Apple and Qualcomm abruptly settle legal battle as Intel exits 5G modem market

After years of back-and-forth legal battles between tech giant Apple and chipmaker Qualcomm, the two unexpectedly reached a settlement agreement this week, leaving Qualcomm to pay an undisclosed amount to Apple. To everyone’s surprise, the settlement came just two days after legal representation for both companies presented opening remarks for their most recent courtroom trial.

The trial, which began in Southern California, originated when Apple claimed Qualcomm was acting as a chipmaking monopoly, and was abusing its power to overcharge on licensing and patent fees. Qualcomm came back and accused Apple of withholding patent payments it had previously agreed to.

As part of the settlement, Qualcomm will pay Apple an undisclosed amount (most likely in the billions), and both companies have agreed to a six-year license agreement, effective April 1, 2019. The contract also includes a two-year option to extend, and a multiyear chipset supply agreement.

“The reality is two great product companies, it’s a natural position for them to work together and want to work together,” said Steve Mollenkopf, Qualcomm CEO.

A few hours after the settlement was announced, Intel, one of Qualcomm’s direct competitors, released a statement confirming the company will be leaving the 5G mobile modem market. Going forward, the chipmaker said, it would focus on “the opportunities for 4G and 5G modems in PCs, internet of things devices and other data-centric devices.”

“We are very excited about the opportunity in 5G and the ‘cloudification’ of the network, but in the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns,” said Intel CEO Bob Swan. “5G continues to be a strategic priority across Intel, and our team has developed a valuable portfolio of wireless products and intellectual property. We are assessing our options to realize the value we have created, including the opportunities in a wide variety of data-centric platforms and devices in a 5G world.”

With Intel bowing out of the market, Apple may have been pressured to settle with Qualcomm for the sake of bringing 5G technology to the iPhone. Apple’s options for 5G enabled chips would have been extremely limited if both Intel and Qualcomm were no longer options for collaboration.