Apple demanded $1 billion for chance to win iPhone: Qualcomm CEO

[angelburst29]

A look into the way some Corporate business's operate and how it affects the consumer on the other end.

Qualcomm sought to become the sole supplier of modem chips for Apple’s iPhone to recoup a $1-billion “incentive payment” that Apple insisted on, not to block rivals from the market, Qualcomm’s chief executive testified on Friday.

Jan. 11, 2019 - Apple demanded $1 Billion for chance to win iPhone: Qualcomm CEO
Apple demanded $1 billion for chance to win iPhone: Qualcomm CEO | Reuters

FILE PHOTO: A woman checks her phone at a flagship Apple store at Iconsiam shopping mall in Bangkok, Thailand November 9, 2018. REUTERS/Soe Zeya Tun

The payment from Qualcomm to Apple - part of a 2011 deal between Apple and Qualcomm - was meant to ease the technical costs of swapping out the iPhone’s then-current Infineon chip with Qualcomm’s, CEO Steve Mollenkopf testified at a trial with the U.S. Federal Trade Commission.

While such a payment is common in the industry, the size of it was not, Mollenkopf said.

Under the 2011 deal, Qualcomm was named Apple’s sole supplier of modem chips, which help mobile phones connect to wireless data networks, in exchange for which Qualcomm agreed to give Apple a rebate - the exact nature of which has not been disclosed. Apple could choose another supplier but it would lose the rebate, effectively increasing the cost of its chips.

Antitrust regulators have argued the deal with Apple was part of a pattern of anticompetitive conduct by Qualcomm to preserve its dominance in modem chips and exclude players like Intel.

At a federal courthouse in San Jose, California, Mollenkopf testified that Apple demanded the $1 billion without any assurance of how many chips it would buy, which pushed the chip supplier to pursue an exclusivity arrangement in order to ensure it sold enough chips to recover the payment.

Qualcomm was not aiming to block rivals like Intel, he said.

“The risk was, what would the volume be? Would we get everything we wanted, given that we paid so much in incentive?” Mollenkopf testified.

Earlier in the day, Apple supply chain executive Tony Blevins testified that it was Apple’s practice to pursue at least two suppliers and as many as six for each of the more than 1,000 components in the iPhone.

The company stopped trying to place an Intel modem chip in the iPad Mini 2 because losing the rebates on Qualcomm’s chips would have made the overall cost too high, he said.

“They made it very unattractive for us to use another chip supplier,” Blevins said of the rebates. “These rebates were very, very large.”

January 11, 2019 - Apple considered Samsung, MediaTek to supply 5G modems for 2019 iPhones
https://www.usnews.com/news/technol...mediatek-to-supply-5g-modems-for-2019-iphones

Apple Inc held talks with Samsung Electronics Co Ltd <005930.KS> and MediaTek Inc <2454.TW> along with existing vendor Intel Corp to supply 5G modem chips for 2019 iPhones, according to an Apple executive's testimony at a trial between Qualcomm Inc and the U.S. Federal Trade Commission on Friday.

Between 2011 and 2016, Apple relied on San Diego-based Qualcomm as the sole supplier of such chips, which help iPhones connect to wireless networks. Starting in 2016, Apple split the business between Intel and Qualcomm, but in 2018, Apple moved solely to Intel for its newest phones.

But Apple supply chain executive Tony Blevins testified on Friday that Apple has also considered MediaTek and Samsung, one of its largest rivals in the smart phone market, to supply the chips for the next generation of wireless networks known as 5G. Those networks are expected to start rolling out this year and provide faster data speeds than current 4G networks.

The FTC is suing Qualcomm alleging the chip supplier engaged in anticompetitive patent licensing practices to preserve a dominant position in the premium modem chip market.

On the stand at a federal courthouse in San Jose, California, Blevins testified that Apple has long sought multiple suppliers for modem chips but signed an agreement with Qualcomm to exclusively supply the chips because the chip supplier offered deep rebates on patent license costs in exchange for exclusivity.
In 2013, Apple broke off work with Intel to start supplying modems for the iPad Mini 2 because Apple would lose its rebates by using Intel's chips, rendering Intel's products "economically unattractive" overall.

