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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: Qurious who wrote (146670)	5/30/2018 3:42:23 PM
From: slacker711	1 Recommendation Recommended By sbfm Read Replies (1) \| Respond to of 196486

Re modem price, what difference does it make to the handset manufacturer if it pays $30 for the modem, versus $18 for the modem and a $12 separate, device-based royalty? Yep, this is really about unit based royalties or ASP based royalties. At $7 billion, Q would be collecting roughly $3.50 a handset. You can either charge based on ASP's to collect the $7 billion or charge each device the $3.50....whether it is at the modem level or final handset level is irrelevant. Both work and can be defended as fair but different consumers would be paying the royalty. Slacker

To: Qurious who wrote (146670)	5/30/2018 4:14:25 PM
From: Wildbiftek	14 Recommendations Recommended By garrettjax JeffreyHF Jon Koplik kech Lance Bredvold and 9 more members Respond to of 196486

I think Apple's challenge to Qualcomm's model has a lot to do with the Android vs iOS rivalry: many smaller OEMs rely on Qualcomm to design the hardest parts of their handsets along with discount in the form of a lower licensing fee to quickly enter the market with a very high quality product that achieves 95% of what Apple does with far higher R&D budget. (They need only boot Android before they have a nearly complete solution, the rest of the design is the easy part...) Clearly Apple would benefit from hobbling Qualcomm's efforts here and their claims of unfairness are a red herring. Their true aim is to hobble the Android ecosystem by removing the pro-competitive discounts granted to the myriad of OEMs with lower BOMs that are producing affordable and high quality iOS competitors.

To: Qurious who wrote (146670)	5/31/2018 12:27:00 PM
From: Jim Mullens	1 Recommendation Recommended By JeffreyHF Respond to of 196486

Qurious, re: QCOM IP / royalty business model................. I probably made the wrong word choice in "silicon" and confused the issue. By silicon, I mean it in the figurative sense to encompass all Q deliverables. Obviously, Q's deliverables include more than just literal silicon. Certainly there are drivers, possibly RAN support layers etc. My point, however, remains that there are deliverables involved, whereas the preposterous Apple design patent, for instance, and the MEN cross-licenses do not. And when there are deliverables involved in, or in connection with, your IP, my belief is it is std industry practice to roll what you deem you can charge for that IP into the price of your deliverables. Is this better, clearer? Re modem price, what difference does it make to the handset manufacturer if it pays $30 for the modem, versus $18 for the modem and a $12 separate, device-based royalty? >>>>>>>>>>>>>>>>>>>>>>>>>> 1) deliverables - The BOM for Samsung’s Galaxy S9 lists 11 separate part numbers (deliverables) supplied by QCOM, and 8 other component suppliers that could possibly use QCOM IP. In the S9’s case, QCOM could sell all 11 components as a package, but for other device makers they may pick and choose components from QCOM and others from QCOM competitors. So, in a worst case scenario, we’re looking at 19 separate components and 20 suppliers (including Samsung) to apply QCOM’s royalty to. So, in essence under your methodology, QCOM would be required to disband its device based license with Samsung (and all other device mfgs) and now negotiate component level licenses with up to 20 separate suppliers. And, that’s only the beginning of the administrative work to follow- tracking/ billing/ auditing the sales and the pricing of each component including exhaustive examination of the P&L of each company to validate the correct net price (not off-set by other agreements). All, an unnecessary costly administrative nightmare to be borne by the ultimate consumer... just to satisfy the perceived notion that the cellular industry should base royalties at the lowest component level as done is some other industries. 2) What difference does it make...... “...Re modem price, what difference does it make to the handset manufacturer if it pays $30 for the modem, versus $18 for the modem and a $12 separate, device-based royalty?..” >>>>>>>>>> “All things being equal” ($7.7B QTL rev) , depending on QTL cost recovery method based on modem ASP (proportional) vs straight dollars/ unit ($5.59), it could be significant. The ultra high tier with $400 cap could see their royalty (without new administrative cost add-on) increase to $17.20 / unit vs $13 ($400 x 3.25%). If QCOM were to maintain the same QTL profit margins, its costs would be significantly higher to administer up to 19 or more licenses (component level) per device manufacturer, and those cost word be passed on to the device maker and ultimately to the consumer. 3) Another important consideration- with several device makers (Samsung, Huawei , etc) now also making their own modems and other connectivity components how is that to be properly accounted for if device level royalty were scrapped? Would the device makers accurately price its modem / connectivity components so that QCOM could proportionately apply its new rate structure? How would QCOM monitor this and how much more legal entanglements would result? Device / Modem tiers (FY 16 metrics- hypothetical distribution units / costs) .......................ASP ........................Device.........Modem .....unit sales/ $.........................QTL royalty .............................................pkg.............%........Amt.........$................% add....$tot.......per unit + ultra Low.............$100...... $ 8............20%....0.274B.....$ 2.2B..................................$ 1.6 + low........................150.........10..........................................2.7........................................2.0 + medium.................200........15...........................................4.1........................................3.0 + high.......................300.........20..........................................5.5........................................4.0 + ultra high (cap).....400.........86 (*)......20%...0.274B......$23.6B..................................$17.2 Total..................................................................1.372B......$38.1B......20%.....$7.665B Not proportional pricing ....................................!.372B.....................................$7.665B...$5.59 Potential administrative cost add-on.................................................................$3.000B...$2.19 39% So, we’re to ask QCOM to get into a new and more costly web of entanglements all to satisfy AAPL’s whims (and some component level pricing “purists”) when the cellular industry’s device level royalty methodology has been the proven efficient, legal, and accepted norm for over three decades?????