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1 Juanita R. Brooks, SBN 75934, brooks@fr.com


Seth M. Sproul, SBN 217711, sproul@fr.com
2 FISH & RICHARDSON P.C.
12390 El Camino Real
3 San Diego, CA 92130
Phone: 619-678-5070 / Fax: 619-678-5099
4
Ruffin B. Cordell, DC Bar No. 445801,
5 Pro hac to be filed, cordell@fr.com
Lauren A. Degnan, DC Bar No. 452421,
6 Pro hac to be filed, degnan@fr.com
FISH & RICHARDSON P.C.
7 The McPherson Building
901 15th Street, N.W., 7th Floor
8 Washington, D.C. 20005
Phone: 202-783-5070 / Fax: 202-783-2331
9
William A. Isaacson, DC Bar No. 414788,
10 pro hac to be filed, wisaacson@bsfllp.com
Karen L. Dunn, DC Bar No. 1002520,
11 pro hac to be filed, kdunn@bsfllp.com
BOIES SCHILLER FLEXNER LLP
12 1401 New York Avenue, N.W.
Washington, DC 20005
13 Phone: 202-237-2727 / Fax: 202-237-6131
14 Gabriel R. Schlabach (SBN 304859)
gschlabach@bsfllp.com
15 BOIES SCHILLER FLEXNER LLP
1999 Harrison Street, Suite 900
16 Oakland, CA 94612
Phone: 510-874-1000 / Fax: 510-874-1460
17
[Additional counsel identified on signature page]
18
Attorneys for Third-Party Defendant Apple Inc.
19
20 UNITED STATES DISTRICT COURT
21 SOUTHERN DISTRICT OF CALIFORNIA
22
23 QUALCOMM INCORPORATED, Case No. 3:17-CV-01010-GPC-MDD

24 Plaintiff,
APPLE INC.S REDACTED
25 v. OPPOSITION TO QUALCOMM
INCORPORATEDS MOTION FOR
26 COMPAL ELECTRONICS, INC., FIH PRELIMINARY INJUNCTION
MOBILE LTD., HON HAI
27 PRECISION INDUSTRY CO., LTD,
PEGATRON CORPORATION, and Date: August 15, 2017
28 WISTRON CORPORATION, Time: 1:00 p.m.
Courtroom: 2D
Defendants. Judge: Hon. Gonzalo P. Curiel
APPLES OPP. TO QUALCOMMS MOT. FOR PRELIM. INJ. CASE NO. 3:17-CV-01010-GPC-MDD
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1 COMPAL ELECTRONICS, INC.,


FIH MOBILE LTD., HON HAI
2
PRECISION INDUSTRY CO., LTD.,
3 PEGATRON CORPORATION, and
WISTRON CORPORATION,
4
Counterclaimants,
5
vs.
6
QUALCOMM INCORPORATED,
7
Counter Defendant.
8 COMPAL ELECTRONICS, INC.,
9 FIH MOBILE LTD., HON HAI
PRECISION INDUSTRY CO., LTD.,
10 PEGATRON CORPORATION, and
11 WISTRON CORPORATION,
12 Third-Party Plaintiffs,
13 v.

14 APPLE INC.,
15
Third-Party Defendant.
16
17
18
19
20
21
22
23
24
25
26
27
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1 TABLE OF CONTENTS
2
3 INTRODUCTION ................................................................................................... 1
4 STATEMENT OF FACTS ...................................................................................... 3
5
A. The Litigation with Qualcomm..................................................... 3
6
B. The Contractual Relationship Circle Among Apple, Qualcomm,
7 and the Contract Manufacturers.................................................... 4
8
C. The Payments Demanded by the Preliminary Injunction Request
9 Include Royalty Rebates that Qualcomm Improperly Withheld
from Apple Due to Apples Cooperation with Law Enforcement
10
Agencies. ....................................................................................... 5
11
1. The BCPA Includes a Gag Order to Limit Government
12 Investigations of Qualcomms Licensing Practices. .......... 5
13
2. Qualcomm Has Sought to Obstruct Justice Even Beyond
14 the Gag Order. .................................................................... 7
15 3. Qualcomms Obstruction of Justice Is at the Heart of the
16 Dispute with the Contract Manufacturers. ....................... 10
17 D. Qualcomms Injunction Ignores the Rebates Qualcomm Has Paid
18 Consistently Since 2007.............................................................. 11

