Is Qualcomm price gouging phone makers? Not everyone thinks so

America’s competition commissioners didn’t want to prosecute Google, which operates a monopoly in over a dozen markets, so why are they complaining about Qualcomm? Yesterday, the FTC filed a complaint against the San Diego chip giant following a South Korean indictment, and two EU probes into Qualcomm’s practices. Qualcomm …

[BillG]

Bull.

I've been in the semiconductor industry all my adult life and I've seen this type of play before. Apple, or someone else, is making the unreasonable demand that they want to know the cost of Qualcomm's chips so they can determine (cough, cough) if they are being paid a fair price. This is, of course, bullshit. I've had this demand made of me before and I politely tell them "no".

The price of something is the market value that people are willing to pay for it. I learned this in high school. If you have something nobody else has, you can charge a premium for it. Duh.

Also, you don't license your most competitive IP to your competitors because they get to see your proprietary IP and put you out of business.

Last, I doubt Apple is being given a "rebate". Apple is being given a standard volume discount, but since Apple buys in such huge quantities the discount may not be figured out until later.

It looks like somebody in the FTC has been paid off, big-time.

[Steve Davies 3]

Re: Bull.

Don't forget that Samsung buys more 'chips' from Qualcomm (or is licensed to make them) than Apple. Perhaps that is why Qualcomm had to pay a fine in Korea.

As Qualcomm were until recently a virtual monopoly in this area isn't it right that the FTC looks into their practices.

Personally, I think that this is a last throw of the dice by the FTC. I don't expect them as an organisation to last long under the rule of Trump.

[hellwig]

Re: Bull.

Personally, I think that this is a last throw of the dice by the FTC. I don't expect them as an organisation to last long under the rule of Trump.

I don't expect Apple to last longer under Trump if they continue making their products over seas, but that's only if you think Trump can get it done.

The problem that Qualcomm has is the other restrictions, such as "Your phone can ONLY use Qualcomm if you want the best. If you put an Intel radio in there, you don't get the best price".

If I recall, Intel themselves got in trouble (and paid AMD almost $2billion to settle out of court) because they were paying companies like Dell to ONLY sell Intel CPUs.

By reducing costs for people only using Qualcomm tech, that could be seen in a similar light. It's just odd that Intel is on the "abused" side this time.

[Steve the Cynic]

Re: Bull.

"Also, you don't license your most competitive IP to your competitors because they get to see your proprietary IP and put you out of business."

Tsk. It's *patented* IP, so they have had to publish (as part of the patent application) enough details that a skilled practitioner (that is, any company likely to compete) can make widgets based on the IP, so while it might be proprietary, it *isn't* secret.

Of course, the said practitioner may not sell the widgets without a patent license, but that's a separate issue.

And, of course, whether it is interesting to license the patents depends on:

* Can you make it for (not counting the costs of licensing) less than the competitors? If so, go for it.

* If you can't, can you make enough on the licensing income to make up the shortfall? If so, go for it.

* Is the technology part of a wider standard, like most mobile telephony "utility" patents are?

* Does the relevant standards body require members to make the licenses available on the "FRAND" basis (most do)?

(At https://en.wikipedia.org/wiki/Reasonable_and_non-discriminatory_licensing the Unreliable Source claims that FRAND = Fair, reasonable and non-discriminatory.)

[BillG]

Re: Bull.

Tsk. It's *patented* IP, so they have had to publish (as part of the patent application) enough details that a skilled practitioner (that is, any company likely to compete) can make widgets based on the IP, so while it might be proprietary, it *isn't* secret.

Not exactly. While the patent contains the "what", the secret sauce of semiconductor IP is in the "how". As in How do you route the traces, and How do you keep the power domains from interfering with each other. Sure you can decap the chip, everyone does it, but it's now common practice to put in false traces or even have some of the chip self-destruct when decapped.

[Steve the Cynic]

Re: Bull.

Sure, but knowing how to do those things is part of being a skilled practitioner. And if it isn't possible to make your own chip *just* from the information in the patent, then the patent isn't strictly speaking valid (or there is a separate patented spoonful of special sauce that must be referenced). There *must* be enough information in the patent to allow that skilled practitioner to duplicate the invention.

Of course, getting a patent clerk to recognise when that information is missing is a separate challenge.

[Anonymous Coward]

I read elsewhere

That Qualcomm is only offering to license their CDMA patents based on a percentage of the cost of the entire phone. If true, they're doing something that's been held by multiple courts to be a violation of FRAND. If that's not true, then what's the explanation for why NO ONE offers a CDMA capable chipset other than Qualcomm?

Those who sometimes wonder why Samsung ships phones in the US that don't have Samsung's own SoC can see why - likely they don't feel it is worth paying licensing fees to Qualcomm to do a CDMA version for the US and other markets that use it. Now maybe that's because they don't feel the volume is there, but they sell a LOT of phones in the US so that's hard to swallow. The problem is, in the US a larger percentage of them are high end (Galaxy S or Note) than probably anywhere else, which means if they would be required to pay royalties based on the price of the entire phone it would be far more expensive - much cheaper to use Qualcomm's chipset in those phones.

Obviously it is convenient for OEMs to build phones that cover the entire world market, but that's only possible if you use Qualcomm's chipset. Apple had a true world phone and took a step back with the 7, where the models (sold for AT&T & T-Mobile in the US) that had the Intel chipset could not be used on Verizon/Sprint's 3G CDMA network - they would only work on those networks in LTE. Supposedly they are a bit slower on LTE but who cares, the real issue is reduced resale value since it isn't of use to half the cellular subscribers in the US!

I think where Apple is going with using Intel's chipset is that they eventually intend to use it for all their phones, once the CDMA networks are almost completely replaced. Instead of installing Intel chips they'll simply license the IP and include the baseband on their SoC. Cheaper to make, lower power, and they'll control the baseband software instead of using Qualcomm's which may well have backdoor access for the NSA (either intentionally or unintentionally)

[diodesign]

Re: I read elsewhere

"Qualcomm is only offering to license their CDMA patents based on a percentage of the cost of the entire phone"

That is something Qualcomm does (Register passim) and has got it into trouble around the world for its, er, unorthodox approach. It typically asks for a percentage of the phone cost in royalties.

C.

[EnviableOne]

Anti-Trust Issues

by tying licensing royalties to chip supplies

Surely this is the same as Microsoft was doing with bundling IE with windows.

EU had an issue there, why not here.

[Anonymous Coward]

Re: Anti-Trust Issues

The EU would have to receive a complaint about this behavior to initiate an investigation, wouldn't they? Since CDMA is primarily used in the US it doesn't really affect the EU, and there are no longer any major phone OEMs in the EU since Nokia, Ericsson, etc. are non-factors in today's smartphone market. Surely they have bigger fish to fry.