https://www.gizmochina.com/2017/11/22/qualcomm-releases-5g-royalty-terms-oems/
15 replies (most recent on top)
What company do you work for? I think it is important we check your potential bias in this discussion.
Either you don’t understand what SEP means or you’re ignoring it. It’s a collective industry model or accelerate standard convergence and commercialization. And almost everyone downstream of the food chain, plus the government agencies, think one entity is abusing it.
Apple/Google App Store is largely market behavior. You can ask yourself what would happen if Windows Phone takes a third of the market share and charges only 10%. You may as well use real estate agent fee as an example and argue the whole world runs on the model. So why is only Qualcomm the bad guy? Qualcomm today charges an average effective rate of 2.9% of device selling price which you can calculate from earning report. With much less 5G SEP percentage wise, it is asking 3.25% for multi mode devices. How is that justified?
Again, I leave out what is right but if you can’t discern some of the differences and ask yourself some fair questions, you are just one of the Qualcommers (assuming you are) clinging to false hope and narratives.
It is very hard for Apple to play a victim with those profile margins. Destroying Qualcomm will do one thing, it will reduce the cellular phone market to less than 8 major players.
@2dqx many disagree with you, including multiple governments, agencies and companies who sell AND buy cellular modems (e.g. Samsung).
An app is an app and its full value (and the corresponding commission similar to real estate) is captured in the price of the app. The "smart phone" is much more than a dumb phone with a modem. Those times were long ago
It is not fair practice (given innovations are allowed into open standards in return for fair licensing practices), to charge different price for the exact product and innovation because it goes into a device that had someone else invest billions into its AP, screen or battery. It just won't work that way. This practice has practically ended due to popular uprising from the industry. Qualcomm has no choice but negotiate a more fair licensing practice (one that values specific cellular modem innovation without usurping others' value on the device). This could be a flat fee or a percent of the price of the cellular modem chipset.
The industry has collaborated to weaken Qualcomm and get it acquired by someone who is more fair on licensing practice. The events of the past 18 months leading to where Qualcomm is today are not coincidental, as should be obvious to any alert and astute observer. Good luck if you still plan to work at Qualcomm in the coming months.
A developer has no choice but to sell on App store if they want to make money. When I started to develop my app, I never considering going on Android first. Apple provides no alternative to running an app outside the App store. Google Play also charges the same royalty. Android at least provides an alternative to install apps outside of official market places. If companies feel a royalty is burdensome, they can choose not to develop an app or phone. No one is forcing anyone to build/buy anything. Apple can not make iPhones.
The bigger question is why does Apple, Google, etc. charge a 30% royalty, regardless of big the app is, its graphics capabilities, how much it uses the game center, etc. Why not a flat rate? Charging a percentage of the entire product is common across many industries. It makes the transaction simpler, more transparent, and subsidizes products that don't cost that much. Not saying this is right, but most of the world works this way.
I would argue most of the value of the smart phone is in the modem. When the latest iPod touch was released, it was less than half the price of the iPhone back then. Same CPU, GPU, screen, wifi, etc., just no modem. In fact, most CPUs/GPUs these days are fast enough. I have $60 Android phone whose screen is responsive as the iPhone's. What I would find infuriating is having a phone that can't make calls or be able to download stuff when I want to when wifi isn't around.
@1rmw The key concept of SEP means it’s something handset chipmakers and OEMs cannot get around with, and the FRND clause is subjective and prone to abuse.
In all the other examples you gave including Apple App Store model, there is stronger elements of competition. Developers can wak away entirely from Apple AppStore and sell only on google play store if so they choose. Customers can walk away and buy other cars if they think the price is unfair (geographically or not). Apple and other OEMs cannot just walk away from Qualcomm because they don’t like the price. And when that’s the case, how do you determine if the price is fair?
The per device (or BoM) model is also a thing of the past when we only had feature phones. It has not evolved with the smartphone revolution where a large chunk of the add on value of the phone isn't based on cellular standards.
Not saying who will eventually prevail but you have to understand why Qualcomm is perpetually beleaguered by licensing and antitrust law suits.
@1aei yes, that practice is very common. The same item typically costs more at expensive areas than cheaper areas. Of course we all know that homes, built by the same bricks and wood, cost different in different areas. Even cars prices differ based on where you buy it from.
