Taking the industry completely off-guard, Apple Inc. and Qualcomm Inc. today announced that they have settled their cross-border, multibillion-dollar legal dispute over mobile modem chip technology.

The agreement will see the companies drop all legal action against one another in the numerous jurisdictions where they’ve been pursuing litigation. This will first and foremost end the original Apple lawsuit that started it all, which went to trial yesterday in a California court. A New York Times estimate put the maximum damages Qualcomm could have been forced to pay at $27 billion.

The iPhone maker sued the chipmaker in 2017 for allegedly abusing its market position as the leading maker of modem chips for mobile devices. Specifically, Apple accused the company of charging excessive prices for its technology by requiring customers to license a raft of mobile patents as part of purchase agreements.

Qualcomm fired back by launching patent infringement lawsuits against Apple in several countries. As part of its legal campaign, the company won injunctions in Germany and China to ban the sale of certain iPhone models.

Today’s settlement will not only end the companies’ dispute but also see them resume working together. Apple will pay an unspecified onetime sum to Qualcomm, enter a six-year licensing deal with an option for a two-year extension and also sign a “multiyear chipset supply agreement.” That strongly suggests that Qualcomm modems are set to reappear in iPhones after getting left out from the 2019 lineup by Apple.

The companies didn’t go too much into the specifics of the deal. However, Qualcomm did divulge that it expects earnings per share to increase by $2 once it starts ramping chip production back up for Apple.

Qualcomm’s shares shot up nearly 11% in trading Wednesday, while Apple’s were up about 2%.

Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told SiliconANGLE that he thinks both Apple and Qualcomm “got deeper into this” than they wanted to. “Apple was challenging Qualcomm’s most profitable business model, licensing, and Qualcomm was accusing Apple of IP theft and lack of payment,” he said.

In particular, said Enderle Group Principal Analyst Rob Enderle, Apple miscalculated with its original lawsuit.

“The goal of the effort appeared to be to put Apple in a massively dominant position after reducing Qualcomm’s valuation, promoting a hostile takeover by Broadcom and ending up in control of Qualcomm’s patent portfolio,” he told SiliconANGLE. ” Secondary goal was to just massively drive down the licensing fee charged by Qualcomm and showcase what happened if a supplier didn’t agree to let Apple set the price of what they sold.”

The problem is that an Apple court win “likely would have put an antitrust spotlight on the firm, resulting is a massive effort to reduce the firm’s power by the EU, China and the U.S., likely crippling the company,” Enderle added. “So the outcome, win or lose, would have been really bad for Apple, and may still be since the EU is looking at Apple as an antitrust problem.”

Qualcomm’s investors certainly appear relieved that the legal battle is over. Shares of the chipmaker are currently up more than 23 percent on the news.  

“This should be good for the wireless industry as companies should be free to invest in research, get paid a fair price for those inventions, and consumers can take advantage of those innovations at a very rapid pace,” Moorhead added.

With reporting from Robert Hof

Photo: atmtx/Flickr