Apple, Qualcomm reach agreement in royalty dispute

Tech giant Apple Inc has reached an agreement with US chip major Qualcomm Inc to end their two-year legal battle over technology licensing fees, as the smartphone vendor steps up its efforts for the forthcoming 5G era.

The move signifies that Apple is prioritizing the need for a stable supplier of 5G modem chips over business disputes, and the global 5G smartphone battle is finally on, putting more pressure on Chinese companies, experts said.

Apple said in a statement that the two companies had inked an agreement to dismiss all litigation between them worldwide. The settlement includes an undisclosed payment from Apple to Qualcomm.

Apple and Qualcomm have also inked a six-year licensing agreement, effective April 1, 2019, including a two-year extension option, and a multiyear chipset supply agreement.

The agreements mean that Apple's newest iPhone models, especially upcoming 5G models, will use Qualcomm's modem chips. The iPhone used to rely entirely on Qualcomm's chips, but from 2016 Apple started using Intel Corp's modem chips in some models.

When it comes to 5G modems, however, Intel failed to provide qualified products for iPhones, so Apple had no other choice but to put disputes aside and get Qualcomm as its supplier again, said Fu Liang, an independent analyst who has been following the telecom industry for more than a decade.

Shares in Qualcomm surged 23 percent after the announcement, while Apple's remained flat on Tuesday.

Xiang Ligang, director-general of the Information Consumption Alliance, said the move signifies that Apple is now ratcheting up resources into the research and development of 5G smartphones, as its rival Huawei Technologies Co and Samsung Electronics Co have already showcased their 5G models.

"Though Qualcomm's way of charging technology licensing fees costs Apple a large amount of money, the US smartphone vendor is now putting more focus on having modem chips that will connect the iPhone to the new, fifth-generation wireless networks," Xiang said. "Apple does not want to risk falling behind its rivals."

"Apple's intensified input will put more pressure on Chinese smartphone vendors," Xiang said.

Chinese tech company Huawei unveiled its first 5G foldable smartphone in February. More than 40 5G smartphone models are expected to be unveiled globally in 2019, according to a report from market research agency IHS Markit.

The first batch of 5G smartphones is likely to be priced above 8,000 yuan ($1,166), China Mobile, the country's largest telecom carrier, said in December.

The market research agency Counterpoint predicted that the global 5G smartphone shipments are expected to reach 108.2 million units in 2021, up an estimated 255 percent year-on-year, which partially offset the continued shrinking of 4G handset volumes.