Qualcomm May Relax Phone Price-Based Licensing Model
Qualcomm is weighing a major change in strategy to ensure that its patent-licensing business continues to earn money. As it functions now, Qualcomm charges device makers a percentage of the total sale price to cover patented technology within. The more the phone costs, the more Qualcomm earns per device. Some believe this practice is unfair, including Apple and the governments of the U.S., China, and Korea. Apple has withheld more than $1 billion in royalty payments from Qualcomm as the two argue over the licensing model. In order to avoid such conflicts in the future, Qualcomm said it may cap the phone price at $400. With this calculation, Qualcomm would take a cut of the sale price up to $400, even for devices that cost far more. iPhones, which sell for close to $1000, would effectively be treated like a $400 device when Qualcomm calculates how much it is owed for licensing. This would lower the amount of money Qualcomm earns in these licensing deals, but could allow it to sidestep disagreements with customers. The information was shared by Qualcomm executives during the company's recent quarterly earnings call. Qualcomm didn't say if or when it might actually move forward with this strategy shift.
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