Later that year after cost negotiations with Qualcomm did not go as Apple hoped, Apple kicked off "Project Antique" to secure a second modem supplier, Blevins testified.

By 2016 and 2017, Apple introduced Intel's modems in some of its iPhones but also still used Qualcomm chips. But Apple's lawsuit against Qualcomm filed in early 2017 caused their business relationship to change "in a very profound and negative manner," leading to using only Intel's modems for the phones released last year.

"The entire concept of Project Antique was to find a second supplier. No offense to (Intel) but we don't want to be single supplier with them. We wanted both Qualcomm and (Intel) in the mix," Blevins said. Blevins also testified Apple considered making Intel the sole supplier of modems for the Apple Watch, which added 4G connectivity in 2017 using Qualcomm chips.

Blevins said that talking with Samsung, whose Galaxy and Note devices compete against the iPhone, is "not an ideal environment" for Apple, but that Samsung is currently the largest component supplier to Apple.

Blevins did not say whether Apple had reached a decision on a 5G modem supplier or whether it would release a 5G iPhone in 2019. Citing sources, Bloomberg previously reported that Apple would not release such a phone until 2020.

 

[Ant22]

an. 11, 2019 - Apple demanded $1 Billion for chance to win iPhone: Qualcomm CEO
Apple demanded $1 billion for chance to win iPhone: Qualcomm CEO | Reuters

Maybe they're trying to make up for the losses they made - or profits they didn't make - when it turned out that their iPhone sales weren't as good as they predicted.

Apple blames the decrease in sales on the market and trade wars, but taking a closer look at the product and its price may give them more accurate answers. I had iPhones for the past 10 years (don't judge ) but when my iPhone 6 died late last year I got myself a cheap but robust Chinese brand of an Android phone. I would seriously have to be on some heavy drugs to think that paying £1,000 for a phone is reasonable.

Some articles about Apple's trouble and their impact on the market:

Not worth it? Chinese resellers cut iPhone prices after Apple bombshell warning

China-based retailers have rolled out huge discounts on Apple phones, including the latest iPhone XR model. The generous offering comes after the US giant had to issue a rare gloomy revenue forecast for its sales in the country.

Suning, one of the largest retailers in China, part of which is owned by Alibaba, and another massive e-commerce company JD.com have slashed the prices for Apple phones this week.

Several models from the latest iPhone XR to earlier iPhone 7 and 8 were being sold at lower prices on Suning website. As of Friday afternoon, Apple fans could get a 128-gigabyte XR with up to a 1,200 yuan ($178) or 17 percent discount. The phone was initially selling for 6,999 yuan ($1,038), and the website cut the price to 6,199 yuan ($919) and offered consumers an additional 400 yuan coupon to cut the price even more to 5,799 yuan ($858). The offer expires in three days, according to the retailer’s website.

Meanwhile, an iPhone 8 with a 64-gigabyte capacity was selling below 3,900 yuan ($578) on the platform, while official Apple website did not change any prices for the region and was offering the same model for $178 more.

Beijing-based Jd.com cut the prices to almost the same level as Suning, allowing iPhone-hungry buyers to get XR with128 storage at 6099 yuan ($899). However, the model, alongside its cheaper version with lower capacity, was out of stock on the platform as Friday afternoon.

On Thursday, Yahoo Finance reported that the Silicon Valley tech giant slashed the price of the iPhone XR for partner sellers in China by about $100 in an attempt to boost sales.

The move comes shortly after Apple boss Tim Cook announced that the company’s revenue is to be lower than expected in the first quarter of 2019, blaming worse sales in China for the gloomy forecast. The news has crashed the US markets and sent the company’s shares into a nosedive on January 3, however it has partly bounced earlier this week.

Chinese telecom giants themselves have what to offer to the large domestic market instead of overpriced Apple products, the former commissioner at the Commodities Futures Trading Commission (CFTC) and host of RT’s Boom Bust’s Bart Chilton earlier said.

“An average person there [in China] makes $10,000 a year, so you’re selling them a $1,200, $1,500 iPhone... when they could get a Huawei phone, that’s Chinese manufacturing, for 500 bucks with all the same bells and whistles that an iPhone can have, what do you expect?” he told RT America.

