Surprise! Apple and Qualcomm just settled: Is a 5G iPhone coming soon?

Surprise! Apple and Qualcomm just settled: Is a 5G iPhone coming soon?

Qualcomm hit back with a countersuit accusing Apple of instructing its contractors to withhold royalty payments to Qualcomm - and the litigation snowballed from there.

Apple and Qualcomm announced a chipset supply agreement yesterday so this year's upgrades should revert to using Qualcomm - to sighs of relief from some of the potential upgraders.

Shares of Qualcomm jumped 22 per cent in late afternoon trading, their biggest gain in more than 19 years.

The deal with Apple, coming at the cusp of the rollout of high-speed 5G network, could help Qualcomm return to the preeminent position it held in the early 2010s when it dominated the transition to 4G mobile networks and expanded revenues dramatically.

Both Apple and Huawei had been at odds with Qualcomm over patents and royalties over modems. The iPhone used to rely entirely on Qualcomm's chips, but from 2016 Apple started using rival Intel's modem chips in some models. The company has been developing its own modems but those weren't expected to be ready until 2020 at the earliest, with 2021 being a more realistic date.

The Apple-Qualcomm spat has also led to reciprocal patents complaints.

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Just how much Apple has to pay will likely be revealed eventually, since both Apple and Qualcomm are public companies that have to report financial results. The two companies have been at odds since Apple ordered its suppliers to stop paying patent royalty fees to Qualcomm in 2017. The two battling companies also agreed to a six-year license agreement, effective April 1, as well as a surprise multi-year chipset supply agreement.

A jury of six men and three women was in the process of hearing opening arguments from Apple's and Qualcomm's lawyers, at a federal court in San Diego, when news of the settlement broke.

"In the USA, around 5G it's Qualcomm's world and everyone else is just paying rent", said Dan Ives, an analyst with Wedbush Securities.

Shares of Qualcomm soared after the news of the settlement was broken by CNBC's David Faber.

The settlement was reached just one day after the two companies' antitrust trial began in federal court in San Diego. Instead, you can expect Apple's legal team to say that the chip maker is only entitled to a royalty based on the $20 part it contributes to a handset regardless if it is mounted on a $300 handset or one that costs $1,000. The fight between Qualcomm and Apple seemed poised to go on for some time as the companies duked it out in courtrooms around the world. Their exit of course leaves the floor entirely open to Qualcomm who now own the vast majority of 5G modem contracts.

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