The settlement includes a one-time payment from Apple to Qualcomm. The companies have entered into a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend. A multiyear chipset supply agreement has also been put into place.
All worldwide litigation will be dismissed and withdrawn, including claims involving Apple’s contract manufacturers.
Both the global patent and the chipset supply agreement are expected to contribute an incremental EPS of approximately $2.00 as product shipments ramp.
The agreement between Qualcomm and Apple appears to have been driven by Intel ending its efforts in 5G modems for smartphones. Intel has said it plans to quit the 5G smartphone modem business and to consider whether to continue with 4G and 5G modems for PCs and IoT devices. The decision to quit the 5G modems business seems to be part of strategic move for Intel away from consumer sector, such as PCs, to focus on data center and networking business. The company said it will continue to invest in producing chips for 5G networking infrastructure.
Intel also said it would continue to meet its commitments to supply its 4G smartphone modem product line but does not expect to launch 5G modems for smartphone, including those originally planned for launches in 2020.
Other options potentially for Apple include using Huawei chips or developing their own 5G modems. However, using Huawei chips would have caused problems for Apple in today's political environment and the fact that these chips are not allowed to be sold in the USA. Apple could develop their own 5G modems but this option would take a few years at least delaying a 5G iPhone until the after 2020. The agreement with Qualcomm could enable a potential 5G iPhone this year.
See also: Apple purchases on-device AI startup
See also: Qualcomm