Gold hits 6-month high as Apple wreaks havoc in global markets

Gold has reached a more than six-month peak rising above $1,300 as investors rushed to seek refuge in the metals after iPhone maker downgraded its revenue forecast and amid fears of a global economic slowdown.

The precious metal futures climbed in a second straight session on Thursday after US stocks saw the worst start of the year in more than a decade. Gold hit $1,300.40 an ounce on the Comex division of the New York Mercantile Exchange – the highest price since June 2018. It slightly rolled back ending the day at around $1,294.80 and remaining at the same level as of Friday opening.

“Obviously, the concerning news from Apple sales in China has created an additional wave of equity market selling, and that in turn has continued to pump money towards gold,” analysts at Zaner Precious Metals wrote as cited by Market Watch.

Apart from gold, most precious metals advanced on Thursday, except for platinum, which was down 0.6 percent trading below $800. March silver closed up 1% on Thursday settling at $15.797. Silver is believed to be more sensitive to signs of global economic weakness and has been growing since the end of December.

Palladium for March delivery hit the highest since December 19 and traded at $1,200.30 per ounce at the end of Thursday and continued to advance of Friday morning rising to $1,204.10 as of 9:20GMT.

This rally in gold is based on investors increasingly realizing that gold is ‘safe money’,” Rainer Michael Preiss, an executive director at Taurus Wealth Advisors said, according to Bloomberg. The demand for the precious metal was also triggered by the potential downturn in the global economy, rising US debt and possible central bank mistakes, the analyst believes.

However, some experts believe that despite the bright start to the year, gold may face great losses in 2019 as the US currency is about to strengthen.

“Gold prices are going lower,” President of Lucid Investment Tyler Jenks said in a New Year’s special of the Keiser Report. “I believe we can see a $600 on gold…because the dollar is going up and silver and gold have been moving inversely to the dollar.”

Thursday was one of the darkest days for US tech giant as it faced the biggest single-day stock percentage decline since 2013 after its CEO Tim Cook revealed a worse than expected revenue forecast for the first quarter of 2019, saying lower sales in China are partly to blame for it. The news sent US markets into a nosedive, with the Dow Jones Industrial Average dropping more than 660 points.

Ouch! Dow sinks 600 points as Apple suffers biggest single-day loss in 6 years

The Dow Jones Industrial Average tumbled more than 660 points as Apple stock dropped nearly 10 percent – the biggest single day decline for the company since 2013 – just one day after it slashed its revenue forecast.

Shortly after spooking Asian and European investors, CEO Tim Cook’s bombshell announcement rocked Wall Street on Thursday. The drop marked the worst start to a year for both the S&P 500 and the Dow since 2000, while for the Nasdaq it was the weakest start since 2005, according to Market Watch.

The Dow Jones fell nearly 2.8 to 22,686.22 points just days after it completed its worst year in a decade. The S&P 500 index plunged nearly 2.5 percent and the tech-heavy Nasdaq lost more than three percent.

The US tech giant itself was hit by Thursday’s sell-off with its stock tanking 9.96 percent. Apple stock, which was trading above $230 per share around three months ago, closed down the trading day at $142.19, its lowest price level since July 2017.

The iPhone maker lost around 18 percent in a year and is down nearly 36 percent since October highs. Thursday’s plunge also pushed Apple market valuation to less than $700 billion and down to fourth place among most valuable publicly traded US companies, just two months after it took the top spot.

In a rare announcement on Wednesday, Apple revealed that it expects a drop of up to $9 billion in revenue in the first quarter of 2019. The iPhone maker’s chief blamed the drop in sales on the economic slowdown in the world’s second-largest economy – China – a key emerging market for Apple smartphones.

 

[Carl]

Maybe they're trying to make up for the losses they made - or profits they didn't make - when it turned out that their iPhone sales weren't as good as they predicted.

Apple blames the decrease in sales on the market and trade wars, but taking a closer look at the product and its price may give them more accurate answers. I had iPhones for the past 10 years (don't judge ) but when my iPhone 6 died late last year I got myself a cheap but robust Chinese brand of an Android phone. I would seriously have to be on some heavy drugs to think that paying £1,000 for a phone is reasonable.

