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Apple uses Infineon 3G chips to dodge Qualcomm royalties

updated 05:35 pm EST, Thu November 19, 2009

Chip choice helps increase gross margin on iPhone

Apple has allegedly established a system to minimize licensing costs for 3G components patented by Qualcomm, according to Bernstein Research analyst Toni Sacconaghi. While most 3G OEMs are paying Qualcomm roughly 4 percent on the wholesale price of their phones, Apple reportedly dodges most of the fees and pays an estimated 1.6 percent of its iPhone revenue to the chip maker.

The discrepancy is attributed primarily to the fact that Apple is not a direct Qualcomm licensee. By purchasing Infineon baseband chips and allowing Foxconn to pay the standard Qualcomm royalties, Apple is paying licensing fees on the transfer price from the iPhone's contracted manufacturer.

""Given that iPhone gross margins are ~60%, Apple is effectively paying royalties on just 40% of the iPhone's average wholesale ASP, vs. 100% for its handset OEM peers," according to Sacconaghi.

The analyst suggests Apple has added an estimated $280 million to its FY 2009 operating profit through the arrangement, which could fetch over $400 million in FY 2010. Separate reports suggest Qualcomm is seeking a chip deal with Apple, although the details of such talks remain unclear.

by MacNN Staff





  1. testudo

    Joined: Dec 1969



    The iPhone's gross margins are 60%? Wow, talk about suckering the carriers.

    No wonder ATT demands you get a phone and data plan. They've got a lot of money to make up.

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