"What you may not know - I didn’t - is that while Apple pays an estimated 1.6% of iPhone revenues to QCOM, most OEMs pay about 4%, giving Apple “a unique profitability edge” versus rival handset companies. According to Sacconaghi, this reflects the fact that the company itself is not a Qualcomm licensee - its buys baseband chips from Infineon - while using a licensed contract manufacturer - Foxconn - to make 100% of its handsets. Sacconaghi explains that Foxconn pays QCOM its standard royalty based on the transfer price to Apple. By contast, he says, essentially all other handset vendors are Qualcomm licensees and pay royalties based on the wholesale price of their phones."

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