Apple and Qualcomm’s Billion-Dollar War Over an $18 Part

https://www.bloomberg.com/news/features/2017-10-04/apple-and-qualcomm-s-billion-dollar-war-over-an-18-part?utm_campaign=Newsletter%20-%20Mi5M%20-%20Q3%202017&utm_source=hs_email&utm_medium=email&utm_content=56997556&_hsenc=p2ANqtz-_t_yzMZ5h4u8ExCHwqtrU36wdFXtmCmjhN87Jf2hKvrGGmGbGZh2C86l0esQP6x0tRaAGRXV998fQpGouzAqxtpadTLg&_hsmi=56997556

by SirLJ • 9 years ago

113 135 9 years ago

bloomberg.com

mtgx• 9 years ago

That sounds very expensive. I believe a few years ago the whole SoC with the modem included was something like $20-$25. Qualcomm is basically trying to make Apple and others pay almost as much for the modem as they would pay for the SoC.

This is a tactic Intel itself is also very familiar with, as they've done with their CPU and GPU bundles. I believe in some cases it was even more expensive to buy the CPU alone, so OEMs were coerced into putting an Intel GPU into any device they sold, whether it had another dedicated GPU or not.

I understand at some point it becomes more expensive (but maybe not that much more) to keep those separated, but at the end of the day I believe it was an anti-competitive tactic through which Intel used its CPU monopoly to gain a much larger portion of the GPU market than they would've gained were it not for such bundles and price coercion tactics (and probably a few threats thrown into the mix against the OEMs too, if they dared to use AMD chips).

I wish regulators would catch on to stuff like this early and nip them in the bud, rather than act 10 years later, when the damage is already done, the monopoly is already well established, and the companies are forced to pay a fine of like 5% of what they gained from achieving that monopoly through the anti-competitive tactics.

Shivetya• 9 years ago

I don't think it is expensive. Qualcomm is doing everyone a service by allowing anyone to buy the chipset from anyone else, just pay a small fee relative to the cost of device. This lets anyone with enough capital to get into the business and start off with good technology.

Apple simply has enough money they apparently have decided they don't have to follow any rules they don't want. How do they handle licensing their patents? The article made no mention.

lttlrck• 9 years ago

This is specifically about the FRAND terms Qualcomm agreed to when their patented methods were included the cellular standards. These methods were included because they may have been the best way to solve the issue but more importantly because an industry giant is ready to build chips to adhere to the standard, helping adoption and time to market. To offset that vested interest, they have to agree to FRAND terms.

jrs95• 9 years ago

I wish regulators would catch on to stuff like this early and nip them in the bud, rather than act 10 years later, when the damage is already done, the monopoly is already well established, and the companies are forced to pay a fine of like 5% of what they gained from achieving that monopoly through the anti-competitive tactics.

Reminds me of Mr. Robot & how Evil Corp still profited from ignoring regulations (which got people killed).

hajile5• 9 years ago

We have very small companies (in the low tens of millions) that make decent SoC. Nobody is going to make 4G anything for less than the tens of billions). The entire market cap of ARM is half that of Qualcomm (and around a third before they lost a quarter of their valuation).

Building modems is way harder than building SoCs (all the SoC challenges plus all the modem ones too). It's taken a decade of work on 5G to just begin preliminary sampling (How many SoC generations would that be?).

You also have to keep in mind that it's not just the modem in the phone. You have huge software stacks, protocol design and testing, and an entire cell tower worth of electronics to design and build.

There's no free lunch. You have to strike a balance between forcing the cost onto the service provider (higher cell bills and/or slower adoption) and forcing the cost onto the phone.

