Qualcomm sues four Apple contract manufacturers

(Reuters) - Chipmaker Qualcomm Inc filed a lawsuit against four Apple Inc contract manufacturers, including Foxconn Technology Group, for not paying royalties, as its legal battle with the iPhone maker intensifies.

The other manufacturers listed in the filing by Qualcomm were Pegatron Corp, Wistron Corp and Compal Electronics Inc.

Qualcomm said in its complaint that Apple had advised the contract manufacturers to withhold royalty payments and agreed to indemnify them against any damages resulting from the breach of their agreements with Qualcomm.

In the complaint filed in the United States District Court for the Southern District of California, Qualcomm did not disclose the quantum of royalty owed to it by the manufacturers.

San Diego-based Qualcomm said last month that Apple had decided to withhold royalty payments to its contract manufacturers that are owed to the chipmaker, for sales made in the first quarter of 2017, until the dispute is resolved in court.

"While not disputing their contractual obligations to pay for the use of Qualcomm's inventions, the manufacturers say they must follow Apple's instructions not to pay," Qualcomm said on Wednesday.

Qualcomm, the largest maker of chips used in smartphones, added in the filing that Apple is trying to force the company to agree to a "unreasonable demand for a below-market direct license".

Apple reiterated that it had been trying to reach a licensing agreement with Qualcomm for more than five years but the company has refused to negotiate fair terms.

Qualcomm said it sought an order that would require the manufacturers to comply with their long-standing contractual obligations to the company, as well as declaratory relief and damages.

Apple sued Qualcomm in January, accusing it of overcharging for chips and refusing to pay some $1 billion in promised rebates.

The chipmaker slashed its current-quarter profit and revenue forecasts last month, saying it excluded revenue receivable from the four contract manufacturers.

Qualcomm is a major supplier to Apple and Samsung Electronics Co Ltd for modem chips that connect phones to wireless networks.

Foxconn Technology Group is the trading name of Taiwan's Hon Hai Precision Industry Co, the main assembler of Apple devices.

Qualcomm's shares were marginally lower at $55.82 in midday trading, while Apple's shares fell 2.3 percent to $151.85.

(Reporting by Narottam Medhora and Supantha Mukherjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel)