Apple Is Refusing To Pay Royalties To Qualcomm

Qualcomm could be seeing a very bad quarter after what Apple just did. The tech giant has refused to pay any royalties that it owes to Qualcomm, the mobile chip maker, for some of the features in its iPhone.

Apple released a statement on Friday that read, “As we’ve said before, Qualcomm’s demands are unreasonable and they have been charging higher rates based on our innovation, not their own.” The company will not pay royalties until the courts determine the amount. This could take years.

Qualcomm relies on these licensing fees for a big part of its revenue and with Apple refusing to pay them could mean it would cost the company up to $500 million.

With no payments from Apple, Qualcomm now expects its revenue for its April-June quarter to range from $4.8 billion and $5.6 billion, down from its previous forecast of $5.3 billion to $6.1 billion.

Don Rosenberg, Qualcomm’s general counse released a statement and said, “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.”

Rosenberg said what Apple was doing was “the latest step in Apple’s global attack on Qualcomm.”

The mobile chip leader doesn’t have to take things sitting down though. In retaliation they could seek a court order that would halt iPhone sales until Apple does pay the royalties according to Patrick Moorhead, of Moor Insights and Strategy.

The company hasn’t gone the retaliation route yet, but it is an option.

Perhaps Apple is on the right side here as the U.S. Federal Trade Commission has also filed a lawsuit alleging that Qualcomm has been imposing unfair licensing terms on manufacturers.

Disclaimer: We have no position in Apple Inc. (NASDAQ: AAPL) nor QUALCOMM, Inc. (NASDAQ: QCOM) and have not been compensated for this article.