Considering that Qualcomm's net sales to R&D ratio is basically unmatched (most companies spend half what Qualcomm does by that metric), it's not easy to make the case for gouging in my view.

jimrandomh• 9 years ago

Qualcomm's chips have a very bad computer security track record, and their patent-enforced monopoly status makes this a serious problem. If they would go the way of Flash and Acrobat, this would make the world much better off.

simonh2• 9 years ago

Would whoever supplanted them necessarily have a better record? Competition is a fine thing, but doesn't necessarily optimise for every desirable outcome. Usually the optimised factor is price, not quality metrics like security.

mschuster912• 9 years ago

Qualcomm's chips have a very bad computer security track record,

Better hope you never see the source of a MediaTek Android kernel code dump. Someone with more malicious intent than me could instantly compromise a boatload of devices.

tmzt• 9 years ago

Are you referring to exploits in the modifications made to kernel source or to something underlying in the hardware or bootloader that is exposed by looking at kernel source.

Are they actually making GPL source availible for their kernels?

samfisher832• 9 years ago

Qcom is not a chip company. It is an IP company that happens to make some chips on the side. A majority of their profits are based on their IP portfolio. As a percentage of revenue they spend more on R&D than most Tech companies especially apple. Apple spends less than 5% on R&D. However I am not a fan of their chips. Their chips aren't that great, but its hard to compete with them since you have to use their patents on your radio.

It would be good if they just split the IP and Chip parts.

hajile5• 9 years ago

Qualcomm reports QCT (chips and software) separately from QTL (licensing). In 2015, their Form 10-K reported that licensing was around 30% of their income and the rest was chips and software (see page 8).

http://investor.qualcomm.com/secfiling.cfm?filingID=1234452-...

praneshp• 9 years ago

This is true. During my internship orientation, they called this out. (100 lawyers in this building make X% of our money, huge X).

yaantc3• 9 years ago

That's a very one-sided pro-Qualcomm piece.

The big issue with Qualcomm IP practice is that they don't charge IPR on the modem function, but over the whole device. So put the same modem in a cheap phone, or in an expensive laptop, and the IPR will be very different. This is really charging IPR on a lot of value completely unrelated to the modem.

Historically, the cellular/3GPP world was very phone centric. The specs were for a phone, and the chipset was really the core of the phone. At that time, charging cellular IPR on the device embedding the chipset was reasonable: the device was just a phone, with all the intelligence coming from the chipset.

We're obviously no longer living in such a world. But Qualcomm keeps this practice, as it's very profitable for them and their dominant position let them do it (so far). Apple is mad at this, as most of the value of a smartphone is outside of the modem part nowadays (even more for a PC). Other device makers hate it too, but don't have the muscle to go against QCOM and can't afford alienating them. Europe is looking into it too, and will issue a recommendation that cellular IPR is charge only on the modem subsystem, not the including device (basically, Apple position). It will start as a recommendation, but could become law later on.

So it looks like it's QCOM against everybody else. Considering the money involved, I'm sure that QCOM has a pretty fat budget to push their angle. Hello Bloomberg ;)

mchafkin• 9 years ago

did you read the story? we discuss the very disagreement you reference.

kartD• 9 years ago

From the guidelines: Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that."

https://news.ycombinator.com/newsguidelines.html

Retric• 9 years ago

"Qualcomm’s big innovation" is followed by several exaggerations and falsehoods. So, saying you mention something is meaningless when you include that amount of bias.

Read up on Token ring vs Ethernet to get some understanding of the history in this area.

danjoc4• 9 years ago

So put the same modem in a cheap phone, or in an expensive laptop, and the IPR will be very different. This is really charging IPR on a lot of value completely unrelated to the modem.

Pot, meet kettle. Apple charges 30% at the App store, whether I want to sell an app for $1 or $1000.

Also, if Apple wanted, they could package the modem separately. Sell it for $50. Again, this mirrors Apple's advice to Samsung to build triangle phones since Apple patented a rectangle with rounded corners. Suddenly, clunky workarounds are bad. Quelle suprise.

I really can't feel sorry for Apple. Live by the sword, die by the sword. Must be nice to be an Apple IP lawyer. They win no matter what happens.

