Qualcomm hammers out patent licensing deal with LG

LG had been negotiating the new 3G, 4G and 5G patent license and chip supply deal for months

After extended negotiations and a lawsuit that threatened to “impact the entire 5G market,” Qualcomm, the world's largest seller of smartphone chips, said it had entered into a licensing deal with LG Electronics that will continue the South Korean company’s access to the US chipmaker’s 3G, 4G, and 5G cellular modem technologies.

The move is undoubtedly aimed at preventing a disruption of LG's smartphone business. But the long-term impact for Qualcomm and other 5G device makers is unclear.

LG terminated its master licensing deal with Qualcomm in 2018 in hopes that it could reach better terms with its key smartphone chip supplier. Yet, their negotiations dragged on past the June end of an interim supply agreement, continuing as LG globally released its Qualcomm Snapdragon-powered V50 ThinQ 5G smartphone, and throughout its work on a superior sequel, the V60, which is expected to launch next month.

Furthermore, the deal notably comes after Qualcomm reached a similar modem supply and patent licensing deal with Apple, one of LG’s key customers, which had instigated lawsuits and antitrust investigations regarding Qualcomm’s chip supply terms. Shortly after Qualcomm and Apple settled their dispute, a US federal court ruled that Qualcomm had been illegally suppressing smartphone chip competition, and ordered the company to renegotiate licensing agreements with customers at reasonable prices without threatening to cut off their supplies. But Qualcomm asked for the court’s order to be postponed pending an appeal.

Qualcomm is saying little about the agreement beyond the fact that it is granting LG a patent license to make “3G, 4G and 5G single-mode and multimode complete devices,” under an arrangement that’s “consistent with Qualcomm’s established global licensing terms”.

"This agreement builds on our long-standing technology relationship and reaffirms the value of Qualcomm's world-class patent portfolio," John Han, senior vice president of technology licensing, said in a statement.

That language suggests that there hasn’t yet been a dramatic change in the companies’ licensing agreements, but doesn’t rule out the possibility that the terms might subsequently be modified.

As the companies’ negotiations proceeded, analysts suggested that a failure to reach a deal with Qualcomm could have “catastrophic” consequences for LG’s smartphone business, while LG pointed to potential impacts on the entire 5G market. In essence, LG suggested, reducing chip or licensing payments to more “reasonable” levels would benefit everyone making 5G devices - except, of course, Qualcomm.

Without Qualcomm chips, LG would almost certainly be unable to continue producing global 5G devices for the immediate future, an issue that almost all of its competitors are facing as well. Rivals including Samsung and Huawei have already developed and shipped regionally usable 5G modems, while smaller chipmaker MediaTek is promising an alternative of its own in the coming months. Intel, a onetime competitor in the 5G modem business, sold off its smartphone modem division to Apple after failing to quickly bring Qualcomm-rivaling alternatives to market.

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