Apple Suppliers Lodge Antitrust Allegations Against Qualcomm

Qualcomm faces new antitrust allegations from four companies that supply parts and components for the iPhone to Apple. The four companies, Pegatron Corp, Compal Electronics, Wistron Corp and Hon Hai Precision Industry Co, Foxconn’s parent, now say that Qualcomm engaged in violations of the United States antitrust law, the Sherman Act.

Filed on Tuesday in California’s Southern District, the accusations now counter a claim in a lawsuit by Qualcomm which was filed two months ago and which sought to demand that the suppliers pay the license fees, a demand which Apple had asked them to ignore.

“Qualcomm has confirmed publicly that this lawsuit against our clients is intended to make a point about Apple and punish our clients for working with Apple. The companies are bringing their own claims and defenses against Qualcomm,” said Theodore Boutrous, an attorney for the four firms, in a statement.

Business model

A broader dispute between Qualcomm and Apple has been raging over the past few months. Primarily, the dispute is over the business model of Qualcomm which links patent licenses with the sale of chipsets. Qualcomm has also faced regulatory scrutiny in a couple of countries including the United States and South Korea over the same.

Earlier in the year Qualcomm was sued by Apple over allegations that the chipmaker had withheld patent license rebates worth close to $1 billion in retaliation for the fact that the iPhone maker had cooperated with regulators in South Korea. Apple then asked its parts and component suppliers to stop making license payments to Qualcomm. This resulted in the chip maker suing the contract manufacturers two months ago.

Indemnification agreement

In a conference call which was held on Wednesday the president of Qualcomm, Derek Aberle, accused Apple of inciting the contract manufacturers into refusing to pay the license fees resulting in the current standoff. The language used in the allegations the contract manufacturers are making mirrors what Apple used in objecting to the business model of Qualcomm.

A senior executive at the Cupertino, California-based tech giant confirmed that Apple was funding the legal defense of its contractors since they had an indemnification agreement. The iPhone maker is also now a defendant in the case brought forward by the contract manufacturers.

As a result of the loss in license revenues, Qualcomm’s sales are expected to fall. In the quarter ending in June, Wall Street expects the chip maker to report revenues of $5.2 billion, a decline from $6 billion from a similar period a year ago.

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