FTC Suit Blames Qualcomm In Part For High Cost Of Smartphones

Back in 2017, the U.S. Federal Trade Commission (FTC) filed a suit against Qualcomm alleging antitrust violations, and only reached trial this week. Odds are that even if the FTC wins the suit against Qualcomm, and licensing fees and royalties that smartphone makers are charged decreased, the smartphone makers would simply pocket the savings and consumers will continue to pay the same prices.

iPhone XR

While the FTC is accusing Qualcomm of antitrust violations, the price of royalties that Qualcomm charges is 5% of the cost of the device up to $20 per handset maximum. That certainly is a hefty chunk for the smartphone makers, but $20 isn't likely to make a smartphone shopper change their mind about buying a device. Qualcomm owns key patents that are required for modern smartphones to operate. Competitors, such as Intel, also offer competing LTE modems, but Qualcomm effectively owns the market.

During the trial, Apple executive Tony Blevins accused Qualcomm of using strong-arm tactics with Qualcomm president Cristiano Amon allegedly having told Blevins during negotiations in 2013, "I'm your only choice, and I know Apple can afford to pay it." Blevins also stated that Apple had considered using Intel chips inside the iPad Mini 2, but backed away when Qualcomm offered a discount to use its chips exclusively. 

Qualcomm maintains that it was Apple who sought out the exclusive deal in 2013. Apple eventually began using Intel wireless chips in 2016. Apple and Qualcomm have been fighting a bitter legal war having to do with patent royalties that Apple refuses to pay around the globe. Qualcomm won a sales ban against Apple in Germany that forced the iPhone 7 and iPhone 8 off the German market.

Qualcomm did admit as part of the court proceedings that it requires companies that use its chips to also license its patents, but that it has been using that practice for many years, since well before it had the market power it has today. Qualcomm says that it doesn't figure the cost of its IP into the price it charges for chips, so it licenses those patents separately.