19 E. Apples Indemnification and Guarantee of Payments to


Qualcomm Once These Disputes Are Resolved......................... 12
20
21 ARGUMENT ......................................................................................................... 13

22 I. The Agreements Among the CMs, Qualcomm, and Apple Demonstrate


that Qualcomms Proposed Preliminary Injunction Would Mandate a
23 Radical Change in the Status Quo......................................................... 13
24
A. Qualcomm is Seeking Disputed Royalties from the CMs While
25 Ignoring the Rebates It Previously Paid to Apple. ..................... 13
26 B. Monies Never Received Before Are Not Irreparable Harm. ...... 15
27
II. Qualcomm Has Not Established That It is Likely to Prevail on the
28 Merits. ................................................................................................... 16

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1 A. Qualcomm Has No Likelihood of Success Because It Seeks to


Recover Money from the CMs that It Withheld from Apple in
2
Breach of Contract and for Purposes of Obstructing Justice. ..... 16
3
B. Qualcomm Has Little Likelihood of Success on Its Claims for
4 Going-Forward Royalty Payments Because Its License
5 Agreements with the CMs Violate Qualcomms FRAND
Commitment and the Antitrust Laws and Are Unenforceable. .. 21
6
C. The CMs and Apples Patent-Related Counterclaims Prevent
7
Qualcomm From Showing a Likelihood of Success on Its
8 Claims. ........................................................................................ 23
9 CONCLUSION...................................................................................................... 23
10
11
12
13
14
15
16
17
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20
21
22
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25
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1 TABLE OF AUTHORITIES
2 Cases
3 Anderson v. United States,
4 612 F.2d 1112 (9th Cir. 1979) .............................................................................. 13
5 Atel Fin. Corp. v. Quaker Coal Co.,
132 F. Supp. 2d 1233 (N.D. Cal. 2001) ................................................................ 20
6
7 Cariveau v. Halferty,
99 Cal. Rptr. 2d 417 (Ct. App. 2000) ................................................................... 16
8
DArrigo Bros. of Cal. v. United Farmworkers of Am.,
9
169 Cal. Rptr. 3d 171 (Ct. App. 2014) ................................................................. 16
10
FTC v. Qualcomm Inc.,
11 2017 WL 2774406 (N.D. Cal. June 26, 2017)...............................................passim
12
Givemepower Corp. v. Pace Compumetrics, Inc.,
13 2007 WL 951350 (S.D. Cal. Mar. 23, 2007) ........................................................ 13
14 GoTo.com, Inc. v. Walt Disney Co.,
15 202 F.3d 1199 (9th Cir. 2000) .............................................................................. 13
16 Harbor Island Holdings v. Kim,
17 132 Cal. Rptr. 2d 406 (2003) ................................................................................ 21

18 Hardie v. Nat'l Collegiate Athletic Assn,


2013 WL 12072530 (S.D. Cal. June 21, 2013) .................................................... 13
19
20 Illinois Tool Works Inc. v. Indep. Ink, Inc.,
547 U.S. 28 (2006)................................................................................................ 21
21
Impression Products, Inc. v. Lexmark International, Inc.,
22 137 S. Ct. 1523 (2017)............................................................................................ 2
23
In re Ex Parte Application of Qualcomm Inc.,
24 162 F. Supp. 3d 1029 (N.D. Cal. 2016) ................................................................ 16
25 Med. Sales & Consulting Grp. v. Plus Orthopedics USA, Inc.,
26 2011 WL 5075970 (S.D. Cal. Oct. 25, 2011) ....................................................... 20
27 Microsoft Corp. v. Motorola, Inc.,
28 2013 WL 2111217 (W.D. Wash. Apr. 25, 2013) ................................................. 21

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1 Northern Pac. Ry. Co. v. United States,


356 U.S. 1 (1958).................................................................................................. 21
2
3 Ridgley v. Topa Thrift & Loan Assn,
953 P.2d 484 (1998) ............................................................................................. 20
4
Stanley v. Univ. of S. Cal.,
5
13 F.3d 1313 (9th Cir. 1994) ................................................................................ 13
6
Statutes
7
15 U.S.C. 49 ............................................................................................................ 16
8
9 15 U.S.C. 57b-1 ...................................................................................................... 16
10 Cal. Civ. Code 1671(b) ........................................................................................... 20
11 Regulations
12
16 C.F.R. 2.4 ........................................................................................................... 16
13
16 C.F.R. 2.7 ........................................................................................................... 16
14
15 16 C.F.R. 2.10 ....................................................................................................... 16