I don't know whether device based royalties is fair, but charging a royalty based on the price of the entire item is common across industries. Again, Apple does it all the time. As a developer, especially a small time developer, you must develop the app for iPhone first. You have to sell on the App store to make money. You can't just develop for Android (Android stores themselves have royalties). In the same way, Qcom charges a royalty on an 'essential' item. The developers could of course not develop any apps, and phone manufacturers could not make phones. Again, don't know if this is fair, but what Qcom and Apple does is common.
@1hup your reasoning could convince kindergarteners on justifying continued unfair licensing practices of Qualcomm, but not adults.
In other news car dealers announced they will charge a tiered price for the cars they sell based on where you live (keep the car). A Toyota residing in Chula Vista is $30k, same car in Rancho Santa Fe goes for $250K. Let's see how long it takes the regulators, the government and the consumers to react to that unfair pricing practice. When there are other car options, this may not be a big deal (don't buy a Toyota) but if an essential element is priced this way, you have a big problem. And this is a big problem in cellular market, as confirmed by multitude of investigations launched against Qualcomm by many governments and protests (and lawsuits!) from customers as well.
The entire world is wrong and Qualcomm is right?! That's the arrogant and self serving attitude of the Q execs. Those days are over.
Hock will end this unfair practice. Hock knows better. Half of Qualcomm is useless deadweight. He will see through b---s--- and do the right thing. Get ready for Armageddon, San Diego! We are coming to clean up this stank
Hock read, Hock laugh. Hock no like device based royalties.
Charging based on a percentage is common. Apple charges a 30% royalty for any transaction on the App store. It doesn't matter if your app takes up 1GB on the app store or 1 MB, makes extensive use of the gaming network or not, costs $1 or $100, they still charge 30%. Furthermore, developers have no choice but to put they apps on the App store because of its popularity; often they release on the App store first, and then focus on Android. Why doesn't Apple charge a fixed price for an app? The high priced apps subsidize the low priced apps. The same thing happens when Qcom charges a royalty for the modem. This benefits the low end/low cost devices or small companies, who may still want to use all the connectivity features of 4G/5G. Hock wants the license to be a fixed cost instead, which could screw companies that don't have the weight of Apple. I think charging a percentage is the fairest way to sell the license to use the actual model SW.
Note that Apple doesn't get charged based on the sold price to you, but on the price Foxconn sells the manufactured phone to Apple.
The actual royalty rate is negotiated with the other company. If Qcom and the other company get into a cross licensing agreement, then they will be charged a lower royalty rate. From what I understand, Apple doesn't do that.
Another example is realtors charging a fee based on a percentage of the selling price of the house. A realtor doesn't work any hard selling a $300K house versus a $1M house. It's probably easier to sell the $1M house.
@1tzd So you think it is fair that for the exact same product, different companies pay different fees? Based on that logic, owners of expensive cars should pay more for gas, or if I own an expensive TV, Best Buy will charge me double for Blurays.
If Mav invests ten billion Dollars into battery technology research and next year releases a phone that last three weeks on a single charge, but costs 200 bucks more to recoup the R&D investment, why should we earn a single Cent more from that phone?
Why sad this announced at same time brcom announces offer hike up?
What's wrong with charging a percent of the chipset price and not device price which includes other innovations irrelevant to the cellular modem like screen, fingerprint, camera, etc. ? Low cost phones would have low cost modems so everything scales nicely and fairly.
Q model is wrong. Devices include so many innovations other than cellular. Cellular technology is just one of many parts of a device and should charge according to its value (price of chipset is a good indicator of this value).
This model has come to an end. The licensing fees of the old days are not coming back. Hock will change things and Q will be part of history. Get ready to be part of mighty Broadcom Avago
If they charge a fixed price, then low cost phones/devices are screwed. If they make a tiered cost model, then it would have to be very fine grained, so they might as well charge based on the percentage of the price of the device. This is common in other industries. For example, Apple charges a royalty based on percentage as well with the App store.
I don't like Qcom as much as you, but their licensing model is not wrong.
Of course they will sue because these rates definitely violate FRAND terms. They are most definitely not „non-discriminatory“.
Sorry to say it, but the times when we could get away with this are over.