Abstract:
Qualcomm announced on September 24 that it had extended its chip-related patent license agreement with Apple, and the new agreement will take effect on April 1, 2027. This renewal continues the cooperative relationship established by the two companies after the long-term patent and baseband chip disputes ended in 2019. It also means that even if Apple continues to expand the use of self-developed modem chips, the patent licensing relationship between Qualcomm and Apple will continue.
Qualcomm did not announce the specific commercial terms of the agreement, including licensing fees and the specific term of the new agreement, and the two companies did not disclose more details.
The current partnership between Qualcomm and Apple stems from a global settlement agreement reached in 2019. Prior to this, the two companies launched a two-year global legal dispute over wireless communication patent licensing fees and modem chip supply issues.
In April 2019, the two companies reached a settlement just as a jury trial was about to begin in San Diego, California, USA. Under the arrangement at the time, Apple paid Qualcomm an undisclosed amount, and the two companies withdrew ongoing global litigation and signed a six-year global patent licensing agreement, effective April 1, 2019.
The original agreement also gave Apple the option to extend the licensing period for two years. With this renewal, Apple actually exercised this extension arrangement, allowing the patent licensing relationship between the two parties that originally lasted until the end of March 2027 to continue to extend backward.
The importance of this agreement lies in the fact that it and Qualcomm's supply of communication chips to Apple are two related but different business relationships. Even if Apple gradually reduces its reliance on Qualcomm modem chips, Qualcomm can still continue to charge Apple related fees through patent licensing business.
In recent years, Apple has been promoting self-developed modem chips and has begun to adopt self-developed solutions in some products. As Apple further expands the use of self-developed baseband chips, Qualcomm's chip sales revenue from Apple is expected to continue to decline.
Qualcomm CEO Cristiano Amon has previously said that Qualcomm's revenue from Apple products may decline faster than previously expected due to Apple's increased use of self-developed modem chips. Qualcomm had previously expected that the proportion of Qualcomm components used in the next generation iPhone would be about 20%, but due to factors such as supply conditions and the advancement of Apple's self-developed chips, the actual proportion may be significantly lower than this level.
This means that the cooperation between Qualcomm and Apple is undergoing structural changes: the modem chip supply relationship that the two parties were highly dependent on in the past is gradually weakening, but the licensing relationship surrounding Qualcomm's wireless communication patents remains.
Qualcomm’s patent licensing business is operated by Qualcomm Technology Licensing, which manages Qualcomm’s large number of wireless communication technology patents. Even if a device manufacturer uses its own modem or purchases chips from another supplier, as long as the relevant product uses essential communications patents owned by Qualcomm, it may still need to pay patent licensing fees in accordance with the licensing arrangement reached by the two parties.
Apple has also been gradually reducing its reliance on Qualcomm chips in recent years. Apple has previously launched self-developed modems and begun applying them to some iPhone products. As self-developed chip technology further matures, Apple may reduce the use of Qualcomm chips in more products in the future.
However, the self-developed modem does not mean that the patent relationship between Apple and Qualcomm will automatically end. Communication standards involve a large number of basic patents, and even if a manufacturer does not use a specific supplier's chips, it may still need to obtain authorization for relevant standard essential patents. Therefore, the extension of the license agreement between the two parties is not exactly the same issue as whether Apple will continue to purchase Qualcomm modem chips.
The 2019 settlement also ended a legal dispute between the two companies that had been ongoing in multiple jurisdictions around the world. At that time, Apple accused Qualcomm of abusing its market position and charging excessive patent licensing fees, while Qualcomm countersued Apple for violating relevant agreements and involving patent issues. In the end, both parties chose to end the two-year global litigation through settlement.
The extension of the agreement shows that although Apple is gradually getting rid of its dependence on Qualcomm communication chips, the two parties still need to maintain a stable patent licensing relationship. For Qualcomm, this also means that its huge patent portfolio can continue to derive licensing revenue from Apple's business after Apple's chip procurement scale decreases.
For Apple, extending the agreement can continue to ensure that its products obtain necessary wireless communication patent authorizations in the global market sales process, while avoiding the two parties from re-erupting in large-scale legal disputes over patent authorization issues similar to those between 2017 and 2019.
At present, the two companies have not announced how long the agreement will be extended, nor have they disclosed the new licensing fee arrangement. What is certain is that the new agreement will take effect from April 1, 2027. As Apple continues to develop its own modem chips, the relationship between Qualcomm and Apple will increasingly shift from "chip supplier and customer" to "communication patent licensee and equipment manufacturer" in the future.
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