16 16 C.F.R. 2.11 ....................................................................................................... 16


17 16 C.F.R. 2.13 ....................................................................................................... 16
18
19
20
21
22
23
24
25
26
27
28

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1 Third-Party Defendant Apple Inc., by undersigned counsel, respectfully


2 submits this opposition to Plaintiffs motion for a preliminary injunction against
3 Defendants Compal Electronics, Inc., FIH Mobile Ltd., Hon Hai Precision Industry
4 Co., Ltd., Pegatron Corporation, and Wistron Corporation. Apple submits this
5 separate memorandum explaining, without seeking to duplicate Defendants
6 arguments, why the preliminary injunction should be denied.
7 INTRODUCTION
8 Apple Inc. (Apple) has brought claims against Qualcomm Incorporated
9 (Qualcomm) in this Court challenging an illegal Qualcomm business model by
10 which Qualcomm excludes its competitors from baseband chipset markets, imposes
11 exorbitant royalties on customers, and illegally licenses exhausted patents. For
12 years, Qualcomm has gone to great lengths to protect and defend its illegal business
13 model, even as it has come under increasing scrutiny from regulators around the
14 globe and legal challenge by consumers, investors, and technology companies, large
15 and small.
16 Qualcomms latest act in the service of enforcing its illegal business model is
17 to seek a preliminary injunction against the Defendants, Qualcomms own longtime
18 licensees, because they are contract manufacturers (CMs) for Apple. Through this
19 action, Qualcomm is seeking contractual payments that ultimately would be funded
20 by Apple and, based on Apples indemnification of Defendants, Apple has been
21 impled as a defendant in this action.
22 Apples Complaint against Qualcomm describes an extortionate scheme, with
23 several interwoven strands. First, Qualcomm requires customers who pay for
24 Qualcomm components (baseband chips providing connectivity to cellular
25 networks) to also enter into a license and pay a royalty, what the Federal Trade
26 Commission has referred to as no license, no chips, a practice unique to
27 Qualcomm. Second, while Qualcomm dominates baseband processor chipset
28 markets, it refuses to license its asserted standard essential patents to chipset
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1 competitors. Third, Qualcomm claims that its licenses are fair, reasonable, and non-
2 discriminatory (FRAND), which they are not, and then requires its customers to
3 abide by gag clauses that prevent lawsuits and certain communications with
4 regulators challenging Qualcomm for violating its FRAND obligations. Fourth,
5 Qualcomm charges the same royalty rate today for all the innovations in modern,
6 multi-featured smartphones (which contain numerous innovations and technologies
7 beyond mere cellular connectivity) as it did years ago for a flip phone whose
8 primary or exclusive feature was cellular connectivity. If that were not enough,
9 subsequent to the filing of Apples Complaint, the U.S. Supreme Court handed
10 down Impression Products, Inc. v. Lexmark International, Inc., 137 S. Ct. 1523
11 (2017), which squarely rejected as a violation of U.S. patent law the type of double-
12 dipping royalty system that is the foundation of Qualcomms business model.
13 In the face of proliferating lawsuits and regulatory actions against Qualcomm,
14 this request for an injunction against Apples CMs appears to be a desperate act.
15 Qualcomm is asking this Court to rewrite the law by declaring lost contract money
16 payments to be irreparable harm. There is more: Qualcomms motion also seeks to
17 have this Court order Apple, via its CMs, to pay billions more in royalties than
18 Qualcomm has previously retained. And still more: Qualcomm would have this
19 Court issue a one-sided preliminary injunction that restores only payments flowing
20 to Qualcommthe legality of which are being challenged in this Court (and other
21 courts and before antitrust agencies worldwide)without reinstating Qualcomms
22 reciprocal payment of rebates to Apple, which Qualcomm has consistently paid
23 since the introduction of the first iPhone in 2007.
24 Qualcomms motion omits the complete business relationship among Apple,
25 Qualcomm, and the CMs, which is crucial to understanding the conduct of the
26 parties and the brazenness of Qualcomms request for relief. The defendant CMs
27 assemble Apples products according to Apples (and Qualcomms) specifications,
28 and pass through Qualcomms excessive patent royalty bills to Apple. Prior to this
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1 litigation, Apple paid the CMs the entire purchase price owed to Qualcomm for the
2 products and the royalties on top of that, the CMs paid that money to Qualcomm,
3 and Qualcomm rebated a portion of the royalties to Apple. Beginning in 2016, in a
4 blatant attempt to thwart investigations of Qualcomms anticompetitive activities,
5 Qualcomm withheld rebates from Apple because Apple had cooperated with law
6 enforcement authorities investigating Qualcomm. In response, Apple withheld
7 royalty payments from the CMs, and the CMs in turn withheld the monies from
8 Qualcomm.
9 Without describing these disputes or circle of payments (Apple CMs; CMs
10 Qualcomm; Qualcomm Apple), Qualcomms motion seeks to enforce only
11 one-third of this circle: the royalty payments from the CMs to Qualcomm. By
