Qualcomm warned of a delay for an upcoming “global 5G flagship phone launch” and confirmed it settled a long-running patent dispute with Huawei.
The news came amid the company’s Q3 2020 results, which saw the stock spike 13 percent on the Huawei news.
Qualcomm said it expects handset sales to drop about 15 percent in its fourth-quarter because of the flagship phone delay. Although the company didn’t specify which phone, the company likely referred to the upcoming iPhone.
Rumours about the iPhone 12 suggest it will include 5G, and that Apple delayed the launch of the phone due to the COVID-19 pandemic. Although Apple hasn’t said anything publicly about the rumours, it would track that Qualcomm’s unknown delayed flagship device is the iPhone. It’s unlikely that any other upcoming flagship smartphones will impact Qualcomm as much. Further, the next round of smartphones from Samsung seem to be just around the corner, so it’s unlikely Qualcomm means them.
As for the Huawei news, the two companies reached an agreement that will see Qualcomm record about $1.8 billion USD (roughly $2.4 billion CAD) from the company in Q4.
Although the U.S. government banned Huawei from buying Qualcomm chips and other American components, it can still pay licensing fees for Qualcomm’s patents.
In fact, Qualcomm’s patent portfolio is one of the company’s strengths. CNET says that Qualcomm derives much of its revenue from licensing patents to device makers with fees based on the device value, not the components.
Huawei isn’t the only big tech company that battled with Qualcomm over patents and licensing. Apple just last year reached an agreement with Qualcomm, which allowed the company to supply wireless modems for iPhones again — hence the 5G iPhone coming this year and Qualcomm’s likely knowledge of its delay. That agreement led Intel, Apple’s other modem supplier, to exit the market.
Huawei and Qualcomm reached an interim agreement 18 months ago with the China-based phone maker agreeing to pay Qualcomm $150 million each quarter. The new deal reached this month will be a long-term agreement and gives the companies access to each other’s patents.
Qualcomm says the new deal with Huawei covers sales beginning January 1st, 2020. The company said it is still assessing the accounting impacts of the agreement. However, it noted that its Q4 revenue would include the $1.8 billion payment along with royalties for the Q4 sales made by Huawei and estimated amounts due for the March 2020 and June 2020 quarters.