SAN JOSE, California (Reuters) – Qualcomm sought to become the only modem chip supplier for Apple's iPhone to recover a $ 1 billion "incentive payment" on which Apple insisted, not to block rivals from the market, Qualcomm's chief executive witnessed Friday.
PHOTO FILE: A woman checks her phone at a flagship Apple store at Iconsiam Mall in Bangkok, Thailand, November 9, 2018. REUTERS / Soe Zeya Tun
Payment from Qualcomm to Apple – part of an agreement 2011 between Apple and Qualcomm – were intended to alleviate the technical costs of replacing the Infineon chip of the iPhone at the time with Qualcomm, the CEO Steve Mollenkopf testified at a trial at the US Federal Trade Commission .
Even if such a payment is common in the industry, the size is not like that, Mollenkopf said.
In the 2011 agreement, Qualcomm was named the only Apple modem chip provider, which helps mobile phones connect to wireless data networks, in exchange for which Qualcomm has agreed to grant Apple a discount – the exact nature of which was not disclosed. Apple could choose another supplier but would lose the discount, effectively increasing the cost of its chips.
The Antitrust regulators argued that the agreement with Apple was part of a model of anticompetitive behavior by Qualcomm to preserve its dominant position on modem chips and exclude players like Intel.
In a federal court in San Jose, Calif., Mollenkopf testified that Apple claimed $ 1 billion without any guarantee of how many chips it would buy, which prompted the chip vendor to pursue an exclusive deal to insure that sold enough chips to recover the payment.
Qualcomm was not aiming to block rivals like Intel, he said.
"The risk was, what would the volume be? We would have got everything we wanted, since we paid so much in incentive?" Testified Mollenkopf.
At the start of the day, Apple Supply Chain Manager Tony Blevins testified that it was Apple's practice to prosecute at least two suppliers and six for each of the more than 1,000 members of the iPhone.
The company has stopped trying to place an Intel modem chip in the iPad Mini 2 because losing the rebates on Qualcomm's chips would have made the overall cost too high, he said.
"They made it very unattractive for us to use another chip supplier," Blevins said about the rebates. "These discounts were very, very big."
Report by Stephen Nellis; Editing by Sandra Maler and Sonya Hepinstall