Qualcomm drops lawsuits against LG
By Kim Yoo-chul
Steve Mollenkopf, Qualcomm CEO
Cho Juno, LG Electronics’ mobile chief
U.S.-based mobile chip titan Qualcomm has resolved its long-running patent dispute with LG Electronics after LG vowed to pay more for Qualcomm processor chips, with increased guaranteed shipments.
Qualcomm said the agreement with LG is “satisfactory” and that the San Diego-based outfit will further boost its patent-related businesses as part of its diversified strategy.
“The dispute with Qualcomm has been completely settled,” LG said Friday, refusing to unveil details, such as readjusted royalty rates.
Qualcomm has been buried in lawsuits. It is facing a probe from European regulators for having charged below-cost fees for its mobile broadband chipsets between 2009 and 2011 to remove competition.
LG claimed that Qualcomm had overcharged under a licensing contract and the dispute went to arbitration.
“This kind of dispute is actually nothing, as this is a kind of contract dispute which is very similar to the ones that the industries had in the past,” said an LG official.
“Qualcomm is said to lower its royalty rate to LG in return for LG’s guaranteed purchase of Qualcomm processors, which are currently being used in its flagship handsets and will be used in upcoming flagship models.”
The timing of LG’s flagship models is in line with mobile chip development and the supply chain management plan by Qualcomm. Unlike Samsung, LG Electronics does not fabricate its own processor chips, relying on Qualcomm-designed chipsets.
The settlement came after Qualcomm forecast third-quarter profit below expectations, because the company expects to ship fewer chips, including those for smartphones, its top business.
Qualcomm’s leadership in the mobile chipset business is still influential, but not as strong as decades ago because rivals are squeezing the company on price.
“Samsung and Apple are making their own components for smartphones,” said another LG official. “It’s a pity, though, to see that LG has less leverage in discussions over an issue of royalty rate readjustment.”
While the “Qualcomm issue” was settled, LG Electronics is still being pushed to pay more to Google after Oracle won against Google in a fight over intellectual property.
The U.S. Supreme Court ordered Google to pay some 1 trillion won to Oracle after the Android software creator was found to have infringed Oracle-owned Java-dubbed programming software, a major blow to LG Electronics, because all LG phones are powered by Android software.
“Because Android software is free to use, manufacturers don’t have to pay Google royalties,” a source said. “But Google will pay Oracle and this will affect LG Electronics.”
To cut LG’s heavy reliance on Qualcomm for mobile chipsets, LG Electronics has invested millions of dollars to develop its own. But their use is limited to cheaper models.