Aloha2• 9 years ago

You don't have to sell your app in the Apple ecosystem - its very hard to build a modern mobile device without Qualcomm IP.

yaantc3• 9 years ago

This story is very Apple vs. QCOM, but I don't care much about this angle really. What I care about is the underlying question: is it ok to charge IPR on value added way outside the scope of the given IP? I don't think so. QCOM does so. Apple is against. So I'm just sympathetic with Apple position in this strong debate and that's it (I'm not even an Apple user).

And I don't feel sorry for Apple. I feel sorry for all the other small manufacturer and companies suffering from this situation, but that are too small to make things move on their own. Apple and Samsung may not have the purest of interest in this debate, but if they move things in what I believe is the right direction, I'll be happy.

ballenf4• 9 years ago

Apple pays $10 on a $1k phone due to rebates (before the dispute started). Without rebates the cost would be $50. Apple will actually benefit less from a win here than the small phone manufacturer.

TheSoftwareGuy• 9 years ago

I really can't feel sorry for Apple.

And that's exactly where you're looking at this wrong. it's not just Apple that loses out because of this, it's consumer's at large.

Likewise, the same thing happens with apps, consumers must pay more money for apps which will have less revenue to invest in themselves.

That's the thing about unfair economic practices, it never just hurts the people directly involved, but also the massive amount of people indirectly involved.

simonh2• 9 years ago

Pot, meet kettle…

Not really equivalent though. Apple advertises and makes the whole app available on the App Store, delivers the whole app from their infrastructure, manages upgrades and back end services for the whole app, provide access to millions of customers and handle the financial transaction for the full cost of the app. It seems reasonable they get a percentage of the whole app’s price.

Meanwhile Qualcomm only own a few patents on a tiny sliver of the circuitry of one component for one function of the device.

hajile5• 9 years ago

That pricing argument is worthless when you start talking about percentages. 5% of a $500 device is quite a lot while 5% of some $25 IoT device is not very much.

Qualcomm spends around 5.5 Billion every year in R&D or 23% of net sales. For comparison, apple spends a paltry 2.2% of its net sales on R&D. Dry up Qualcomm's net sales and the R&D will dry up too.

All the most crucial wireless patents (the really fundamental ones) have already expired. Why doesn't Apple design another, competing system around Qualcomm's patents and license it for free? The answer is that it takes a decade and tens of Billions of dollars.

Apple has the money, but it's cheaper to work the courts over so they pay less. If Apple were the ones who built 4G, you can be very sure they'd be charging at least as much as Qualcomm.

Remember, Apple thought the look of their iphone was worth $40 per device when suing Samsung, but now they think the actual technology to make it work isn't even worth $10 per device. If Qualcomm were making the same profit margins (relative to R&D) as Apple, they'd have to go from $10 per device to $100.

I'm not a Qualcomm fan (or any big corporation for that matter), but if we were making a list of price gouging companies, I think there are a lot of companies that should be getting fined and regulated (especially Apple) before Qualcomm.

model_m_warrior• 9 years ago

You're the guy who hates big corporations? I'm the guy who wants to end world hunger.

yaantc3• 9 years ago

Please see my reply @danjoc. I don't care much about Apple really. The manufacturing world is pretty hard and penny pinching, the practice of charging for value unrelated to one's IP hurts small manufacturers who can't stand to a QCOM. I really don't mind QCOM charging whatever they want on their modem, to sustain their R&D. But I don't agree on their charging unrelated parts just because they can. Hope this clarifies my previous comment.

rgbrenner3• 9 years ago

All the most crucial wireless patents have already expired

The 2G patents (that Qualcomm owned 90% of) have expired.. but who uses that anymore?

Qualcomm also owns 13% of the patents used for LTE (which they agreed to license under FRAND terms).. it's those patents they are using to create a monopoly on LTE chips.

First they refuse to license their patents to other manufacturers who want to produce chips.. then they say to handset manufacturers, they won't sell you chips unless you agree to pay a royalty on every handset (even if it does not contain Qualcomm chips).

They own the same percentage of patents as Erickson, but they produce 4x the revenue from IP licensing (+ the revenue from chipset sales).

