Apple and Qualcomm settle billion-dollar lawsuit

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What Apple-Qualcomm settlement means for you For those unaware, Apple was using Qualcomm's 4G modem chip until 2017's iPhone X. However, it completely moved to Intel's 4G modem for the latest iPhone XS, XR and the iPhone XS Max.

Qualcomm stock rose more than 20% on the news, while Apple stock was flat. As you might imagine, billions of dollars are up for grabs in this case and both Apple CEO Tim Cook and Qualcomm CEO Steve Mollenkopf are expected to testify.

"This was a major win for Qualcomm as fears of a loss in the courts was a major overhang on the name with Apple going after this IP issue full steam ahead", Wedbush Securities analyst Dan Ives said.

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"All litigation between the two companies worldwide" has been dropped, the firms said in a joint statement.

Intel said Tuesday it was exiting the phone modem business and would focus its 5G efforts on other devices such as networking gear. As a result, the face of the cellular modem market is changing in an instant, as Apple's shift in allegiances will have repercussions throughout the industry. Qualcomm sued Apple for royalties the company's suppliers were refusing to pay, claiming Apple had interfered with contracts Qualcomm had with companies such as Foxconn.

Ben Wood, chief of research at CCS Insight said the settlement was "a huge vindication for Qualcomm". It establishes a six-year global patent license agreement, with a two-year option to extend, and multiyear, renewable chipset supply agreement, which could affect rival semiconductor slinger Intel. But now that Apple and Qualcomm are once again able to work together, Intel can expect Qualcomm to supply at least some of the 5G chips in the 2020 iPhone-and Apple would have had more leverage to negotiate better pricing.

The settlement was announced as opening arguments were beginning in San Diego federal court in the federal trial of a patent dispute between the two tech giants.

Shares of Intel were up 2.7 percent at $58.25 in after hours trade.

In 2015, Qualcomm paid a $975 million fine to settle Chinese government claims that it charged too much for technology royalties.

CNBC was the first to report the settlement, with confirmation from Apple and Qualcomm coming shortly afterward Tuesday.

In February this year, Intel advised Apple that it would not have 5G modems until 2020.

FILE PHOTO: An employee of German Apple retailer Gravis displays an iPhone 7 and 8 in a store in Berlin, Germany, January 3, 2019.

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