Qualcomm to charge up to $16.25 in royalties for every 5G phone, more than Ericsson’s $5/phone

Qualcomm disclosed the prices it plans to charge handset makers for its 5G intellectual property. Specifically, the company said that it could charge smartphone manufacturers up to $16.25 in royalties for every 5G phone they sell.

That figure is noteworthy considering Qualcomm expects 5G phone sales to begin in earnest in 2019.

However, $16.25 per 5G phone is not necessarily the exact price that 5G handset makers would pay to Qualcomm. The company said its rates would vary depending on exactly what kinds of technologies were included in the license, as well as what types of devices manufacturers would sell.

Moreover, patent-licensing agreements often include cross-licensing deals, which would also affect the final price.

Specifically, Qualcomm said that it would offer a royalty rate for its patents on the 5G NR standard, up to and including release 15 of the 3GPP specifications, of 2.275% of the selling price of branded single-mode 5G handsets; and a royalty rate of 3.25% of the selling price of branded multi-mode (3G/4G/5G) handsets. And for manufacturers that want to license both Qualcomm’s “cellular standard essential patents” as well as its patents that are not essential to the standard, the company said it would charge a royalty rate of 4% of the selling price for branded single-mode handsets and 5% of the selling price for branded multi-mode handsets.

The company added that its rates were capped at $500 for the selling price of the phone.

Qualcomm’s licensing rates for its 5G patents are significantly higher than the $5 per phone that Ericsson said in March that it plans to charge (Ericsson said it might reduce that rate to $2.5 per phone under “exceptional circumstances”). Qualcomm’s rate is also significant considering the company is locked in a heated patent-licensing dispute with Apple, which along with Samsung is one of the world’s largest smartphone vendors. Apple has argued that Qualcomm is overcharging manufacturers for licenses to its patents. Apple has sued Qualcomm for $1 billion over the issue, and is reportedly moving to replace Qualcomm chips with products from Intel or MediaTek in its phones.

“For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with,” Apple said in its lawsuit against Qualcomm in January. “Qualcomm built its business on older, legacy standards but reinforces its dominance through exclusionary tactics and excessive royalties. Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined.”

Qualcomm’s 5G IP royalty rate was outlined by Jim McGregor, principal analyst with Tirias Research, in a post on EE Times. “Given the breath of Qualcomm’s product portfolio and the fact that these rates have been established over more than a decade by the entire wireless industry, the rates do not seem unreasonable. But, with other companies like BlackBerry, Ericsson, Huawei, Intel, InterDigital, and Nokia also charging licensing fees, it is understandable how the overall royalty fees can add up and why the industry is concerned,” McGregor wrote. “Even though Qualcomm has the most extensive IP portfolio, the licensing issues are about the hundreds of millions of patents that may be applicable to smartphones.”