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Apple Could Have Used Qualcomm Modems For 2018 iPhones

Apple COO Jeff Williams’ testimony in the FTC Trial, that Qualcomm did not want to sell modems to Apple, appears misleading. Bloomberg’s Ian King viewed emails between Qualcomm’s CEO, Steve Molenkopf, and Apple’s COO, Jeff Williams, and from his article, it was rather clear that negotiations were ongoing, and that Qualcomm wanted to sell modems despite the licensing dispute.

Our investigation into what happened revealed that Apple had several options to purchase modems from Qualcomm for 2018 iPhones.

Our well-informed sources confirmed that Apple had at least two viable options to use Snapdragon modems in its 2018 phones.

  1. Apple could have used Snapdragon X16 modems (used in 2017 iPhones) with comparable performance to Intel’s 2018 modems, but it chose not to.
  2. Apple was offered Snapdragon X20 modems with source code if it committed to certain volumes for 2018 and 2019, and it guaranteed Qualcomm that it would protect its software from misuse. Apple declined.

And in our opinion, a third viable option existed: Apple already had an offer to purchase X20 modems without Qualcomm’s source code; Qualcomm always gave Apple engineering support to help integrate and optimize its modems with Apple’s application processors (APs), so it’s unclear why Apple needed Qualcomm’s source code just to build phones. Apple declined this option as well.

Analyzing the details

To refresh your memory, for iPhones 7 and 8/8 Plus, Apple decided to cripple Qualcomm modems in its phones. In 2017, to better align modem performance of Qualcomm’s X16 with Intel’s XMM 7480, Apple once again chose a lowest common denominator strategy and disabled some of the X16’s features so that both modems would perform similarly.

So for option 1, Apple could have used re-used the X16 in 2018 without disabling Gigabit LTE features and 4×4 MIMO, and it’s likely that its performance would at least have matched Intel’s 2018 modem (XMM 7560).

Ironically, Apple already had ongoing supply agreements and guarantees for Snapdragon X16 modems (Apple still sells a lot of iPhone X’s), and already had X16 source code (from 2017 iPhone X development efforts), and its engineers already knew the X16 well.  However, it decided not to use the chips for the 2018 iPhone XS, XS Max, and XR.

The second option would have allowed the latest and greatest Snapdragon X20 modems to end up in some 2018 and 2019 phones. While Apple insisted on obtaining X20 source code, Qualcomm was clearly uncomfortable with the idea, because it had concerns that Apple had already misused X16 source code and tools to aid competitors. Apple’s motivation might have been to improve the odds that it could have multiple viable suppliers, and also to increase leverage in chip purchase negotiations.

To mitigate these risks, Qualcomm asked for:

  • renewed commitments that Apple would protect its source code and software from misuse, and
  • volume commitments to assure that it would be made whole financially even if Apple secretly broke its promises.

According to our well-placed sources close to the matter, Apple declined this offer as well.

The irony of Apple wanting to use Snapdragon X20 modems capable of 1.2 Gbps, is that Apple would once again have to throttle them to 1 Gbps to more closely match Intel’s 2018 modem performance. The Intel XMM 7560 is only capable of 1 Gbps.

The third option

In our opinion, the third option which Apple declined, was to buy Snapdragon X20 modems without source code. The argument was, that Apple engineers needed to do further optimizations of the modem to integrate it with Apple’s AP, and therefore needed the source code. At one of the Qualcomm events we attended, people close to the modem business unit told us anecdotally that Apple had tried to optimize a Qualcomm modem and had made things worse. In fact, Qualcomm engineers had to help Apple resolve the problems before commercialization.

The real questions and concerns surround why Apple is insisting on getting Qualcomm’s source code. In an ongoing lawsuit, Qualcomm has already accused Apple of sharing its modem trade secrets (source code, development software) with competitors, which is a serious allegation. Even more disturbing, is Apple’s track record of appropriating and integrating its suppliers’ technology and the likelihood that it is already working on a future modem. This could explain its insistence on source code as part of the deal. There have been rumors for quite some time that Apple is working on a modem and this makes perfect sense.

Recall what happened to former Apple supplier Imagination Technologies and its GPU and licensing businesses. Apple used Imagination’s GPU IP and resources for years but then cut off the supplier, hired many of its engineers, and recently launched its own GPU that shares a lot of similarities with Imagination’s. Imagination is currently suing Apple for stealing its IP.

Another interesting theory is that Apple’s skipping a modem deal with Qualcomm could be made to look like Qualcomm withheld modems from Apple, an allegation that could help the FTC’s case. Apple is playing the victim even though it is well-known for squeezing every cent out of every supplier it has ever worked with, and it somehow makes 90 percent of all mobile phone industry profits.

Apple on a self modem development path

We are not (yet) even exploring the fact that Apple wanted to negotiate a 500 percent reduction in licensing costs compared to what its contract manufacturers (CMs) were paying to license Qualcomm’s IP, or that Apple was already paying less than all other smartphone vendors due to the nature of its unique arrangement with its CMs. That is another story altogether.

Bryan Krzanich’s decision to make modems for Apple may in the long-term help Apple’s ambition to make its own. Apple seems to have more leverage over Intel than Qualcomm, because Apple is Intel’s only mobile customer.  One can expect that Apple will continue its strategy of hiring engineers from Intel, Qualcomm, and likely other vendors including Samsung, Huawei, Nokia, Ericsson, all with the ultimate goal of making its own modem.

Huawei and Samsung have built their own modems in-house, and Apple desperately wants one to create an integrated SoC to be more competitive.  Saying that Apple didn’t have the opportunity to buy Qualcomm modems simply because of a failed negotiation is a simplistic explanation. The more complex, likely truth is that there’s a lot more at stake and that the deals/options on the table didn’t meet Apple’s long-term strategic objectives, so it walked.  It would then seem disingenuous for Apple to claim that Qualcomm didn’t let it buy its modems. Based on our analysis, we believe that headlines accusing Qualcomm of refusing to sell modems to Apple for 2018 iPhones are largely inaccurate.―Fudzilla

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