Qualcomm CEO

Apple held talks with Samsung Electronics Co, and MediaTek along with existing vendor Intel Corp to supply 5G modem chips for 2019 iPhones, according to an Apple executive's testimony at a trial between Qualcomm and the US Federal Trade Commission on Friday. All iPhones came with Qualcomm chips until 2016, when some iPhone 7 and 7 Plus models started to come with Intel chips. iPhone X models came with both Qualcomm and Intel chips.

Earlier in the day, Apple supply chain executive Tony Blevins testified that it was Apple's practice to pursue at least two suppliers and as many as six for each of the more than 1,000 components in the iPhone.

Antitrust regulators argue that Qualcomm's deal with Apple is symptomatic of the way Qualcomm behaves more generally, with anticompetitive practices created to block out rival chipmakers. Apple could choose another supplier but it would lose the rebate, effectively increasing the cost of its chips.

Apple's alleged reasoning was that swapping modems was expensive and the incentive would "ease the technical costs". As a result of the $1bn payment, Qualcomm offered Apple a rebate - the size of which hasn't been revealed - under the condition that it would only apply if Qualcomm chips were exclusively used. However, between 2016 and 2017 Apple utilized Qualcomm and Intel chips.

"The entire concept of Project Antique was to find a second supplier". Ot did not want to rely too much on a single supplier.

Needless to say, that is the argument for the courts, but the sheer fact that a huge chunk of Qualcomm's revenue comes from royalty fees instead of chip sales adds water in Apple's argumentation mill that the double-dip licensing fees that Qualcomm demands are excessive.

"They made it very unattractive for us to use another chip supplier", Blevins said of the rebates.

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.

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