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Qualcomm will receive IP royalties even if the company face competition from Apple in the future

Qualcomm skyrocketed after they announced an agreement with Apple. CEO Tim Cook was asked about the agreement with Qualcomm during Tuesday`s earnings call and he said Apple is satisfied with the resolution.

Qualcomm is the world`s leading chip designer for wireless technologies, including 3G and 4G/LTE, and the company wants to be the leader in 5G as well. The agreement means that Apple could offer a 5G iPhone as early as spring 2020.

“Were glad to put the litigation behind us and all the litigation around the world has been dismissed and settled. Were very happy to have a multi-year supply agreement and we`re happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution,”┬áTim Cook said on Tuesday.

The settlement also included a chipset supply agreement, and Qualcomm is expected to provide the 5G chips that Apple will need to introduce 5G connectivity in its 2020 iPhones. After the agreement, Intel said that they are dropping out of the smart phone modem chip market entirely, and they have no plans to manufacture 5G chips.

Apple will be licensing 5G IP from Qualcomm and other license holders under the Fair, reasonable, And Non-discriminatory (FRAND) terms established by ETSI throughout the 5th generation of wireless technology.

If Apple develops and integrates its own modem technology in the future, Qualcomm will not lose on that, but still receive IP royalties even if the company face competition from Apple. So, licensing for the 6th generation will depend on Apple`s participation in future standards efforts.

Qualcomm does not have its own manufacturing facilities like Intel and Samsung. Their chips are produced by contract manufacturers such as Taiwan semiconductor Manufacturing Company (TSMC), or provide licenses to produce and use its intellectual property in smartphones.

Qualcomm has been on the market for a long time. So have Taiwan semiconductor manufacturing Company. TSMC was the world`s first dedicated semiconductor foundry and has long been the leading company in its field.

Qualcomm was created in July 1985 and have 35,400 employees. Net income last year was US$4,86 billion. The company is expected to report earnings on 01 May, 2019 after market close.

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