Qualcomm fined €997m by EU for paying Apple to exclusively use its chips

US chipmaker Qualcomm has been fined €997m (£872m) by EU antitrust regulators for paying Apple to use only its chips in the iPhone, locking out rivals such as Intel.

The European commission launched an investigation in July 2015, covering the period from 2011 to 2016, looking at Qualcomm’s dominance within the market for modems and chips required to connect handsets to 4G mobile phone networks. It issued a charge sheet five months later.

“Qualcomm illegally shut out rivals from the market for LTE baseband chipsets for over five years, thereby cementing its market dominance,” said European competition commissioner Margrethe Vestager.

“Qualcomm paid billions of US dollars to a key customer, Apple, so that it would not buy from rivals. These payments were not just reductions in price – they were made on the condition that Apple would exclusively use Qualcomm’s baseband chipsets in all its iPhones and iPads.”

The fine represented 4.9% of Qualcomm’s 2017 turnover, the commission said, less than half the maximum possible fine of 10% of the company’s £15.8bn annual revenue.

However, the company said it will seek a judicial review. Qualcomm executive vice-president and general counsel Don Rosenberg said: “We are confident this agreement did not violate EU competition rules or adversely affect market competition or European consumers.

“We have a strong case for judicial review and we will immediately commence that process.”

Separate from the EU’s investigation, Apple and Qualcomm are locked in a wide-ranging legal battle over the latter’s business practices. In January 2017, Apple sued Qualcomm for $1bn, arguing the company overcharged for chips and failed to pay $1bn in patent royalty rebates.

Qualcomm accused Apple of infringing on several patents related to prolonging smartphone battery life in July, then sued Apple in November for allegedly violating a software license contract to the benefit of rival Intel. Apple then accused Qualcomm of patent infringement for battery-life related patents.

The chip manufacturer, which also makes components used in millions of Android devices, including those from Samsung, is facing investigations in multiple countries. The US Federal Trade Commission is also investigating Qualcomm’s dealings with Apple, while South Korea has investigated the company for dealings with Samsung.

The EU is also expected to rule in the coming months in another case involving British phone software maker Icera, which was later bought by chipmaker Nvidia. Qualcomm is accused of selling chips at below cost to drive out Icera.

The EU’s fine may also make Qualcomm more vulnerable to chipmaker Broadcom’s $103bn hostile takeover bid. Broadcom argues it will smooth rocky relations with customers such as Apple.