Apple Vs. Qualcomm: Apple Ceases Royalty Payments Amid Lawsuits, Qualcomm Stock Price Plummets

The feud between Apple and Qualcomm escalated as the chip company announced Thursday Apple is completely withholding payments for royalties amid lawsuits filed by both companies.

“Qualcomm Incorporated today announced that it has been informed by Apple Inc. that Apple is withholding payments to its contract manufacturers for the royalties those contract manufacturers owe under their licenses with Qualcomm for sales during the quarter ended March 31, 2017,” the chip supplier said in a release.

Read: Apple Vs. Samsung: Apple Sees Flat 2017 Q1 Sales Despite iPhone SE, RED iPhone 7 Release

After Apple told Qualcomm it would cease all royalty payments, the chip supplier cut its prior 2017 third quarter forecast figures. Qualcomm now estimates a revenue of $4.8 billion-$5.6 billion, down from the previous numbers predicted before Apple’s move, $5.3 billion-$6.1 billion.

Qualcomm also saw its stock price plummet on Thursday.

Executive vice president and general counsel of Qualcomm, Don Rosenberg, said in a statement on Thursday:

“Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees. These license agreements remain valid and enforceable. While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts. Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade. Apple’s continued interference with Qualcomm’s agreements to which Apple is not a party is wrongful and the latest step in Apple's global attack on Qualcomm. We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.”

History Of Apple And Qualcomm’s Feud

The feud between both companies started when Apple filed lawsuits against Qualcomm. Apple claimed Qualcomm, which has a chipset business and licensing business, was charging royalties for technologies “they have nothing to do with.” Qualcomm, a major chip supplier for Apple and its rival Samsung, said the Cupertino company’s accusations were “without merit” when the lawsuits were filed.

In response, Qualcomm countersued the iPhone seller earlier this month. The chip supplier is currently seeking damages from Apple over breached agreements and negotiations with the chip supplier. Qualcomm also accused Apple of interfering with Qualcomm’s long-standing agreements with its licensees that manufacture iPhones and iPad.

Read: Qualcomm Sues Apple, Says iPhone Success Wouldn't Have Been Possible Without Its Technologies

Apple used chips from Qualcomm for its iPhones until last year’s iPhone 7. In Apple’s filing, the company said it signed a 5-year exclusivity agreement with Qualcomm. However, in the lawsuit Qualcomm filed against Apple, the company said there was no exclusivity between both companies.

After Qualcomm announced it was counter suing Apple, Rosenberg said Apple would not have been able to build the iPhone franchise without the chip company.

“Apple could not have built the incredible iPhone franchise that has made it the most profitable company in the world, capturing over 90 percent of smartphone profits, without relying upon Qualcomm's fundamental cellular technologies,” said Rosenberg earlier this month.

Apart from the accusations made by Apple in its lawsuits, Qualcomm is also being investigated in other countries for anticompetitive and monopolistic trade practices.