Apple settles dispute with Qualcomm, potentially allowing new features to come to the iPhone

Argument involved the suppliers that help build Apple products

Tim Cook, chief executive officer of Apple, speaks during an Apple event at the Steve Jobs Theater at Apple Park (Justin Sullivan/Getty Images)

Apple has settled a major argument with chip maker Qualcomm that could help change the future of the iPhone.

The two companies were locked in a bitter and worldwide international dispute about the technology that iPhones use to connect to the internet.

The pair had been expected to try and resolve the dispute in legal hearings in San Diego, in a case that involved Apple's key iPhone suppliers. But just as that case began, the surprise truce was announced, with few details of the settlement being revealed.

The argument could pave the way for Apple to go back to happily using Qualcomm chips. Concerns over the Apple's suppliers for those chips had led to uncertainty over when a 5G iPhone might arrive, for instance, and so the resolution could mean that the faster network technology could arrive more quickly.

The deal requires Apple to pay Qualcomm an undisclosed amount. It also includes a six-year licensing agreement that likely involves recurring payments to the mobile chip maker.

Investors reacted as if it were a resounding victory for Qualcomm. The San Diego company's stock soared 23% to close Tuesday at $70.45. Apple shares edged up 2 cents to $199.25.

Neither Apple nor Qualcomm would comment beyond a brief statement announcing they had resolved their differences. Details about how much Apple and its iPhone suppliers will be paying Qualcomm could emerge in court documents or when the companies announce their latest financial results. Apple is due to report its quarterly results on April 30 while Qualcomm is scheduled to release its numbers on May 1.

Apple had been seeking at least $1 billion for money that Qualcomm was supposed to rebate as part of an earlier licensing agreement. Apple had begun to have misgivings about that deal as it added more features to its increasingly popular line-up of iPhones.

Qualcomm was seeking $7 billion for unpaid royalties it contended it was owed for its patented technology in the iPhone. Apple's iPhone suppliers, including Foxconn and Pegatron, wanted another $27 billion from Qualcomm.

The dispute was clearly beginning to hurt all parties involved, motivating them to settle, said technology industry analyst Patrick Moorhead of Moor Insights & Strategy.

"Both Apple and Qualcomm got deeper into this than they wanted to," Moorhead said.

Apple had already lost an earlier battle with Qualcomm last month when a federal court jury in San Diego decided the iPhone maker owed Qualcomm $31 million for infringing on three of its patents.

Qualcomm still faces other potential fallout from its demands to be paid royalties in addition to the fees it charges for its mobile chips. The Federal Trade Commission has accused the company of using its royalty system to stifle competition in the mobile chip market in another case in which Apple played a central role.

A trial about the FTC's lawsuit wrapped up in a San Jose, California, court in January, but the judge still hasn't issued a ruling.

Additional reporting by Associated Press