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Qualcomm CEO: Litigation costs will subside as 5G opportunities grow

Litigation with Apple Inc., the U.S. Federal Trade Commission and others has cost Qualcomm Inc. a lot of money, but the chipmaker's CEO hopes the buildup and subsequent explosion of 5G will take away some of that pain.

"We've had an impact with litigation, but we've also had tremendous growth in areas like China and our ability to get ready for the launch of 5G and the ramp of the technologies associated with 5G, which were really put in place at the end and during fiscal year 2018," said Qualcomm CEO Steven Mollenkopf, addressing investors at the company's annual stockholder meeting March 12.

There have been excessive costs due to litigation, but "we anticipate and hope that those disappear and move out of the long-term run rate of the company," Mollenkopf said.

Apple in January 2017 filed a lawsuit against Qualcomm for overcharging on licensing fees. In July 2017, Qualcomm responded with a lawsuit against Apple, alleging patent infringement. The FTC has charged Qualcomm with monopolistic behavior and overcharging on licensing fees. Arguments in the FTC case ended Jan. 29, and both sides are awaiting the judge's decision. Mollenkopf has previously said he hopes the lawsuits with Apple would be settled by the end of the year.

During an earnings call Jan. 30, Qualcomm officials said they expect meaningful 5G revenue in late 2019 or early 2020. Smartphones and hybrid tablet-phone devices were launched with Qualcomm Snapdragon 5G chipsets at the recent Mobile World Congress in Barcelona, Spain. At the trade show, Qualcomm also released its latest Snapdragon X55 5G modem, and a chipset that integrates a 5G modem and central processing unit.

"There are now 35-plus 5G licensing agreements. Our flagship Snapdragon product, the Snapdragon 855, has over 100 designs currently ongoing, and we have over 30-plus designs for 5G that will launch in 2019 alone," Mollenkopf said.

Qualcomm's revenue in the first fiscal quarter of 2019 was $4.84 billion, declining from $6.04 billion in the same quarter a year earlier.

Qualcomm executives also addressed the pricing of its 5G modem licenses, with Alexander Rogers, executive vice president at Qualcomm, saying during the meeting that the chipmaker has taken a fairly conservative approach to pricing 5G chipsets.

"What we actually did was we kept our 5G pricing at the same level that we had our 3G, 4G SEP-only pricing," Rogers said. SEP refers to "standard essential patents," which include foundational technologies alongside the 5G modem. Apple in its original lawsuit said Qualcomm was overcharging for the standard essential patents.

Rogers, though, said, "We kept that pricing level set for the rest of the world. We took that kind of a modest, conservative approach."