Is Apple Using a Technicality to Avoid 3G License Fees?

[(Spork)]

You may not be aware, but Qualcomm holds a number of patents on modern 3G cellular technology. Any company making a 3G cell phone has to pay patent royalties to Qualcomm. Analyst Sanford Bernstein pointed out in a report this week that Apple appears to be taking advantage of a licensing loophole to avoid paying all those fees for the iPhone. The loophole is estimated to save Apple $290 million in fiscal 2009 alone.

Licensees must pay 5% of the wholesale price of a 3G device to the patent owner. Qualcomm?s website lists over 145 companies that have licensed their 3G technology. The list includes all major makers of 3G handsets. The one notable exception? Apple. One surprise on the list is Foxconn, the Taiwanese manufacturer of the iPhone.

The Bernstein report says that Qualcomm is being paid royalties not on the price Apple charges (average $590), but on the unit price Apple pays Foxconn, a mere $244. So instead of making $23.60 per iPhone, Qualcomm is only seeing $9.70. Apple is able to get away with this because the entire manufacturing process is done externally. Qualcomm seems fine with the arrangement. After all, $9.70 per iPhone is pretty good considering how they fly off the shelves.

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[Rudy]

You may not be aware, but Qualcomm holds a number of patents on modern 3G cellular technology. Any company making a 3G cell phone has to pay patent royalties to Qualcomm. Analyst Sanford Bernstein pointed out in a report this week that Apple appears to be taking advantage of a licensing loophole to avoid paying all those fees for the iPhone. The loophole is estimated to save Apple $290 million in fiscal 2009 alone.

Licensees must pay 5% of the wholesale price of a 3G device to the patent owner. Qualcomm?s website lists over 145 companies that have licensed their 3G technology. The list includes all major makers of 3G handsets. The one notable exception? Apple. One surprise on the list is Foxconn, the Taiwanese manufacturer of the iPhone.

The Bernstein report says that Qualcomm is being paid royalties not on the price Apple charges (average $590), but on the unit price Apple pays Foxconn, a mere $244. So instead of making $23.60 per iPhone, Qualcomm is only seeing $9.70. Apple is able to get away with this because the entire manufacturing process is done externally. Qualcomm seems fine with the arrangement. After all, $9.70 per iPhone is pretty good considering how they fly off the shelves.

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good for them i guess

[Tech Star]

Brilliant! :laugh:

[Subject Delta]

Typical of Apple

[bob_c_b]

If Qualcomm doesn't care why would you?

[Raa]

Well, if Foxconn is buying the phone license from Qualcomm, what's the problem? :p

Except for the price of an iPhone I guess!

[Subject Delta]

If Qualcomm doesn't care why would you?

My problem is the shady way Apple does business, and the way they rip off their customers. I am sure Qualcomm do care that they are being cheated out of millions of dollars due to a technicality but as long as US law stays the same they are pretty powerless to stop it. The simple fact is that Apple are charging their customers extortionate amounts for the devices, and not paying fairly for the use of other people's technology (hey I thought it was Microsoft that stole everyone else's ideas :laugh:)

[ThehAWKs]

Wow thats kinda annoying to think that Apple uses a Licensing loophole and the iPhone was so high priced to begin with.

[resol612]

My problem is the shady way Apple does business, and the way they rip off their customers. I am sure Qualcomm do care that they are being cheated out of millions of dollars due to a technicality but as long as US law stays the same they are pretty powerless to stop it. The simple fact is that Apple are charging their customers extortionate amounts for the devices, and not paying fairly for the use of other people's technology (hey I thought it was Microsoft that stole everyone else's ideas :laugh:)

I hope you have a reliable anti-flame shield. I heard fanboys are vicious.

[leph555]

show me a company that does their business with complete honesty, while being profitable

[_neutrino Veteran]

Perhaps due to the fact that Qualcomm produces most of the components for the Iphone?

[em_te]

Doesn't sound like a loophole to me. That just seems like the way the law is intended and written.

It's either that, or Qualcomm is double-dipping by requiring Foxcon to pay 5% for using the technology, and then Apple pays another 5% on top of that for selling it.

And then if we want to sell our second-hand phone, maybe we pay another 5% to Qualcomm?

[Growled Member]

Seems like smart business to me.

[sundayx Veteran]

No one in here seems to argue why Qualcomm is making billions out of a patent?

[bdsams Veteran]

No one in here seems to argue why Qualcomm is making billions out of a patent?

they devloped the technology, they incurred the R&D costs...whats the problem?

[MrA]

Perhaps due to the fact that Qualcomm produces most of the components for the Iphone?

So we're ignoring the fact that almost none of the components in the iPhone are made by Qualcomm. Lets see, the parts that could be made by Qualcomm but aren't:

- Application Processssor core: ARM

- Graphics core: Imagination Tech

- SoC: Samsung (includes the two above components and many other IP cores)

- Baseband: Infineon

- Wifi/Bluetooth: Broadcom

Source: http://www.phonewreck.com/2009/06/19/iphon...n-and-analysis/

[FloatingFatMan]

I don't see why people think this is a problem? Patent license fees are paid at the point of manufacture, not the point of sale. ALL mobile phone companies do exactly the same thing.

Do you think T-Mobile pay Qualcomm's licensing fees for the HTC phones it rebrands?

[sundayx Veteran]

they devloped the technology, they incurred the R&D costs...whats the problem?

The patent system.

It's like striking oil.

[xtrabit racing]

this situation is due to less detailed licencing agreement, IMO.

[em_te]

http://blogs.wsj.com/digits/2009/11/20/doe...hole-on-iphone/

Qualcomm?s patents cover key aspects of newer third-generation networks. So companies delivering 3G products pay patent royalties to the company, which are widely believed to average a little less than 5% of thwholesaleb> price of a cellphone.

Seems to makes sense since it should be the "wholesale" price, which is much cheaper than the "retail" price. If anything, they're not screwing Qualcomm, they're screwing us!

[The_Decryptor Veteran]

If Qualcomm doesn't care why would you?

Because Apple sux!!!

Who knows really, 3 companies come to an agreement that differs from agreements with other companies, but people don't like one of the companies involved so they make it out to be a bad thing.

[NienorGT]

Where is ACER on Qualcomm list?

This is just a pretext to bash Apple over and over...

[FloatingFatMan]

Where is ACER on Qualcomm list?

This is just a pretext to bash Apple over and over...

Acer have not been using Qualcomm's chips for that long, so maybe that list isn't recent?

[Nashy]

What a non-event this thread turned out to be.