Edit: if you believe the 13% of LTE patents Qualcomm owns are worth $10... that would be $77 for all of the LTE standard essential patents at the same rate. So we are not far off from your $100 Apple-like price in your post.

mcculley4• 9 years ago

they don't charge IPR on the modem function, but over the whole device.

Is this why there's no option for an LTE modem in a MacBook Pro?

greglindahl2• 9 years ago

It's much more cost-effective to have a mobile hotspot, because then you're only paying the Qualcomm tax on a minimal thing.

tooltalk13• 9 years ago

No.

Qualcomm's patented features do drive market demand (or add value) for mobile devices, including that of Apple's. That's why Qualcomm can ask a percentage of the entire device.

This is not so with MacBook Pro -- unless Qualcomm can prove it otherwise.

yoz-y• 9 years ago

Is it a common practice in other fields to charge a percentage of final product as a fee? To me it seems that while this can make sense to some extent there should be a cap. If I put a modem which uses Qualcomm IP in a car should I also pay 5% of the price?

newusertoday2• 9 years ago

there is cap at 300$, max royalty at this cap is 15$.

rgbrenner3• 9 years ago

A patent holder can charge whatever they want, or even refuse to allow anyone to license it.

The difference is that Qualcomm agreed to FRAND (fair, reasonable, and non-discriminatory) licensing terms in exchange for their patent being included in the standard.

Once they got their patent in the standard, now they're saying they get to charge whatever they want.

That's the problem. That wasn't the deal they and everyone else agreed to, and it's too late to remove their patent from the standard.

atka2• 9 years ago

There is nothing in FRAND that says what they can charge. They can charge whatever they want as long as it is fair reasonable and non discrimatory.

tooltalk13• 9 years ago

no, a patent holder CAN NOT charge whatever they want. Apple tried it during their quest to destroy Android (Samsung) a few years back, but most of their utility claims were "apportioned" accordingly. Apple was able to gorge the entire profit on per device on a couple of frivolous design patents, but the SCOTUS stepped in to reverse that absurd ruling last year.

Contrary to your unsubstantiated claims, Qualcomm's licensing rates are publicly available and published time to time -- often in the range of 3% to 5%. Apple according to this article pays nowhere close to the published rate that most other handset makers are paying.

tooltalk13• 9 years ago

In this particular industry, it is. It depends on whether qualcomm's patented features "drive the market demand" for the finished goods.

So in mobile devices, Qualcomm's wireless patents do deservingly get per device royalty whereas, for automobiles, it would make no sense to use the same per device royalty.

On a somewhat unrelated note, Apple demanded the entire profit on per device basis for a couple of frivolous design infringement from Samsung and won a couple of years ago. This absurd, biased lower court ruling was overturned by the Supreme Court last year.

throwaway000002• 9 years ago

If AAPL thinks QCOM doesn't add proportional value to their phone, let them sell their phone without QCOM ip.

Because we all know AAPL takes its proportional percentage of flesh from an app developer for having the audacity to add value to iOS, whilst simultaneously holding back the web.

Hypocrisy all around.

rgbrenner3• 9 years ago

Apple can't really do that (sell a phone without Qualcomm IP).

Qualcomm agreed to FRAND terms in exchange to adding their patents to the 3G standard.

Once that happened, Qualcomm then violated their FRAND terms to create a monopoly on CDMA chipsets, charge additional royalties, etc.

If they drop Qualcomm, then they'll have to drop CDMA support (Verizon, Sprint, 3g, 4g).

RandVal301423• 9 years ago

Apple can't really do that (sell a phone without Qualcomm IP).

Maybe they should do some long term investments in this realm if it is where they choose to make their profits from?

Or pound sand in court..

lanaius• 9 years ago

Sewell is directly quoted as saying cellular "isn't as important as it used to be." When they thought 3.5mm TRS wasn't as important as it used to be they cut it. Seems like cellular is perhaps still more crucial to the viability of the phone than they want to admit.

tooltalk13• 9 years ago

in what ways did Qualcomm violate FRAND terms? Nokia, Ericsson and pretty much everyone else uses the entire device as a royalty basis. This is a fairly standard industry practice -- and has been so for decades.

