Qualcomm Fined $1.2 Billion for Paying Apple to Use its Mobile Chips

Qualcomm fined $1.2 billion for paying Apple to use its mobile chips

By Andy Boxall January 24, 2018

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Qualcomm has been hit with a $1.23 billion fine by antitrust regulators in Europe, after an investigation concluded it paid Apple to use its chips over those from competitors. The EU investigation began in 2015 and examined Qualcomm’s actions between 2011 and 2016. While Qualcomm is best known for the Snapdragon mobile processor, this is not the chip in question here. It’s a baseband chip that controls network connectivity, linking your phone to 4G LTE signals.

The EU antitrust commission says Qualcomm paid “billions of dollars” to Apple, and its actions “illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance.” The statement goes on to say, “no rival could effectively challenge Qualcomm in this market, no matter how good its products were.” While Qualcomm is the largest supplier of baseband chips, other manufacturers include Intel and MediaTek.

It’s revealed Apple signed an agreement with Qualcomm in 2011 to accept payments if it used Qualcomm chips exclusively in the iPhone and the iPad. If either device was launched with a competing chip in place, the payments would stop and Apple would have to return a percentage of payments already made. EU antitrust commissioner Margrethe Vestager said, “This is illegal under EU antitrust rules and why we have taken today’s decision.”

The resulting fine of 997,439,000 euros, or about $1.23 billion, represents 4.9 percent of the turnover made by Qualcomm in 2017. Qualcomm has been told it cannot enter into such agreements with companies again.

In a statement of its own, Qualcomm says it will appeal and, “Strongly disagrees with the decision.” Executive vice president and general counsel Don Rosenberg said, “We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers.”

Qualcomm faces a similar challenge in the United States. The Federal Trade Commission (FTC) sued Qualcomm in January 2017 over anticompetitive tactics related to baseband chips in smartphones. Qualcomm denies wrongdoing. The case is ongoing, and at the end of December, Apple was fined for not producing required documents to the FTC in a timely manner, so the case drags on. In 2017, Apple launched some iPhone 7 models with Intel baseband chips inside, a move that has become a point of contention in the ongoing, and separate legal battle between Qualcomm and Apple.

Update: Added statement from Qualcomm.

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