Had LG not settled, it may have faced “catastrophic damage to its mobile business”
Disagreements and a lawsuit followed South Korean electronics company LG’s termination of its master licensing deal with U.S. chip manufacturer Qualcomm in 2018. In June, LG claimed that it was unable to settle its differences with Qualcomm; however, the two companies have now announced a new direct worldwide patent license agreement.
Under the terms of the five-year, royalty-bearing agreement, Qualcomm has granted LG a patent license to develop, manufacture and sell 3G, 4G and 5G single-mode and multimode complete devices.
The LG settlement is reminiscent of April’s somewhat surprising settlement between Qualcomm and Apple, which allowed for iPhones to once again use Qualcomm’s components. Notably, Apple is one of LG’s critical customers.
During the lawsuit, LG stated in a court filing that Qualcomm’s licensing requests “may ultimately impact the entire 5G market.” For example, Qualcomm has the practice of charging royalties based on a device’s total value, as opposed to just the value of the mobile chips inside the device. Therefore, whenever a smart phone maker adds more to a phone, Qualcomm gets a higher royalty. While practices like these are highly beneficial for Qualcomm, some electronics companies have argued they negatively impact the 5G movement as a whole.
However, according to analysts, LG had little choice in its decision to settle because the electronics company would likely be unable to produce global 5G devices anytime soon without Qualcomm’s chipsets. “It would do catastrophic damage to its mobile business,” BNK Securities analyst Park Sung-soon said back in June.