Apple demanded $1 billion for chance to win iPhone chip contract, Qualcomm CEO testifies

Under the 2011 deal, Qualcomm was named Apple’s sole supplier of modem chips. (Reuters)
Updated 12 January 2019
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Apple demanded $1 billion for chance to win iPhone chip contract, Qualcomm CEO testifies

  • The payment from Qualcomm to Apple was meant to ease the technical costs of swapping out the iPhone’s then-current Infineon chip with Qualcomm’s
  • While such a payment is common in the industry, the size of it was not

SAN JOSE, California: Qualcomm sought to become the sole supplier of modem chips for Apple’s iPhone to recoup a $1-billion “incentive payment” that Apple insisted on, not to block rivals from the market, Qualcomm’s chief executive testified on Friday.
The payment from Qualcomm to Apple — part of a 2011 deal between Apple and Qualcomm — was meant to ease the technical costs of swapping out the iPhone’s then-current Infineon chip with Qualcomm’s, CEO Steve Mollenkopf testified at a trial with the US Federal Trade Commission.
While such a payment is common in the industry, the size of it was not, Mollenkopf said.
Under the 2011 deal, Qualcomm was named Apple’s sole supplier of modem chips, which help mobile phones connect to wireless data networks, in exchange for which Qualcomm agreed to give Apple a rebate — the exact nature of which has not been disclosed. Apple could choose another supplier but it would lose the rebate, effectively increasing the cost of its chips.
Antitrust regulators have argued the deal with Apple was part of a pattern of anticompetitive conduct by Qualcomm to preserve its dominance in modem chips and exclude players like Intel.
At a federal courthouse in San Jose, California, Mollenkopf testified that Apple demanded the $1 billion without any assurance of how many chips it would buy, which pushed the chip supplier to pursue an exclusivity arrangement in order to ensure it sold enough chips to recover the payment.
Qualcomm was not aiming to block rivals like Intel, he said.
“The risk was, what would the volume be? Would we get everything we wanted, given that we paid so much in incentive?” Mollenkopf testified.
Earlier in the day, Apple supply chain executive Tony Blevins testified that it was Apple’s practice to pursue at least two suppliers and as many as six for each of the more than 1,000 components in the iPhone.
The company stopped trying to place an Intel modem chip in the iPad Mini 2 because losing the rebates on Qualcomm’s chips would have made the overall cost too high, he said.
“They made it very unattractive for us to use another chip supplier,” Blevins said of the rebates. “These rebates were very, very large.”


Saudi Aramco boss reveals gas and LNG ambitions amid petchems push

Updated 22 January 2019
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Saudi Aramco boss reveals gas and LNG ambitions amid petchems push

  • Saudi Aramco CEO Amin Nasser: We are in discussions in different countries with a lot of partners. We are reviewing these opportunities to make final decisions in terms of investment
  • Amin Nasser: A lot of it is in partnerships with leading companies around the world and it is either in gas investment, LNG investment or both

London: Saudi Aramco is eyeing gas and LNG acquisitions as it also prepares for the potential purchase of the Kingdom’s biggest chemical maker, CEO Amin Nasser revealed on Tuesday.

He made the disclosure in an interview with Bloomberg TV on the sidelines of the World Economic Forum in Davos.

“We are in discussions in different countries currently with a lot of partners. We are reviewing these opportunities to make final decisions in terms of investment,” Nasser said.

“A lot of it is in partnerships with leading companies around the world and it is either in gas investment, LNG investment or both.”

Aramco has also been in discussions with a credit rating agency ahead of a planned bond sale.

It comes ahead of the potential purchase of Saudi Basic Industries Corporation (SABIC), the Kingdom’s biggest chemical maker and a key part of Aramco’s ambitions to grow its global petrochemicals business.

“We will decide soon how much we would like to take from the bond market. Definitely it is going to be an international bond. We are currently in discussion with regard to how much and where,” Nasser said.

He said that the purchase price for SABIC was still under discussion.

“We are in discussion currently with the Public Investment Fund about acquisition of 70 percent of the share of SABIC. We are in discussion with regard to the price at this stage,” he said.

Earlier this month Saudi Energy Minister Khalid Al-Falih said Aramco would issue bonds in the second quarter of 2019.

Aramco’s planned acquisition of SABIC is expected to involve buying all or nearly all of the 70 percent stake in the chemicals company held by the Public Investment Fund (PIF), the Kingdom’s principal sovereign wealth fund.

Nasser said that there was no plan to acquire the 30 percent of the company that is currently publicly traded in Saudi Arabia.