12 ignoring the full payment structure among these companies, Qualcomm seeks a
13 windfallan even greater share of royalties from Apple than it has ever received.
14 Remarkably, Qualcomm bases this overreaching claim on the enforcement of a gag
15 clause, which Qualcomm argues was supposed to have prevented Apple from
16 cooperating with law enforcement entities investigating Qualcomms
17 anticompetitive practices and unfair and discriminatory pricing.
18 Qualcomms claims are all about money and greed, and not irreparable harm.
19 Money never before received, and a profound alteration of the status quo, cannot be
20 the basis for irreparable harm. Nor can Qualcomm demonstrate a likelihood of
21 success on the merits in light of Apples (and regulators around the world)
22 formidable challenges to its business model that are based on antitrust law, patent
23 law, the FRAND commitments made by companies seeking to license Qualcomms
24 standard essential patents, and the contracts between the parties.
25 STATEMENT OF FACTS
26 A. The Litigation with Qualcomm
27 Qualcomms Complaint against the CMs was brought as a related case to
28 Apples Complaint filed in January before this Court. (Qualcomms Notice of
3
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1 Related Case, Case No. 3:17-cv-00108-GPC-MDD, ECF No. 69 (May 17, 2017))
2 Apple has brought claims for, among other things, breach of contract,
3 monopolization, violations of Californias Unfair Competition Law, and
4 declarations of non-infringement, invalidity, exhaustion and/or FRAND royalties as
5 to eighteen of Qualcomms declared essential patents. Defendants have brought the
6 same claims as counterclaims and defenses in this action. On July 6, Qualcomm
7 also brought a Complaint for patent infringement against Apple in this Court, but
8 not for infringement of any of its asserted cellular standard essential patents.
9 (Complaint, Case No. 3:17-cv-01375-JAH-NLS, ECF No. 1)
10 B. The Contractual Relationship Circle Among Apple, Qualcomm,
and the Contract Manufacturers
11
12 Even though Apple pays royalties for Qualcomm patents through the CMs,
13 Qualcomm has never given Apple a direct license. (Qualcomm Amended
14 Counterclaims to Apples Complaint (QC Counterclaims) 129, Case No. 3:17-
15 cv-00108-GPC-MDD, ECF No. 70) Instead, Qualcomm has entered into license
16 agreements (kept confidential from Apple)1 with Apples CMs, who are defendants
17 in this action. (Pl. Br. Exs. 15 (filed under seal), ECF No. 35-3) On top of the
18 price for Qualcomm chipsets, the CMs pay royalties to Qualcomm for Apple
19 products under these separate license agreements, and Apple funds the CMs for
20 these payments. (Pl. Br. 3, ECF No. 35-1) By licensing the CMs, but not Apple,
21 Qualcomm can demand royalties through confidential agreements that the CMs have
22 little if any ability to reduce.
23 As described in the Apple Inc. v. Qualcomm Inc. pleadings, Qualcomm and
24 Apple are parties to a complicated thicket of agreements, including the Business
25 Cooperation and Patent Agreement (BCPA), dated January 1, 2013. The BCPA is
26
1
27 Last week, Qualcomm consented to the disclosure of the unredacted pleadings in
this action along with exhibits, including the licenses, filed under seal on an
28 attorneys eyes only basis to outside counsel for Apple.
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1 one of the agreements that Apple and Qualcomm entered into to reduce Apples
2 (indirect) payments to Qualcomm. Section 7 of the BCPA required Qualcomm to
3 make payments to Apple, payments described as the difference between defined
4 Reference Amounts and the by the
5 CMs, i.e., royalty rebates. (Ex. 1 7; Pl. Br. Ex. 7) The BCPA expired on
6 December 31, 2016, though Qualcomms obligation to pay Apple any accrued
7 payments prior to expiration survives. (Ex. 1 2, 3, 7, 10.4)
8 As described below, under the BCPA and other agreements, a significant
9 portion of CM royalty payments to Qualcomm for Apple products have traveled a
10 round trip: (1) Apple paid monies for royalties to its CMs, (2) the CMs paid those
11 royalties to Qualcomm pursuant to license agreements with Qualcomm, and (3)
12 Qualcomm rebated a significant portion of those royalty monies back to Apple.
13 Qualcomms request for a preliminary injunction seeks payment by the CMs of all
14 royalties paid to Qualcomm while ignoring Qualcomms rebates to Apple, which
15 have existed in one form or another since the introduction of the first iPhone in
16 2007.
17 This round trip of payments is squarely relevant to this litigation, but
18 Qualcomm completely omits it from its injunction motion. Qualcomms injunction
19 seeks to collect billions from the CMs that they do not have. (Pl. Br. Exs. 2629)
20 Given the reality that it is Apples money at issue in this dispute, Apple has
21 indemnified its CMs in this litigation. If contractual payments are ordered by the
22 Court, as preliminary relief, by virtue of the indemnification, Qualcomm will seek
23 payment from Apple of the monies Apple has withheld from Qualcomm, including
24 billions in disputed amounts between Apple and Qualcomm.
25 C. The Payments Demanded by the Preliminary Injunction Request
Include Royalty Rebates that Qualcomm Improperly Withheld
26 from Apple Due to Apples Cooperation with Law Enforcement
Agencies.
27
1. The BCPA Includes a Gag Order to Limit Government
28 Investigations of Qualcomms Licensing Practices.
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1 For patents that companies have declared essential to cellular standards to


