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PUBLIC VERSION

UNITED STATES INTERNATIONAL TRADE COMMISSION
WASHINGTON, D.C.

In the Matter of

Investigation No. 337-TA-1065

CERTAIN MOBILE ELECTRONIC DEVICES
AND RADIO FREQUENCY AND
PROCESSING COMPONENTS THEREOF

INTEL CORPORATION’S STATEMENT ON THE PUBLIC INTEREST
PUBLIC VERSION

Intel Corporation (“Intel”) respectfully submits this statement in response to the Commission’s

Notice of Request for Statements on the Public Interest. 83 Fed. Reg. 54,138 (Oct. 26, 2018).

Administrative Law Judge (“ALJ”) Pender correctly concluded that an exclusion order would be against

the public interest under the unique circumstances of this Investigation. (ID at 114, 194.)

Qualcomm’s requested relief, here and in the co-pending 1093 Investigation, targets Intel,

Qualcomm’s only competitor in the open or “merchant” market for premium baseband chipsets, the type

of high-performance chipsets used in cutting-edge smartphones such as the iPhone. Qualcomm’s requested

exclusion order would—and is intended to—fence Intel out of the market.

Intel’s exit would be particularly damaging because the world is on the cusp of a transition to the

next generation of wireless technology—from fourth generation (4G) to fifth generation (5G). That

transition will be powered by premium baseband chipsets for smartphones, the focal point of 5G innovation.

5G will dramatically increase the speed, breadth, and volume of data that can be transmitted over cellular

networks, enabling new industries and fostering economic growth, but also presenting risks as increasing

numbers of sensitive applications rely on cellular networks. Indeed, ALJ Pender correctly found that an

exclusion order poses “tangible national security implications to the United States.” (ID at 115.)

The United States has the distinction of being home to the only two merchant-market suppliers of

premium baseband chipsets, both of which are driving 5G innovation. An exclusion order that eliminated

Intel’s chipsets from the market would put at risk U.S. leadership and economic competitiveness in this

critical technology. Given these unique circumstances, the Commission’s exercise of its public interest

discretion is warranted and would not, contrary to Qualcomm’s suggestion, immunize Apple from an

exclusion order in “any” case. This is not just any case: it is one in which Qualcomm seeks to use Section

337 to eliminate its sole rival in a crucial market with implications for national security and competitiveness.

I. Premium Baseband Chipset Competition

Between 2012 and September 2015, Qualcomm’s annual share of the worldwide premium LTE

modem market exceeded 80 percent. FTC v. Qualcomm Inc., No. 5:17-cv-220, 2017 WL 2774406, at *4

(N.D. Cal. June 26, 2017) (“FTC”). Throughout that period, several would-be competitors closed their
PUBLIC VERSION

baseband chipset businesses. Intel is Qualcomm’s only competitor left in the merchant market for sales of

premium baseband chipsets. If an exclusion order issues, causing Intel to exit and restoring Qualcomm’s

monopoly position, the well-known benefits of competition—lower prices, richer innovation, and higher

quality—would be lost. (ID at 192.)

These concerns are not just hypothetical. Qualcomm has been the subject of investigations around

the globe for its anticompetitive baseband chipset sales and patent licensing practices, resulting in billions

of dollars in fines by competition authorities in the European Union, China, Korea, and Taiwan. The U.S.

Federal Trade Commission sued Qualcomm for engaging in a web of anticompetitive practices through

which Qualcomm raises the cost of using competitors’ chipsets. Through a practice known as “no license

no chips,” Qualcomm refuses to sell its baseband chipsets to smartphone original equipment manufacturers

(“OEMs”) (such as Apple) unless they agree to license Qualcomm’s patent portfolio at unusually high

royalty rates, which are then imposed on all phones using competitors’ chipsets. FTC at *5-6. Qualcomm

long held a dominant position in premium and CDMA chipsets, meaning OEMs such as Apple had no

choice but to purchase at least some chipsets from Qualcomm. Id. at *3-6. Qualcomm also conditioned

billions of dollars of discounts of its high royalty rates on Apple’s exclusive use of Qualcomm baseband

chipsets. Id. at *6-7. If Apple used a non-Qualcomm chipset, Apple would be required to refund past

discount payments. Id. The FTC found that Qualcomm’s conditional discounts resulted in below-cost

pricing. Complaint ¶ 125(c), FTC v. Qualcomm Inc., No. 5:17-cv-220 (N.D. Cal. Jan. 17, 2017). These

arrangements foreclosed rivals such as Intel from competing for Apple’s business. FTC at *23-25.

Only recently has Intel been able to break into the premium baseband chipset market, supplying to

Apple after Apple’s obligations to buy only from Qualcomm ended. Qualcomm’s ITC complaint targeting

Intel is an attempt to restore its dominant position in the baseband chipset market through a new means.

II. An Exclusion Order Would Nearly Certainly Cause Intel to Exit the Premium Baseband
Chipset Market.

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PUBLIC VERSION
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. It would be impossible for Intel to sit on the sidelines for 4G and re-emerge successfully

for 5G. Ms. Evans explained, “ .” (Tr. [Evans] at 1083:15-20.)

