Apple’s 3G Money Gambit
If you want to create a 3G-operating device, do you know who you will have to pay a license fee to? If you guessed Qualcomm, you would be right as they currently hold a multitude of patents related to 3G technology. However, something you most likely do not know is that Apple has seemingly gotten away with paying a much lower fee to Qualcomm. Every licensee (HTC, LG, Motorola, etc.) must pay 5% of the wholesale price of their 3G product to Qualcomm. If the device cost $500 to manufacture wholesale, then the company must pay $25 to Qualcomm. If they make 1 million devices, that is $25 million out of pocket to Qualcomm.
It seems that Apple has found a way to circumvent this. Although the Apple iPhone sell's for on average $590, it looks like they only pay the 5% on the unit price Apple pays Foxconn (the company that actually manufactures the iPhone), which is a mere $244. This loophole has been estimated to save Apple $290 million in fiscal 2009 alone. Qualcomm is only seeing $9.70 for each iPhone sold, instead of making $23.60 per iPhone. That is a savings of $13.90 per device sold, quite a pretty penny when you are selling millions of units per quarter.
How you may ask is Apple able to do this without Qualcomm taking them to court? The entire manufacturing process of the iPhone is done externally, through Foxconn. Qualcomm seems fine with the arrangement as they still make $9.70 per device. Looking at the available data, Qualcomm has raked in close to $27,000,000 in licensing fees.
Source- MaximumPC.com
© 2009, BigDiesel07. All rights reserved.
Wow, clever…
typical apple
How much is $270,00,00 ?
If they are losing out on $290M a year then I surprised that they aren’t going after Apple for this.
@Stealth86
Thanks for noticing that – I fixed the typo
You can bet that if it were the other way around Apple would be suing big time. BTW, is Apple unique in this arrangement? The article said licensing fees were based on wholesale manufacturing costs, so how would Apple be any different than anyone else? I assume most phones are outsourced for manufacture.
So does Foxconn have to pay licensing fees to Qualcom since they are the manufacturers? Or can you build a 3G device without paying the licensing fees as long as you don’t plan on selling to consumers? This doesn’t make any sense at all. Once other companies get wind of this there may be some sort of lawsuit against Qualcomm to lower fees for other companies.
A lawsuit against Qualcomm would never hold, the lawsuit would be against Apple for cheating!!!