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Qualcomm's hardball tactics squeezed Apple's iPad 2014 Intel chips

Qualcomm and the FTC face each other in the United States District Court in San Jose.

Qualcomm and the FTC face each other in the US District Court. UU In San Jose, California.

Stephen Shankland / CNET

Apple wanted to incorporate an Intel communication chip into its iPad Mini 2, launched in the fall of 2013, but Qualcomm's business methods crushed the plan, an Apple executive testified on Friday in a case of the US government. UU Directed to the power of Qualcomm in the mobile market.

Apple did not like to rely solely on Qualcomm for the modem chips, which connect devices to mobile networks, said Tony Blevins, Vice President of Acquisitions of Apple and witness of the Federal Trade Commission of the United States. In exchange for the exclusive use of its chips, Qualcomm offered reimbursements to Apple that cut costs so that they were no longer "exorbitant," an agreement that pulled Intel out of the iPad Mini 2, Blevins said in the US District Court. UU In San Jose, California.

Blevins thought that the Qualcomm agreement for the iPad Mini 2, whose code name J86 was Apple, would be a good first step in a long-term relationship. He realized otherwise at a meeting in 2013 with the president of Qualcomm, Christiano Amon, said. Amon said bluntly to Blevins: "I'm your only option, and I know Apple can pay for it," Blevins said. That ultimatum led Blevins to clean up his schedule and immediately start the Antique Project to find a second modem chip provider and "reduce the dominance that Qualcomm had for us … It was no longer a level playing field like before."

The case, filed in January 2017, confronts Qualcomm not only against the FTC but also against several FTC allies, including Apple, Intel, Huawei and Lenovo. The result could hinder or cement Qualcomm's business methods and how telephone companies buy crucial components. But it remains to be seen whether it will have much effect on the factors that consumers might notice, such as the prices of smartphones or how soon they will be connected to the next generation 5G networks.

The FTC is trying to prove that Qualcomm harmed the competition by using its domain to keep competitors out of the market. One practice that the FTC has raised is a "no license, no chips" policy that requires companies to pay for expensive patent licensing agreements before they can buy and use Qualcomm chips.

Qualcomm used difficult tactics, yes. But in the case of 2 years, the FTC must show that Qualcomm has harmed competition not only in the past but also in the future, affecting progress on things like the speed of the 5G network and the prices of chipsets, he said. the analyst of Creative Strategies Ben Bajarin. Making that case will be "very difficult," he said.

Qualcomm did not immediately respond to a request for comment. He is not scheduled to present his defense until the second half of the trial.

& # 39; No license, no chips & # 39;

Apple saw the "no license, no chips" policy first hand in 2005 by aligning vendors for the approximately 1,000 components that make up each iPhone, Blevins testified.

"We would target potential suppliers and ask for samples and technical specifications to do a value analysis," Blevins said. With Qualcomm, "we were surprised." Instead of offering samples and specifications, we received a letter indicating that they had a license agreement that had to be completed before obtaining the samples.

Worse still, Qualcomm demanded Apple to cross-license its own intellectual property, giving Qualcomm the rights to use it, Blevins said.

"We do not understand why to buy a component of them we have to sign a license agreement that requires Apple to license their IP We do not understand why that would be in the best interest of someone other than Qualcomm", said Blevins.

Apple clearly did not like being on a barrel. It is based on Intel modem processors, but the company has also discussed the modem chip agreements with MediaTek and Samsung, Blevins said.

Other critics of Qualcomm

Huawei also said Qualcomm made access to the chips conditional on intellectual property licenses.

"Qualcomm declined to provide those chipsets until we signed a license agreement," Nanfren Yu, Huawei senior legal advisor, said in a video testimony earlier this week.

A similar situation faced Mark Davis, technology director of Via Telecom, who appeared in video testimony on Friday. Qualcomm dictated the terms more than what it negotiated, he said.

"We had the option of living in the box defined by Qualcomm or going to war, as a small company, that is not practical," he said. The Qualcomm licensing agreements were "considered very expensive and unfair, but it was like a ticket, if I wanted to be in this walled garden, it was the only option available."

Aichatou "Aicha" Evans of Intel, questioned by Qualcomm in the trial, recognized the respect for her modern rival, but only for her technical prowess, not for her business model.

"They are excellent technical engineers," said Evans. "That does not give them the right given by God to use unfair commercial practices."

The FTC has many allies that help you make your case. But even if it finally prevails, do not wait for Apple or any other phone manufacturer to transfer the savings.

"Apple is not going to lower the price of its phone," Bajarin said.

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