Shares Of Qualcomm Rise After Surprise Settlement with Apple

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Today, Qualcomm Inc won a major victory with a shocking settlement of its wide-ranging legal dispute with Apple Inc that includes a supply agreement that paves the way for the iPhone to once again utilise the modem chips of Qualcomm including potentially for new 5G capability.

The said settlement also includes a six-year patent license and a payment from Apple to Qualcomm, however, the firms did not disclose the amount.

An analyst at Susquehanna Financial Group, Christopher Rolland, said that “this is a big win” for Qualcomm. The shares of Qualcomm rose by 23 percent to $70.45, their largest gain in over 19 years.

As their dispute intensified, Apple had exclusively relied on Intel Corp chips since 2018. The stocks of Apple marginally rose, gaining two cents to $199.25. The shares of Intel, the competitor of Qualcomm for supplying modem chips to Apple, increased by 43 cents to $56.71.

The settlement comes after two years of increasingly bitter legal conflict between the two firms. It also came as opening arguments took place at a trial in federal court that is located in San Diego.

The deal restores Qualcomm to the stable of suppliers of Apple. It could also help it return to the preeminent position that it held in the early 2010s. Qualcomm dominated the transition to 4G mobile networks and dramatically expanded its revenues.

Apple had slammed Qualcomm of making use of illegal patent practices to keep a monopoly on modem chips that connect the phones to mobile data networks. Qualcomm had said that Apple was using its technology without paying for it.

Apple started using Intel modem chips in some iPhones since 2016. Apple later stopped paying the license fees to Qualcomm and completely stopped using its chips in its iPhones last year.

Apple and Qualcomm did not disclose when their new supply agreement would begin, however, Qualcomm has released 5G chips for the next generation of wireless networks, while Intel, the current iPhone supplier, has said that it does not expect to have a 5G chip ready for phones until next year.

Stacy Rasgon, a Bernstein analyst, said that it would most likely mean that Apple is tapping Qualcomm for a 5G chip. Apple did not disclose whether it would keep Intel aboard as a supplier, however, last January the executives of the company testified at a trial between the U.S. Federal Trade Commission and Qualcomm that the policy o Apple is to always seek several suppliers.