2 standard setting organizations, patent law is reinforced by contractual obligations to
3 license such patents on fair, reasonable, and non-discriminatory (FRAND) terms.
4 (Declaration of BJ Watrous (Watrous Decl.) 4) FRAND commitments are the
5 heart of the standard setting process and prevent monopolistic abuses by patent
6 holders. Qualcomm has made binding contractual promises to standard setting
7 organizations regarding the patents at issue in this matter that require Qualcomm to
8 grant licenses to these patents on FRAND terms. (Id. 5)
9 In the BCPA, Qualcomm took steps to protect itself from litigation or
10 government investigations regarding its abuse of its FRAND obligations and its
11 attempts to license exhausted patents. The BCPA required that Apple not:
12
13
14
15
16
17
18 (Ex. 1 7) The term Litigation is defined as including
19 (Id. Attachment 1) Apple objected to this provision
20 during negotiations, but conceded because it had no suitable alternative suppliers for
21 chipsets at the time. (Watrous Decl. 25)
22 Apple was able to protect its responsibility to respond freely to a request or
23 inquiry from governmental authorities. (Any provision prohibiting Apple from
24 responding to law enforcement inquiries would have been illegal.) The third
25 paragraph of Section 7 states:
26
27
28
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1 By this language, the BCPA prohibited Apple from litigating or inducing litigation
2 on the specific topics of whether Qualcomms licenses exceed FRAND or the sale
3 of a Qualcomm component exhausts a Qualcomm patent, but the agreement did not
4 police the content of Apples responses to ongoing government investigations into
5 Qualcomms licensing practices. Moreover, Apple was not prohibited from
6 litigating or inducing litigation of exclusionary conduct under the antitrust laws.
7 2. Qualcomm Has Sought to Obstruct Justice Even Beyond the
8 Gag Order.
9 As noted in Judge Kohs recent denial of Qualcomms motion to dismiss the
10 FTCs complaint against Qualcomm, Qualcomm is combatting ongoing government
11 investigations in the United States and around the world, including in Europe, South
12 Korea, and Taiwan, into allegations of its monopolistic, exploitative, and unfair
13 business practices, both as a supplier of cellular baseband chipsets and as a licensor
14 of standard essential patents (SEPs). FTC v. Qualcomm Inc., No. 5:17-cv-00220,
15 2017 WL 2774406, at *25 n.8 (N.D. Cal. June 26, 2017). The FTC filed its lawsuit
16 this year against Qualcomm, charging it with monopolizing the markets for CDMA
17 and premium LTE baseband chipsets based on the anticompetitive conduct that
18 Apple and the CMs allege here. (Complaint, FTC v. Qualcomm Inc., No. 5:17-cv-
19 00220 (N.D. Cal. Jan. 17, 2017), ECF No. 1)2 This conduct includes Qualcomms
20 refusal to license its competitors, its refusal to sell chipsets without a license, and its
21 imposition of exclusivity on Apple in exchange for royalty relief, all of which has
22 had, according to the FTC, the effect of marginalizing Qualcomms competitors and
23 elevating prices above competitive levels. Samsung (Apples primary competitor in
24 the smartphone market), Intel (Qualcomms competitor in the premium LTE
25 baseband chipset market), and app developers each have submitted amicus briefs in
26 support of the FTCs case against Qualcomm; each described how Qualcomms
27 2
See https://www.ftc.gov/news-events/press-releases/2017/01/ftc-charges-
28 qualcomm-monopolizing-key-semiconductor-device-used.
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1 anticompetitive conduct harmed them. (FTC v. Qualcomm Inc., Case No. 5:17-cv-
2 00220, ECF Nos. 90, 92, 95)
3 In each case and investigation, the antitrust enforcement agencies
4 investigating Qualcomms conduct have sought information and testimony from
5 Apple, and Apple has responded. Qualcomm has had the opportunity to advocate its
6 case in each of these investigations. For example, the KFTC conducted seven
7 separate hearings, many of which were devoted to presentations of evidence and
8 experts by Qualcomm, and the KFTC gave Qualcomm the opportunity to present a
9 defense. (Ex. 2, at 15, 1719)
10 In response, Qualcomm has sought to obstruct these investigations by
11 withholding nearly a billion dollars in money owed to Apple. From 2013 until mid-
12 2016prior to and during these investigationsQualcomm continued paying
13 rebates under the BCPA. But Qualcomm changed course and, without notice,
14 withheld the BCP Payment for the second calendar quarter of 2016, which was due
15 and payable on September 13, 2016. (Exs. 34) This withholding occurred just a
16 few weeks after Apple made a presentation to the KFTC in its ongoing investigation
17 about Qualcomms monopoly power, exclusionary conduct, the competitive effects
18 of that conduct, and the proper remedy at an open KFTC hearing on August 17.
19 (Ex. 3)
20 The timing was not an accident. When Apple reached out to Qualcomm
21 shortly after Qualcomms withholding of the BCP Payment, Qualcomm stated that it
22 was withholding the funds due to legal issues associated with the KFTC hearings.
23 (Id.) In response, Apple explained that its presentation to the KFTC had been
24 requested by the KFTC and provided Qualcomm with a copy of the request. (Id.)
25 Qualcomm continued to refuse payment, and on October 9, 2016 confirmed
26 that it did not intend to make any further BCP payments due to Apples interactions
27 with regulators. (Ex. 4, at 2) Qualcomm told Apple that it was withholding the
28 BCP payments because Apple was engaged in a campaign of urging agencies to
8
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1 find Qualcomm in violation of competition laws. (Id.) In response to Qualcomms


