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Samsung, Huawei Supply Majority of Own Modem Chips, Qualcomm Says

Samsung, Huawei Supply Majority of Own Modem Chips, Qualcomm Says

By Reuters | Updated: 7 January 2019 11:22 IST

Highlights

A trial between US FTC and Qualcomm kicked off in court on Friday
Regulators argued that Qualcomm engaged in anti-competitive practices
Qualcomm has argued its licensing practices follow industry norms

The two largest smartphone makers in the world supply a majority of their own modem chips to help their devices connect to wireless data networks, according to evidence presented at an antitrust trial for chip supplier Qualcomm.

A trial between the US Federal Trade Commission and Qualcomm kicked off in a federal courtroom in California on Friday, with the regulators arguing that Qualcomm engaged in anti-competitive patent licensing practices to preserve a monopoly on modem chips. The case is being closely watched because it may shed light on the likely eventual outcome of the global legal battle between Apple and Qualcomm.

Apple has alleged that Qualcomm engaged in illegal business practices, and Qualcomm in turn has alleged Apple violated its patents, scoring victories in China and Germany last month.

Qualcomm has argued its licensing practices follow long-established industry norms and that it charges broadly the same licensing rates that it had for many years before it ever started selling chips.

That has become a big market for Qualcomm, which controlled 59.6 percent of the $15.3 billion market for 4G modem chips in 2017, according to IDC's Phil Solis, who studies mobile chips for the research firm.

But Bob Van Nest, an attorney representing Qualcomm in the case, also sought to show that Qualcomm is not dominant in the world's two biggest handset makers.

During opening arguments, Van Nest's presentation said that Huawei internally sources 54 percent of the modem chips it puts in its devices and gets only 22 percent of its modems from Qualcomm, with the remainder coming from other unnamed makers. Samsung internally sources 52 percent of the modem chips it uses, with 38 percent from Qualcomm and the rest from other makers, according to the presentation.

Huawei and Samsung did not immediately respond to a request for comment. Also, the FTC's case centres not on the overall modem chip market - which includes slower chips that go into cheaper handsets - but rather the market for speedy "premium" chips where Qualcomm is among the only options.

Huawei and Samsung are both large diversified technology corporations that make many other products aside from premium-priced smartphones. Huawei's HiSilicon unit supplies the chips for its high-end phones such as its Mate and P series. Samsung's chip division supplies processors and other components for many of its handsets and is also a dominant global supplier of memory chips beyond its own products.

The two firms are also Apple's fiercest rivals in the market for premium smartphones costing $700 or more. Apple depends entirely on Intel Corp and Qualcomm for modem chips, though the iPhones released in 2018 use Intel modems exclusively.

Technology news publication The Information last month reported that Apple was designing its own modem chip, citing Apple job listings and a source briefed on Apple's plans. Apple declined to comment on its plans.

For the second quarter of 2018 - the most recent figures available from IDC - Apple was the third-largest smartphone supplier by volume, with Samsung and Huawei in first and second place, respectively.

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