Qualcomm fined $1.2 billion by the EU for paying off Apple

Qualcomm has been hit by a fine of €997 million ($1.2 billion) from the European Union for violating antitrust laws in a series of deals with Apple.

The US chipmaker is accused of paying the iPhone-maker billions of dollars between 2011 and 2016 to exclusively use its 4G chips in the iPhone and iPad. “This meant that no rival could effectively challenge Qualcomm in this market, no matter how good their products were,” said EU competition commissioner Margrethe Vestager in a press statement. “This is illegal under EU antitrust rules and why we have taken today’s decision.”

Speaking at a press conference in Brussels, Vestager said that Qualcomm’s actions had shut out rival Intel, which makes its own 4G chips. “It would have cost Apple a lot of money” to switch supplier while the deal was in place, said Vestager. Apple began using Intel’s modems in its iPhone 7 and iPhone 7 Plus devices after its agreement with Qualcomm ended.

The EU’s antitrust commission began investigating this case in 2015, and said the fine represented 4.9 percent of Qualcomm’s revenue in 2017. According to Bloomberg, Vestager told reporters that the fine served as a warning to other tech companies: “Don’t go there.” But, she made clear that Apple was not at fault in this case.

In a statement, Qualcomm said it “strongly disagrees” with the decision and will “immediately appeal” it at the General Court of the European Union.

The fine is significant in and of itself, but it’s also important considering Qualcomm’s wider position in the market. The company is not only being sued by Apple in a dispute over chip royalties, but is also facing down a $100 billion-plus hostile takeover from rival chipmaker Broadcom. Qualcomm rejected the bid last November, saying it “dramatically undervalued” the company.

These matters are complicated yet further by Qualcomm’s falling profits (down 90 percent in the fourth quarter last year) and the company’s own ongoing attempt to buy Dutch chipmaker NXP for $47 billion — a deal which still needs approval from Chinese regulators before it can go ahead. All in all: not a good time to get hit by a $1.2 billion fine.