2 statement that Apple was not allowed to tell law enforcement agencies about its
3 illegal conduct, Apple stated:
4 Qualcomm has used a complicated scheme of rebates, essentially
holding billions in ransom every year, to preclude Apples use of a
5 second source of chipsets and restrict Apples ability to initiate certain
legal actions against Qualcomm. Now Qualcomm seeks to expand
6 those restrictions even further to punish Apple for even responding to
government requests on any terms Qualcomm disapproves.
7
8 (Ex. 5, at 3) Qualcomm thereafter again objected that Apple had in violation of the
9 terms and spirit of the BCPA affirmatively advocated for governmental
10 authorities to disturb Qualcomms business. (Ex. 6, at 1)
11 Qualcomm then even offered to make the BCP payments if Apple altered its
12 testimony to competition authorities. On December 2, 2016, Qualcomm offered to
13 repay all past due BCP Payments if Apple would change its testimony to
14 government regulators, specifically:
15 (i) publicly and specifically retract and correct each of Apples
misstatements about Qualcomm to regulatory agencies, including
16 those detailed above; (ii) inform the relevant agencies that such
statements were and are untrue . . . .
17
18 (Ex. 7, at 6) For example, Qualcomm demanded that Apple retract statements
19 falsely representing that Qualcomm prevented Apple from using Intel through the
20 use of exclusivity incentive payments (id. at 2)the same conclusion reached by
21 many others, including, based on their investigations, the FTC (FTC v. Qualcomm
22 Inc., 2017 WL 2774406, at * 19), and the European Commission (Ex. 8).
23 Among other things, Qualcomm also demanded that Apple retract and declare
24 numerous statements it calls falseagain, statements also found in the FTC
25 Complaint, worldwide regulatory findings, and consumer and investor complaints.
26 Qualcomm demanded retractions of widely and increasingly accepted statements,
27 including that Qualcomm charges super-premium royalties, that Apple faced
28 significant royalty burden, and that Qualcomm asked Apple to renounce
9
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1 technology competition. (Ex. 7, at 4) In this letter, Qualcomm offered to pay


