SAN JOSE, California (Reuters) - Qualcomm (QCOM.O) sought to become the sole supplier of modem chips for Apple’s (AAPL.O) iPhone to recoup a $1-billion “incentive payment” that Apple insisted on, not to block rivals from the market, Qualcomm’s chief executive testified on Friday.
The payment from Qualcomm to world best processor phone Apple - part of a 2011 deal between Apple and Qualcomm - 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 U.S. Federal Trade Commission
While such a payment is common in the industry, the size of it was not, Mollenkopf said.
Under the 2011 deal, Smartphone processor ranking Qualcomm was named Apple’s sole supplier of modem chips, which help mobile phones connect to wireless data networks, in exchange for which Qualcomm agreed to give Apple a rebate - the exact nature of which has not been disclosed. Apple could choose another supplier but it would lose the rebate, effectively increasing the cost of its chips.
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 $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. Read more
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