UBS analyst Timothy Arcuri estimates Apple paid somewhere between $5 to $6 billion to settle its ongoing legal fight with Qualcomm.
CNBC reports Apple probably also agreed to pay between $8 and $9 in patent royalties per iPhone, based on Qualcomm’s guidance that it expects earnings per share to increase by $2 as a result of the settlement.
The $5 to $6 billion payment would have been equal to royalty fees that Apple hadn’t paid during its two year fight with Qualcomm.
Apple is thought to have its hand forced as it was running out of options to source 5G modems for its 2020 iPhone lineup. Apple has planned to use Intel chips, but the chip maker was having issue meeting development deadlines.
Following the agreement between Apple and Qualcomm, Intel announced it was leaving the 5G smartphone modem business, and would instead concentrate on 5G modem development for PCs and other connected devices.
As Apple was already scheduled to debut 5G-capable iPhones at least a year behind its smartphone competitors, the Cupertino firm couldn’t afford any more delays.
The settlement was a big win for Qualcomm, as its stock went up 38% following news of the settlement, which includes a six-year licensing deal and a “multiyear chipset supply agreement.”