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Intel says Qualcomm tactics forced it out of modem chip market

Intel says Qualcomm tactics forced it out of modem chip market
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By Stephen Nellis

(Reuters) – Intel Corp <INTC.O> sold its smartphone modem chip business to Apple Inc <AAPL.O> at “a multi-billion dollar loss,” the U.S. chipmaker said in a court filing on Friday, alleging that rival Qualcomm Inc <QCOM.O> forced it out of the market.

Intel made the claims in a brief filed with the 9th U.S. Circuit Court of Appeals, where Qualcomm is seeking to overturn a sweeping antitrust decision against it after losing a lawsuit by the U.S. Federal Trade Commission. Intel, whose executives testified at the trial, argued on Friday that the ruling should stand. Appeal proceedings are expected to begin in January.

In a 233-page decision issued in May, U.S. District Judge Lucy Koh in San Jose wrote that Qualcomm’s patent licensing practices “strangled competition” in parts of the market for modem chips that connect smartphones to mobile data networks. She ordered the San Diego-based company to renegotiate licensing agreements at reasonable prices.

Qualcomm appealed Koh’s ruling and won a pause in enforcement while the appeal unfolds.

Intel was Qualcomm’s chief rival in modem chips, and sold the components to Apple for the iPhone. But Apple signed a chip supply agreement with Qualcomm after they settled a major legal battle in May. Hours later, Santa Clara, California-based Intel said it would sell its modem chip business.

In July, Apple bought the Intel unit in deal valued at $1 billion (779.4 million pounds).

In its court filing and an accompanying blog post published on Friday, Intel said it was forced out of the market because of Qualcomm’s patent licensing practices and supported the FTC’s case against Qualcomm.

“We invested billions, hired thousands, acquired two companies and built innovative world-class products that eventually made their way into Apple’s industry-leading iPhones, including the most recently released iPhone 11,” Steven R. Rodgers, Intel’s general counsel, wrote in the post.

“But when all was said and done, Intel could not overcome the artificial and insurmountable barriers to fair competition created by Qualcomm’s scheme and was forced to exit the market this year.”

Qualcomm has denied the FTC’s accusations, and other parts of the U.S. government urged the appeals court to pause enforcement of the FTC ruling against it. In July, the Pentagon and the Department of Energy said Qualcomm was a “trusted” supplier of 5G technology and would be “impossible to replace” in the short term if put out of business.

(Reporting by Stephen Nellis in San Francisco; Editing by Richard Chang)

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