While Qualcomm is the largest contributor of wireless standards, it is far from a monopology.

Also note that Apple accuses of every wireless patents holders of some sort of unfair pricing and violation of FRAND terms whenever Apple is up for license renewal. This is coming from a company that audaciously asked about $30 per device for a handful of frivolous design and utility patents from Samsung.

briandear3• 9 years ago

How is Apple holding back the web? Is there an assumption that every application ought to be on the web and that a browser is the best means to use an application?

jeffdavis• 9 years ago

I don't understand what the problem is. Qualcomm invents something, patents it, and then they have a monopoly.

Apple's answer should be to open their own EE labs and start inventing things and getting their own patents. Instead, they complain and go to court.

Of course, that assumes the patents are good ones.

dpark4• 9 years ago

I don't understand what the problem is. Qualcomm invents something, patents it, and then they have a monopoly.

Apple's assertion is that the pricing is not Fair or Reasonable, which Qualcomm agreed to as a concession to make their patents part of the cellular network standards.

Apple's answer should be to open their own EE labs and start inventing things and getting their own patents. Instead, they complain and go to court.

Apple cannot simply invent their own cell technology and have it work with the cellular networks that actually exist.

sgift• 9 years ago

The problem seems to be that there's no definition what exactly FRAND actually means. The only thing everyone seems to agree on is that "you cannot exclude companies from licensing your tech", but apart from that it seems to be wild west.

RandVal301423• 9 years ago

Apple's assertion is that the pricing is not Fair or Reasonable

I assert Apple's markup on products is not fair or reasonable. Perhaps Qualcomm's demands are in line with the true value of the device and not the pie in the sky numbers Apple wants.

hajile5• 9 years ago

Qualcomm's R&D budget is around 25% of net sales. Google, Cisco, Intel, and Microsoft (for example) are considered big spenders, but they only spend 12-15% of net sales (apple spends 2.2% of net sales on R&D).

Qualcomm sounds a lot more fair and reasonable than any of the other multi-billion dollar companies I know of.

tooltalk13• 9 years ago

Yes, Apple has made the same assertion against every FRAND patent holders for many, many years-- without zero evidence. This time around, it's slightly different in that Apple successfully engineered a scheme in which KFTC convicted Qualcomm of anti-competitive licensing practices.

Apple is late to the wireless game and now they are trying to find a way to pay as little as possible while not contributing virtually nothing to it and being one of the largest benefactors of the tech.

noselasd• 9 years ago

It's not that black and white. When someone has IP that is included in an international standard, there are room for debate.

aetherson2• 9 years ago

It's kind of hilarious to hear Apple bitching that when it marks up its phones a ridiculous $100 for $20 worth of memory, it has to share its $80 profit.

Neither of these companies deserves our sympathy. They are two big amoral profit-seeking entities wrestling for money in a way that won't meaningfully affect your life. Whether Apple wins or Qualcomm wins or they split the difference, it's neither justice nor injustice.

briandear3• 9 years ago

What can you do with the $20 worth of memory by itself? That $100 "markup" is because it's part of a great whole -- a whole that took millions to engineer and create. It isn't like Apple is just reselling memory chips.

I could buy all the raw materials that go into an iPhone, but that doesn't mean that I personally could make an iPhone. I'm glad to pay a premium because I don't have time to build a phone.

ianamartin3• 9 years ago

Not sure why this is being downvoted. The existence of Apple at all today is exactly because people perceive a value greater than the sum of the cost of parts.

This isn’t a new idea, and people put tens of billions of dollars behind this concept every fiscal quarter.

wyldfire• 9 years ago

IMO the debate over whether QCOM can/should charge based on the finshed cost of the device hinges on which analogy you pick.

Is it the sofa from your house [1] or the powertrain that powers your luxury automobile?

