Qualcomm surges after announcing a settlement with Apple over patent royalties
Apple and Qualcomm have settled their royalty dispute, the companies announced in a press release.
The settlement includes a payment from Apple to Qualcomm as well as a chipset supply agreement, suggesting that Apple will buy Qualcomm chips for future iPhones. The companies did not say how much the payment will be.
Qualcomm stock rose more than 20% after the news broke, boosting its market cap by about $14.5 billion to more than $84 billion. Its Qualcomms best day since 1999.
Apple was up less than 1%. Intel, a Qualcomm competitor, sharply dipped on the news before recovering.
For years, Apple bought modem chips from Qualcomm, but it chafed under Qualcomms prices and requirement that any company using its chips would also pay licensing fees for its patents.
Apple argued that Qualcomm was abusing its position as one of the only suppliers for cellular technology, and Qualcomm contended that Apple was withholding payments that the two companies had hammered out as part of a royalty agreement.
According to Qualcomm, the new license between the two companies is six years, with a two-year option to extend. It includes a one-time payment from Apple to Qualcomm. The amount of the payment was not disclosed.
In November, Qualcomm CEO Steve Mollenkopf said that he believed that the two companies were on the doorstep to settling. Apple CEO Tim Cook contradicted him shortly after, saying that Apple hasnt been in settlement discussions since the third calendar quarter of 2018.
New iPhone models released in 2018 used Intel modem chips instead of Qualcomms technology.
Analysts had previously said that the dispute between Qualcomm and Apple could slow down Apples plans to support next-generation 5G networks. Qualcomm is one of the top suppliers of chips that can connect to 5G networks. The agreement opens up the possibility that Apple could release a 5G iPhone sooner than expected with Qualcomms modem technology.