Intel wants the FTC’s ruling on Qualcomm’s business practices to stand, and it’s filed an amicus brief with the court outlining its own position. If you haven’t read up on the details of how the “No License No Chips” (NLNC) program worked, or the broad strokes of how Intel alleges this program was used to prevent its own success in modems, the amicus brief is an approachable and easy way to dig into the topic.
The brief mostly steps back through the findings in the case and the various schemes that Qualcomm used to prevent Intel and other companies from gaining market share in the modem market. Intel writes:
Qualcomm refuses to sell modem chips to a third-party handset manufacturer (OEM) unless the OEM takes a separate license to Qualcomm’s standard essential payments (SEPs) on Qualcomm’s preferred terms–including the payment of a royalty to Qualcomm on every handset an OEM sells, even if the handset uses a rival’s chip. That coercion allows Qualcomm to shift part of its chip revenues into its royalty rates, overcharging on the patent royalty while undercharging for chips. That manipulation of prices in turn destroys the normal competitive process in the chip market. It artificially limits OEMs’ interest in buying modem chips from suppliers like Intel because OEMs must pay Qualcomm’s manipulated royalty on top of whatever the competing supplier charges for the chip itself. At the same time, because Qualcomm has funneled its monopoly chip profits into coerced “royalties,” rivals like Intel cannot engage in meaningful price competition in the sale of modem chips.
The findings against Qualcomm, in this case, were significant. Judge Lucy Koh wrote a 233-page brief detailing the findings against Qualcomm, and it’s a 20-year history of how Qualcomm structured its contracts to benefit itself and hamper competition. We don’t know yet if Qualcomm will succeed in its effort to have the federal court case against it overturned, but so far, the findings of fact in the case have echoed Intel’s complaints and the findings of ruling bodies in other countries. China, Korea, the European Commission, and Taiwan have all found against Qualcomm in various investigations.
There Are Few Heroes Here
It’s hard to read Intel’s arguments against Qualcomm without a severe feeling of deja vu. While the specific claims that Intel makes against Qualcomm are particular to the cellular modem industry, they generally echo exactly the same themes that AMD raised against Intel in its own lawsuit against that company in 2005. Like Qualcomm, Intel was accused of using its market dominance and monopoly power to harm competitors and customers. Like Qualcomm, Intel was hit by fines and judgments in multiple countries. The chief difference is that AMD and Intel settled their lawsuit out of court, agreeing to a broad patent cross-licensing agreement, a less-restrictive x86 license for AMD, changes to Intel’s product messaging with regards to its software products, and a $1.25B cash payment. AMD and Intel settled their case, but these issues continue to reverberate through the community, as the recent discussion around Matlab and the use of Intel software libraries makes clear.
I’ve seen various people argue that it’s hypocritical for Intel to raise these issues in a lawsuit given the way it treated AMD. I think this is genuinely short-sighted. The practices that Qualcomm was found to have engaged in were anti-competitive and harmful to the broader cellular industry and to consumers. They allowed Qualcomm to charge more for its products. We all ended up paying for it. The question of where the information came from is less important than the fact that the abuses existed in the first place.
Intel’s 5G modem — before the company sold to Apple
At the same time, we can acknowledge that none of the companies involved here necessarily look all that great. Apple may have instigated all of this by filing lawsuits against Qualcomm in the first place, but the company has been happy to work as an enforcer on behalf of monopolistic power in countless ways, from cooperating with book publishers to try and stop Amazon from selling books at its own prices, to its own work against right-to-repair efforts. But then, there’s been plenty of concern over Amazon’s market dominance in various areas as well. We’ve already discussed the Intel / AMD angle. None of the companies involved here are exactly spotless.
The real problem here, I’d argue, is the diminished number of competitors in many markets. Companies have become adept at concentrating their own market power and at making it relatively difficult for other firms to enter the space. The legal system has proven inadequate to the task of policing these situations, if only because of how long it takes for cases to work their way through the system. Qualcomm’s near-total ownership of the LTE market is now being investigated at the same time as 5G deployments are being considered. 6G could well be on the way before these cases wind up.
On balance, I think it’s more important to protect consumers and to know when companies are abusing the market than it is to worry about where the information comes from — but the current process virtually ensures that any eventual penalty will just be considered a cost of doing business.
Now Read:
- Qualcomm Ruled a Monopoly, Found in Violation of US Antitrust Law
- Qualcomm fined $865 million by South Korean FTC for abusive business practices
- European regulators announce formal antitrust investigations against Qualcomm
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