[1] https://www.imore.com/tim-apples-ceo-companys-2017-q1-earnin...

bactrian• 9 years ago

All the money spent on patent wars will be paid for by consumers. Abolish all patents. Let the free market sort things out.

xigency• 9 years ago

Doubtful. Did you see the graphic in the article which shows Apple's margins on an iPhone?

prewett• 9 years ago

Those were Apple's gross margins. Cost of goods is never the total cost, even for retail. In Apple's case, a lot of the magic of the iPhone happens through the effort of R&D. The media saying Apple's profit margin is their gross margin is disingenuous and grossly misleading. Most companies' gross margins are somewhere around 70% for products, but Apple is the one that gets singled out.

mkhalil• 9 years ago

I love battles when you can't really feel sorry for either side.

As much as I or anyone hate patent trolls, one can't sit here and complain that a percentage of the value isn't a fair price to pay if one thinks it's okay for Apple to charge Music + App devs 30% to improve their OS + provide content for it's users.

MBCook7• 9 years ago

App developers agreed to the 30%. Qualcomm agreed to FRAND pricing.

But that’s not what they’re charging Apple. They broke an agreement.

What Apple is doing doesn’t violate an agreement, whatever you think of it.

tooltalk13• 9 years ago

and Apple agreed to pay Qualcomm's FRAND rates, didn't it? Like Apple's 30% cut known to the public, Qualcomm's FRAND licensing rates are published time to time and Apple agreed to abide by it.

Apple pays according to the article about $10 per device, or 1.33% of the retail price. This is far below what Qualcomm is charging, 3% to 5%, and what most handset makers pay. Further the royalty Apple pays (indirectly) is based on Apple's manufacturer's build cost, not retail cost.

atka2• 9 years ago

And FRAND doesn't mean anything. It just means fair reasonable and non discrimatory. If Qualcomm charges everyone the same then how is this not met.

briandear3• 9 years ago

App developers are free to find customers elsewhere. Perhaps app developers could create their own distribution system that guarantees security, updates and ease of use and create a device upon which it can run.

App developers can also handle the multiple country's tax laws, create a payment system and do all of that on their own as well. Apple devs don't have to deal with collecting taxes in the countries in which they sell. They don't have to deal with fraudulent transactions, chargebacks or distributing updates to users.

The idea that the 30% is somehow unfair is ridiculous. Look at retail markup rates for products sold in conventional stores. That's what that 30% is -- a retail markup and it's completely fair. Whole Foods sells olive oil for $20 that they buy from a supplier for $8. How unfair does 30% seem now? The supplier prices their product at the price they need to collect. What the end-distributer charges really isn't a concern to the supplier. But unlike Whole Foods, Apple doesn't give preference to certain suppliers over others. Everyone on the App Store has an equal chance to sell their product.

pwinnski4• 9 years ago

People forget that 30% was lower than most comparable outlets prior to Apple's App Store. Competitors immediately slashed their own rates to 30% to match.

dheelus3• 9 years ago

An analogy for this in the real world would be tips for waiters. As a foreigner, I'm aghast at the tipping culture in the US but more importantly, I fail to understand why tips are calculated on a percentage basis. It is no more effort to bring me out a $60 steak than it is to bring me a $5 coffee. So why should I tip $12 for the steak and $1 for the coffee? To Apple's point, they want a "fixed" tip charge. But then again, Apple charges devs 30% of revenue from their App store when really it's (arguably) no more effort for them to host/monitor a 99-cent app vs. $10 app.

smm2000• 9 years ago

Throughput, expectation of service and number of tables/waiter are very different for coffeeshop/casual diner and place that sells $60 steak. In casual restaurant you can expect one waiter per 8 tables compared to 4 tables/waiter in fine dining place. People easily take 2x time to eat the same amount of food in fine dining place compared to something cheaper. In fine dining place waiters are better trained/educated (ever tried to ask for wine recommendation at Denny's?) and dress nicer.

Higher tips per person are totally expected in fine dining place purely from economic perspective.

dheelus3• 9 years ago

Agreed and my analogy is imperfect at best. However, assuming I am eating at a fine-dining establishment, why should tips be percentage calculated? Shouldn't the tip amount be the same regardless of whether I order the expensive items on the menu or the (relatively) cheaper ones? Which is basically what Apple's argument boils down to.

