Qualcomm shares jump after settling patent dispute with Apple

The settlement includes an undisclosed payment from Apple to Qualcomm, signing a six-year patent license deal, and a chipset supply agreement which suggests that Apple will purchase Qualcomm chips for future iPhones.

Qualcomm and Apple on Tuesday settled their royalty dispute, with an agreement to drop all ongoing litigation between the two companies worldwide.

The settlement includes an undisclosed payment from Apple to Qualcomm, signing a six-year patent license deal, and a chipset supply agreement which suggests that Apple will purchase Qualcomm chips for future iPhones.

Shares of Qualcomm soared 22% in late afternoon trading, marking it the largest gain in more than 19 years. The jump boosted the firm’s market capitalization value to more than US$84 billion. Meanwhile, Apple shares were up marginally.

Qualcomm’s competitor Intel, saw its shares dip sharply to US$56.07 from a high of US$57.47 before recovering to close at US$56.71.

Apple on Qualcomm

The settlement comes after two years of legal conflict between the two firms and Monday was when the court case between the two started.

Apple and four companies in its supply chain were initially suing Qualcomm for up to US$27 billion in damages for overcharged chip royalties. Qualcomm, which has denied on any wrongdoing, was asking for back-payments of at least US$7 billion from Apple and its suppliers in addition to billions in damages.

Apple had argued that Qualcomm was abusing its position as one of the only suppliers for cellular technology, and Qualcomm had said that Apple was using its technology without paying for it.

Since 2013, Apple and its suppliers have been arguing that the chipmaker overcharged for royalties. In 2017, Apple told its manufacturers to stop paying Qualcomm as the prices were too high. New iPhone models released in 2018 used Intel modem chips instead of Qualcomm’s.

With the settlement and agreement made between Apple and Qualcomm, analysts think it opens up the possibility to a release of a 5G iPhone sooner-than-expected, using Qualcomm’s modem technology as it supplies chips that can connect to a 5G network.

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