US: Apple demanded $1 billion for chance to win iPhone

Qualcomm sought to become the sole supplier of modem chips for Apple’s iPhone to recoup a US$1 billion “incentive payment” that Apple insisted on, not to block rivals from the market, Qualcomm’s CEO testified on January 11.

According to Reuters, in 2011 Apple and Qualcomm struck the deal which was meant to ease the technical costs of swapping out the iPhone’s then-current Infineon chip with Qualcomm’s, CEO Steve Mollenkopf testified at a trial with the US Federal Trade Commission. While such payment is common in the industry, the size of it was not, Mollenkopf said.

Antitrust regulators have argued the deal with Apple was part of a pattern of anticompetitive conduct by Qualcomm to preserve its dominance in modem chips and exclude players like Intel.

At a federal courthouse in San Jose, California, Mollenkopf testified that Apple demanded the US$1 billion without any assurance of how many chips it would buy, which pushed the chip supplier to pursue an exclusivity arrangement in order to ensure it 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? Would we get everything we wanted, given that we paid so much in incentive?” Mollenkopf testified.

Full Content: Reuters

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