FWIW, I don't really have a dog in this race (except as an AAPL stockholder I want the stock to do well). If any judgement mandates that the license fee be charged on the cost of the chip and not the device, then I'd like to see that be extended to the App Store ToS as well.

Domenic_S• 9 years ago

If I go to Denny's and order a coffee, the waitress pours the coffee and stops by every so often to refill it. They get a $1 tip.

If I go to that same Denny's and order 4 Grand Slams, the waitress waits on the cooks, and then makes one trip to my table. They get a much higher tip for less work.

MBCook7• 9 years ago

Qualcomm agreed to only charge 50¢ per item (FRAND licensing) but is complaining Apple isn’t paying 20%. They’re violating an agreement.

In the App Store Apple offered a deal and sticks to it. You may not need like it but they’re doing exactly what they agreed to.

dheelus3• 9 years ago

Can you please point out where in the referenced article there is a mention of QCOM changing the terms of the deal? I seem to have missed it. Thanks.

newusertoday2• 9 years ago

So why is apple suing in 2017? why didn't they sued in 2007 at time of launch of iphone? Issue is way more complex in this fight. 1. Qc has more than 130k patents,licensee gets blanket protection for all.(one can argue about bundling though) 2. Qc,ericcson,nokia and other patent holders have cross licensing agreements with each other.This is to avoid negotiating individual contracts with every patent holder in a standard.

threeseed5• 9 years ago

Don't people understand the App Store model ?

You aren't paying for their effort in hosting the app. It's a fixed cost and the App Store runs largely on the back of the iTunes Store platform. You are paying Apple for being a distribution channel i.e. channel to market. And it's incredibly common for those to be based on a percentage rather than fixed amount.

Apple does spends a significant amount of money (far more than your 30%) on giving developers the perfect market to sell to. Every customer has a credit card, is on the latest OS, is willing to spend, is unable to pirate etc.

ballenf4• 9 years ago

And don't forget that Apple doesn't get a cent of any non-IAP monetization of the app of which advertising is primary.

Off topic here, but I find it interesting that Apple cracks down on various other workarounds like in app "tipping", but doesn't touch ads.

Would be interesting to see what the effective % apple tax is, if all ad revenue was factored in to the gross.

guftagu• 9 years ago

The title is too clickbaity to resist

alexandercrohde• 9 years ago

You guys are making this a really irrational, really emotional "Apple vs Qualcomm" issue. The root of the problem is not that.

The root of the problem is bad patent law. It really doesn't matter what apple does, it doesn't matter if their CEO eats babies, the merits of a patent are irrelevant to whether the company "feels like a baddy."

If you think apple has bad monopolistic practices in its app store, that only reinforces the fact that our system is anticompetitive, and that both Qualcomm should lose its patent as well as potential opening up of the IOS ecosystem.

ballenf4• 9 years ago

And a broken cellular standards body that doesn't nail down in explicit detail how the IP will be licensed before granting a government-sponsored & mandated monopoly.

philjohn• 9 years ago

It's a difficult one - Qualcomm have invested a huge amount of money in developing some awesome baseband hardware - so should see some protection of that.

svantana• 9 years ago

Who said anything about a "problem"? It's a fight between corporations, I don't see anything about this that is bad for society at large. Apple already turns a huge profit on each phone, it's not likely that they would pass on a potential saving to the consumer. And Qualcomm is hardly a patent troll, they use their licence fees to fund R&D. There are plenty of problems with our IP laws but is this really one of them?

petraeus• 9 years ago

Imagine if your employer paid you on your cost rather than your value. Same concept.

tzakrajs• 9 years ago

Reads like a fluff piece for Qualcomm, I wonder how much they paid.

donarb• 9 years ago

"...we invented airplane mode. That patent’s out in the lobby."

Now that is truly an innovation from Qualcomm, a switch that turns off the cell modem.

Apple and Qualcomm’s Billion-Dollar War Over an $18 Part

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