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Apple and Qualcomm settle all disputes worldwide

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Apple needs chips that will connect the iPhone to the new, fifth-generation wireless networks being introduced now or risk falling behind its rivals.

San Francisco 

APPLE Inc put its flagship product, the iPhone, ahead of distaste for the way Qualcomm Inc. does business in settling a bitter, two-year legal dispute with the chipmaker.

Apple needs chips that will connect the iPhone to the new, fifth-generation wireless networks being introduced now or risk falling behind its rivals. The company had bet on Intel Corp, but recently decided its would-be 5G supplier wasn't up to the task. That led Apple back to Qualcomm - and spurred a sudden end to a long-running court fight over patents, component costs and royalties for one of the most critical parts of an iPhone.

Modems, or baseband processors, are what connects all iPhones and some iPads and Apple Watches to cellular networks and the Internet on the go.

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Throughout the fight, which centered on Apple's accusations that Qualcomm overcharges for patents on its technology, the iPhone maker played down the importance of the modem and Qualcomm's inventions.

Just before the settlement was announced on Tuesday, Apple's lawyers were in a San Diego courtroom saying the component was just another method of connecting to the Internet.

In reality, Qualcomm's modems are leading a potential revolution in mobile Internet - and Apple could have been forced to play catch-up without them.

Intel, which dominates the market in personal computer chips, has struggled for decades in mobile. The company pledged that its 5G part was coming in phones next year. But within hours of Apple's deal with Qualcomm, and with it the loss of its prime mobile customer, Intel announced it would end its effort to produce a 5G modem for smartphones.

Apple's rival Samsung Electronics Co already has a 5G-capable phone on sale using Qualcomm's products. The San Diego-based chipmaker has also said it will have a better 5G modem ready by the end of the year - plenty of time for Apple to introduce a 5G phone in September 2020.

"If they didn't settle with Qualcomm soon they'd miss next year's product," said Mike Walkley, an analyst at Canaccord Genuity. "Building their own baseband will take years and Intel is behind. Maybe that was the final thing that got this done."

Apple already faces falling iPhone sales and a saturated global smartphone market. The company in January reported that holiday revenue declined year-over-year for the first time since the iPhone was introduced in 2007. BLOOMBERG