It seems that cheap Chinese phones are killing apple, along with a kind of malaise setting in with the whole phone, technology stuff.

The fever for latest and greatest phones is dying out at the same time that social media seems to have reached it's peak and people are sick of it. Facebook looks to be on its way down now, funnily enough after they were found to be blatantly abusing their customers' data.

The next wave of consumer tech might be more along the lines of wearable devices or AR/VR stuff. Even then it's gimmicky and hard to push. Who knows, maybe a renaissance of books and real conversations will come next.

 

[mkrnhr]

Apple has always appeared as a big scam. It is also noteworthy that Apple computer users are very annoying when they try to rationalize the fortunes they spend in these products and their closed ecosystems (hardware, software, and even repairs), despite the repeated malpractice scandals like the slowing down of old iphones in order to push consumers to buy new phones. Of course, people can choose to be scammed but it's getting ridiculous.

 

[goyacobol]

Apple has always appeared as a big scam. It is also noteworthy that Apple computer users are very annoying when they try to rationalize the fortunes they spend in these products and their closed ecosystems (hardware, software, and even repairs), despite the repeated malpractice scandals like the slowing down of old iphones in order to push consumers to buy new phones. Of course, people can choose to be scammed but it's getting ridiculous.

Actually, I agree that the perception is that Apple is overvalued as I type on my refurbished 2015 iMac. It does involve many nuanced factors when we choose the tools to buy. As far as closed ecosystems "(hardware, software and even repairs)" that can also apply to DELL which a very good dependable hardware company (that needs software drivers and repairs) used by both government and business and Microsoft.

And the slowing down of old iPhones to push consumers to buy new phones is as bad as any capitalistic programmed obsolescence.

Am just another "Apple Fan" ? No, not exactly. I have just seen Mircosoft do as many cheap shots and found many features of Apple to work well for me. My reasons for going with Apple were based on disgust for Mircosoft's operating system registry which is always a pain to repair (not to mention Vista) and their cannibalizing smaller companies often without integrating them efficiently into an overall software/hardware brand.

I think any company that can pull the combination together (hardware, software, product integration) gets some attention. Also, Apple offers upgrades to their operating system for free far more so than Microsoft in my opinion. Please consider this in the spirit of "mirth" to a certain extent. My granddaughter has a cool HP touchscreen PC to die for that is way less expensive than an Apple iMac.

Anyway, the main thing I see is that now China and other customers are affecting even Apple and other U.S. companies in the stock market which is maybe as it should be, considering we are eventually going to have to face the repercussions of being the holders of a fiat currency.

 

[angelburst29]

Anyway, the main thing I see is that now China and other customers are affecting even Apple and other U.S. companies in the stock market which is maybe as it should be, considering we are eventually going to have to face the repercussions of being the holders of a fiat currency.

With Trump's Trade war, I would imagine that it will eventually affect prices on goods, appliances and electronics across the board. It may start breaking up some of these monopoly-like Corporations in the tech world? China is definitely a competitor and it wouldn't surprise me if Russia eventually begins marketing some of their own specialties in the Tech world?

In 2016, the Russian Government ditched Microsoft Outlook for Russian-made software.

Moscow's government ditches Microsoft for Russian software

The city will initially install locally developed MyOffice software on the computers of 6,000 workers, replacing the Microsoft (MSFT) e-mail service they currently use. MyOffice is made by Russian company New Cloud Technology.

The program will eventually be expanded to all of Moscow's 600,000 municipal employees, according to a statement published by the country's ministry of communications on Tuesday.

"Russia-developed software is not inferior to foreign software, but it's much cheaper and, most importantly, provides reliable data protection," said Sergey Kalugin, the head of Moscow's information technology department.

The ministry has published a list of preferred Russian software on its website.

Samsung is the latest tech giant to warn that its business is suffering.

Tue January 8, 2019 - It's not just Apple — Samsung is hurting, too
https://www.cnn.com/2019/01/07/tech/samsung-earnings-drop/index.html

The South Korean company said Tuesday that its fourth-quarter operating profit is set to plunge nearly 30% from a year earlier, well below analysts' forecasts. It blamed the sharp drop on "lackluster demand" for its memory chips and "intensifying competition" in the smartphone industry.

