Why Qualcomm matters to Apple and Microsoft

Qualcomm matters to Apple, a lot. Qualcomm matters to Microsoft, a lot. Qualcomm worries about Apple and loves Microsoft. Why? Even friends need enemies.

Who is Qualcomm?

Qualcomm is a small supplier that became a massive supplier on the back of the mobile phone.

Qualcomm owns a number of technologies that are key to 4G technology, along with a lot of other technology that a massive number of other companies rely on to connect to mobile phone networks and the internet, from mobile devices such as phones, tablets, laptops, and increasingly desktop PCs.

Qualcomm made a fortune out of its patent licencing model, which charges companies for Qualcomm technology based on the total end cost of the device, rather than the part that Qualcomm supplies. This is at the heart of their lawsuit with Apple, currently worth US$1.2 billion and change.

Why Qualcomm matters to Apple

Apple uses Qualcomm chips and modems in the iPhone. Enough said.

Qualcomm was Apple's best friend across the reign of the iPhone 5, 6, and 7. Things got ugly when Apple balked at renewing their agreement with Qualcomm for the parts inside the iPhone 8 and iPhone X, where Qualcomm wanted to collect based on the end value of the whole phone, rather than just the parts supplied by Qualcomm.

Apple turned to Intel, and Intel rushed to get modems and parts ready for the iPhone 7 and 8.

Apple then turned its back on Qualcomm, who cried all the way to their lawyers. Qualcomm sought an import ban on the iPhone. Apple hit back by stopping payments to Qualcomm, and Apple told other iPhone parts suppliers to stop paying Qualcomm fees as well. This dug a US$1.2 billion hole in Qualcomm's income.

Lonely and somewhat afraid of the investor backlash, Qualcomm needed a new best friend. Fortunately, somewhere deep inside the campus rabbit-warren at Qualcomm, a group of engineers had been working with Microsoft on a little project that might one day be of value. That day had come.

Why Qualcomm matters to Microsoft

Microsoft had killed Windows Phone, and needed a eyeballs on their apps on a phone.

Microsoft had success with Surface, but Surface devices are premium (hint: expensive), and run Windows 10.

Microsoft needed a way to get more customer eyeballs on Microsoft apps on phones, which meant doing deals with Google. Or.... did it?

Microsoft owns core components of Android, and has previously successfully extracted payment from Google and other Android phone manufacturers that use Android on phones. Microsoft had burnt those bridges with angry lawyers, and wasn't likely to rebuild them in a hurry. Microsoft needed a friend.

So, two big friendless empires came together.

Qualcomm and Microsoft, now best friends, with different strengths and weaknesses, complimented each other's ambitions and balance sheets. They also both wanted to murder Apple.

Microsoft and Qualcomm used their new-found friendship to quietly develop Snapdragon 845, a new chip from Qualcomm capable of powering new experiences on new smartphones and tablets. Bingo.

Try as they might, Windows Phone OS was dead. Enter Android, the green robot deep in Microsoft's patent drawer.

Microsoft and Qualcomm set about customising a reference design for hardware manufacturers, enabling them to quickly design and built Snapdragon-powered Android tablets.

Qualcomm wins.

Qualcomm gets to sell great new chips to their existing Android phone-manufacturing partners, and enables them to quickly build Android tablets. This generates more sales for Qualcomm.

Microsoft gets in on the action by insisting that Microsoft apps get pre-installed on those Android tablets. Office, Skype, LinkedIn, Hotmail, Outlook, OneNote, OneDrive; all the good ones.

Microsoft gets to hook those apps back in to the Windows Android Store and the Microsoft Cloud, sliding a quick middle finger to Google.

Device manufacturers jump for joy, having a ready-to-go product line, waiting for a logo and a battery.

Best of all, Qualcomm can maintain its Zen-like calm in the face of the Apple lawsuit, knowing it has Microsoft's money in its pocket, and a waiting list of orders for chips from OEMs.

Until next time,

Xavier Zymantas

XYZtech XYZ Media Group

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