2 Apple the nearly $1 billion in rebates it has withheld if Apple altered its testimony
3 to government agencies investigating Qualcomm.
4 3. Qualcomms Obstruction of Justice Is at the Heart of the
5 Dispute with the Contract Manufacturers.
6 Qualcomms efforts to obstruct justice by preventing Apple from cooperating
7 with law enforcement authorities have resulted in a round trip of withheld
8 contractual payments. The first party to withhold contractual payments in this
9 dispute, as described above, was Qualcomm. Qualcomm admits that it gave notice
10 in October 2016 to Apple that it would stop making BCP Payments to Apple. (QC
11 Counterclaims 358) Qualcomm subsequently withheld BCP Payments to Apple
12 totaling $963 million. (Pl. Br. Ex. 7)
13 The second party to withhold contractual payments in this dispute was Apple.
14 In response to Qualcomms withholding, Apple withheld $963 million in payments
15 to the CMs, which would otherwise have been sent to Qualcomm as royalty
16 payments. (Id.) Finally, the CMs withheld $963 million from their royalty
17 payments to Qualcomm for the fourth quarter of 2016. (Pl. Br. 3)
18 Thus, the $963 million that the CMs withheld from Qualcomm and that
19 Qualcomm now demands be paid as preliminary injunctive relief is the same amount
20 Qualcomm first withheld from Apple under the BCPA. These are the same royalties
21 that otherwise would have been returned or rebated to Apple from royalties paid by
22 the CMs to Qualcomm (after Apple paid the CMs). (Ex. 1 7) It is also the same
23 amount that Qualcomm complains that Apple has withheld from the CMs. It is all
24 the same $963 million. Qualcomm admits this in its Motion: Defendants withheld
25 from Qualcomm the same amount Apple withheld from themin total, nearly $1
26 billion. (Pl. Br. 3)3
27 3
Accord Pl. Br. 3 (Apple did pay some royalties due to Qualcomm for sales during
28 the fourth quarter of 2016, only deducting off the top the specific amount at issue in
the Cooperation Agreement dispute between Apple and Qualcomm (emphasis in
10
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1 D. Qualcomms Injunction Ignores the Rebates Qualcomm Has Paid


