As the number one producer and supplier of SoCs for the world’s top Android smartphone vendors, and the clear leader of the entire mobile LTE modem chip market, you’d probably expect Qualcomm to be financially thriving.
But although the San Diego-based semiconductor giant reported a hefty $22.3 billion in revenue and $2.6 billion operating income for the last fiscal year, mounting legal problems and an increasingly aggressive Broadcom takeover attempt are making it hard to focus on technological innovation and business profitability.
Qualcomm is in trouble not just because long-time partner Apple reportedly wants to break the alliance after realizing the so-called “double-dipping” practice is unfair, but also for “abuse of dominant market position” in an unrelated matter.
While Cupertino’s multiple complaints are yet to be resolved, the European Commission has already slapped Qualcomm with a massive €997 million fine for an anti-competitive Apple agreement covering the years 2011 through 2016.
The European Union’s legislation-enforcing institution found that the two’s agreement was in direct breach of EU antitrust rules, preventing Qualcomm’s rivals from competing in a market where the company held an over 90 percent share.
Specifically, Apple was offered “significant payments”, which “were not just reductions in price”, to exclusively use Qualcomm-made LTE baseband chipsets in iPhones and iPads. Alternative suppliers like Intel couldn’t possibly hope to get a piece of the action for themselves, at least until September 2016, when the unlawful partnership came to an end at “limited” costs, and Apple started to “source part of its baseband chipset requirements from Intel.”
€997 million is a big chunk of change, mind you, equating to over $1.2 billion right now, and representing close to 5 percent of Qualcomm’s 2017 turnover. That’s what you get for denying “consumers and other companies the benefits of effective competition, namely more choice and innovation.” Of course, Intel’s cellular modems are still inferior, according to every speed test out there, but maybe that wouldn’t have been the case if Qualcomm hadn’t abused its market dominance for so long.