Samsung's guidance comes after Apple (AAPL) set off alarm bells last week by warning that it will sell fewer iPhones than previously expected, mainly because of disappointing demand in China amid an ongoing trade war with the United States.
Samsung, the world's largest smartphone maker, didn't mention China specifically in its earnings guidance on Tuesday, but it said "mounting" macroeconomic uncertainties are affecting its business.

Shares in Samsung ended the day down about 1.7% in Seoul. The stock lost nearly a quarter of its value last year.

China, the world's largest smartphone market, is experiencing a deepening economic slowdown that's affecting businesses around the world.

As well as selling its own phones, Samsung supplies key parts like chips and display screens to other major device manufacturers.
Apple's latest iPhones use Samsung's OLED screens.

The South Korean company said it expects operating profit for the fourth quarter of 2018 to come in at 10.8 trillion won ($9.6 billion), compared with about 15.2 trillion won ($13.5 billion) in the same period a year earlier. It predicted sales will drop about 11% to 59 trillion won ($52.5 billion).

It warned the weak performance is likely to continue, predicting its earnings will "remain subdued in the first quarter of 2019 due to difficult conditions for the memory business" before improving later in the year.

The company is also hoping that the introduction of new technology like 5G services and foldable smartphones will help boost its mobile division.

Analysts weren't entirely surprised by Samsung's bleak statement.
"There is obviously the competition from the Chinese players that is limiting the growth of Samsung in many markets including the high-growth ones like India and South East Asia," said Kiranjeet Kaur, a Singapore-based analyst with research firm IDC.
According to IDC's latest report, Samsung still sells the most devices globally, but experienced a 13% decline in sales in the third quarter of 2018, compared with the same period a year earlier. Chinese smartphone maker Huawei, meanwhile, posted 33% growth.

And while many smartphone makers still use Samsung as a supplier, memory chip prices have "passed their peak days," Kaur added.

Samsung will report full fourth-quarter results at the end of this month.

The global market for smartphones is shrinking, and two of its biggest players are hurting badly.

Wed January 9, 2019 - Global smartphone sales fell for the first time ever in 2018. This year may be better
https://www.cnn.com/2019/01/09/tech/smartphones-apple-samsung-xiaomi/index.html

Apple (AAPL) and Samsung have both warned of slumping sales in the last quarter of 2018. Samsung's South Korean competitor LG warned of an 80% drop in operating profit in the same period compared to the previous year.

But the worst may already be over. Industry analysts are predicting a gradual return to growth in 2019.
Sales figures over the past year have made for grim reading.

The industry declined around 1% in 2018, according to preliminary forecasts by tech consultancies Canalys and Counterpoint Research. That's the first annual decline for the smartphone market ever.

IDC, another research firm, has forecast that the drop will be as steep as 3%.

The main drag has come from the world's biggest smartphone market, China, where sales have been falling for almost two years. Canalys estimates the Chinese market shrunk by nearly 9% in 2018 due to a slowing economy, a weaker currency and a long-drawn out trade battle with the United States.

Back to 'very slim' growth
"[In] 2018 the market was so bad that it will be easy for 2019 to be a better year," said Tom Kang, a research director at Counterpoint. "[The] first half looks gloomy but second half we can expect these things to pan out," he added.

The recovery will mainly be driven by "feature phone" owners upgrading to better devices, Kang says. Feature phones don't provide full access to the internet, and Kang predicts many will switch to smartphones in 2019.

Although the Chinese market continues to languish, analysts are predicting a sharper pickup in emerging markets, including India and Africa where collectively more than a billion people still don't have a smartphone.

"Those markets will continue to grow, to push up the global smartphone market size," said Mo Jia, an analyst at Canalys, adding that the global market will likely return to "very slim growth in 2019."

But much still hinges on China and its trade war with the United States, which has already hurt companies on both sides, including Apple, Huawei and ZTE.

Analysts still expect the Chinese market will gradually bounce back as the two sides try to hammer out a trade deal. But for now clouds remain on the horizon.