. (Id. at 1105:20-1106:6; ID at 196-97 (rejecting any tailored exclusion order).

. (RX-8C

[Evans] at Q.84-85.) Ms. Evans explained, “

.” (RX-8C [Evans] at Q.82.)

III. An Exclusion Order Would Harm the Public Interest by Undermining U.S. Leadership in
5G, Resulting in Harm to U.S. Economic Competitiveness and National Security.

ALJ Pender concluded that “5G is crucial to U.S. national security and competitiveness in the

national economy and thus Intel’s exit would harm the national interests of the United States.” (ID at 193.)

Intel’s exit and the resulting harm to 5G innovation would also negatively impact U.S. consumers, the

public health and welfare, and domestic production of baseband chipsets. (ID at 193-94.)

5G implicates national security because it represents a revolutionary increase in the speed and

volume of data being transmitted for increasingly sensitive applications, such as electrical grids, hospitals,

cars, machine-to-machine communications, and drones. As Apple’s economic expert Dr. Jeffrey Eisenach

explained, digital technology is shifting from a means of communication to a mechanism of control and,

consequently, it is critical to have secure U.S. suppliers of 5G cellular technology “to protect the private

and public entities that will depend on 5G connectivity, and to ensure they can use that connectivity without

sensitive information being compromised and without private and public functions being disrupted.” (RX-

1612C [Eisenach] at Q.22; see also Tr. [Eisenach] at 1268:5-21; Tr. [Evans] at 1089:13-17.) Foreign

countries understand the economic and security implications, and thus are intensely competing to lead the

world in 5G and are poised to fill any void left by a weakening of U.S. leadership. (Tr. [Evans] at 1088:16-

1089:5.) The Committee on Foreign Investment in the United States (“CFIUS”) found that “[g]iven well-

known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a

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shift to Chinese dominance in 5G would have substantial negative security consequences for the United

States.” (CX-1929 [CFIUS Letter] at 2-3.) President Trump recently stated that “America’s national

security depends on technological excellence” and “it is imperative that America be first in [5G] wireless

technologies.”2 ALJ Pender thus properly described national security as a matter of “pre-eminent

importance” in this Investigation and found a “real and palpable likelihood the National Security interests

would be jeopardized” by an exclusion order. (ID at 195-96.)

U.S. leadership in 5G is also important for the U.S. economy because 5G will foster new

applications thanks to “improvements in the speed, reliability, and efficiency of mobile wireless networks.”

(RX-8C [Evans] at Q.80.) 5G promises to contribute hundreds of billions of dollars in U.S. economic

growth and millions of new jobs—growth that could be undermined if Intel’s 5G presence is diminished.

The pace and scope of 5G innovation in the United States would suffer without Intel’s innovations.

(Tr. [Evans] at 1087:5-1088:12; RX-9C [Bowers] at Q.78.) Intel is a key 5G baseband chipset innovator

and has made significant contributions to 5G standard setting, as well as early development and testing of

5G technology. For example, Intel developed the groundbreaking 5G Mobile Trial Platform, which enables

5G network field testing by simulating the performance of a 5G baseband chipset. (RX-9C [Bowers] at

Q.29-38.) Intel also offers a distinct perspective on 5G innovation because of the singular breadth of its

experience in technologies relevant to 5G through its “end-to-end” approach, encompassing work across

the cloud, the core network, the access network, wireless technology, and the baseband chipset. If Intel

exits the baseband chipset market, not only would the country lose the benefits Intel brings, but Qualcomm

also would have less incentive to innovate at its current pace. (RX-11C [Scott Morton] at Q.166.)

Intel submits that ALJ Pender was correct that “[t]he National Security issues inherent with 5G are

too serious to risk” (ID at 195), particularly where Qualcomm has an “adequate remedy at law for any

patent infringement by Apple” by seeking damages in ongoing district court litigation. (ID at 194.)

2
“Presidential Memorandum on Developing a Sustainable Spectrum Strategy for America’s Future” (Oct.
25, 2018), https://tinyurl.com/ya7mfmon.

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Dated: November 8, 2018 Respectfully submitted,

/s/ William F. Lee
William F. Lee
Joseph J. Mueller
Louis W. Tompros
Sarah B. Petty
Timothy D. Syrett
WILMER CUTLER PICKERING
HALE AND DORR LLP
60 State Street
Boston, MA 02109
Telephone: (617) 526-6000
Facsimile: (617) 526-5000

William G. McElwain
Nina S. Tallon
Michael D. Esch
WILMER CUTLER PICKERING
HALE AND DORR LLP
1875 Pennsylvania Avenue, NW
Washington, DC 20006
Telephone: (202) 663-6000
Facsimile: (202) 663-6363

Counsel for Non-Party Intel Corporation

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UNITED STATES INTERNATIONAL TRADE COMMISSION
WASHINGTON, DC
Before the Honorable Thomas B. Pender
Administrative Law Judge

CERTIFICATE OF SERVICE

I, Lanta M. Chase, hereby certify that on November 8, 2018, copies of the foregoing,
INTEL CORP.’S STATEMENT ON THE PUBLIC INTEREST (PUBLIC VERSION), were filed
and served on the following as indicated:

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/s/ Lanta M. Chase
Lanta M. Chase