Consistently Since 2007.
2
3 Regardless of the BCPA dispute, Qualcomms proposed injunctive relief
4 would also result in an enormous windfall of monies because it ignores Qualcomms
5 historical practice (dating back to the first iPhone in 2007) of rebating a significant
6 portion of its gross royalties for Apple products back to Apple. Apples net royalty
7 burden has never been the full amount Qualcomm has demanded from the CMs
8 under their license agreements. Instead, it has consistently hovered around .
9 (Watrous Decl. 14)
10 Between 2007 and 2012, this effective royalty level for non-CMDA iPhones
11 was governed by an agreement called the Marketing Incentive Agreement (MIA).
12 Under the MIA, Qualcomm rebated back to Apple the difference between the per-
13 unit price paid by the CMs and (Id. 15; Ex. 9 5)
14 From 2013 until Qualcomm stopped making BCP Payments in September
15 2016, Apples effective net royalty was reduced to about through two separate
16 agreements, the BCPA and the First Amendment to the Transition Agreement
17 (FATA). The BCPA rebated back to Apple the difference between the per-unit
18 price paid by the CMs and for an iPhone and for an iPad. (Watrous Decl.
19 17; Ex. 1 7) Thus, under the BCPA (and its agreements with the CMs), Apple
20 indirectly paid an effective net royalty to Qualcomm of for an iPhone and for
21 an iPad. Apart from the BCPA, Qualcomm also rebated Apple other monies for
22 exclusivity, specifically per iPhone and per iPad, bringing the effective
23 net rebate for both products to the level first established under the MIA.
24
original)); id. at 8 (Apple engaged in unlawful self-help by withholding from
25 Defendants the exact amount it claims Qualcomm owes under the Cooperation
Agreement). On February 3, 2017, Apple wrote in correspondence to Qualcomm
26 and confirmed the sameness of the withheld monies. QC Counterclaims 273; Pl.
Br. Ex. 7 (Apple has withheld a total of approximately $963 million from Apples
27 January payments to certain of its contract manufacturers. The amount covers
BCPA payments Qualcomm withheld from Apple for CQ2 and CQ3, as well as the
28 BCPA payment Qualcomm indicated it would not pay for CQ4.)
11
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1 (Watrous Decl. 1819; Ex. 10 2)


2 In 2015, the final year in which Qualcomm fully complied with its rebate
3 obligations under the BCPA and FATA, the difference between the gross royalties
4 and the net royalties for Apple products was more than (Watrous Decl.
5 21)
6 E. Apples Indemnification and Guarantee of Payments to Qualcomm
Once These Disputes Are Resolved
7
8 As Qualcomm has stated, Apple has entered into indemnification agreements
9 with the CMs in this action. (Qualcomms Complaint 2, ECF No. 1; Cathey Decl.
10 in Support of Preliminary Injunction Motion 6, ECF No. 35-6) Under these
11 agreements, Apple has agreed to indemnify the CMs against claims arising from
12 alleged underpayment of royalties for Apple products under the CMs license
13 agreements with patent holders, including Qualcomm. (Exs. 1115)
14 Separately, Apple has offered to enter into a direct cellular SEP cross-license
15 agreement with Qualcomm on terms that Apple views as compliant with both
16 parties FRAND obligations. (Watrous Decl. 32; Exs. 1617) Consistent with this
17 offer, Apple obtained an irrevocable performance guarantee of from
18 Deutsche Bank AG, usable as security for payments due to Qualcomm resulting
19 from (a) a direct license agreement between Apple and Qualcomm, (b) an adverse
20 patent infringement ruling, or (c) a ruling setting a FRAND royalty rate for one or
21 more Qualcomm patents. (Watrous Decl. 43; Ex. 17) Qualcomm
22
23 (Watrous Decl. 44; Ex. 18, at 3) Nevertheless, Apple has offered to obtain
24 additional guarantees for each year that this litigation continues, exceeding
25 by 2019. (Watrous Decl. 43; Ex. 19, at 2)
26 At bottom, Qualcomms injunction seeks to collect billions from the CMs that
27 the CMs do not have. The reason for this otherwise futile Qualcomm strategy is that
28 Apple has indemnified its Contract Manufacturers. (Apple has agreed to be impled
12
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1 as a defendant in this action based on this indemnification.) Qualcomms proposed


2 injunction really seeks payment from Apple of the monies that Qualcomm originally
3 withheld from Apple and then Apple withheld from Qualcomm due to Qualcomms
4 efforts to obstruct justice, abuse its monopoly power, collect royalties in violation of
5 patent law on exhausted patents, and charge exorbitant royalties in violation of its
6 FRAND obligations for patents it refuses to show have been infringed.
7 ARGUMENT
8 I. The Agreements Among the CMs, Qualcomm, and Apple Demonstrate
that Qualcomms Proposed Preliminary Injunction Would Mandate a
9 Radical Change in the Status Quo.
10 Qualcomm seeks specific performance of one set of agreements between the
11 CMs and Qualcomm. The burden on Qualcomm to justify preliminary relief in the
12 form of mandatory contract performance is a showing of extreme or very serious
13 damage. Hardie v. Natl Collegiate Athletic Assn, 2013 WL 12072530, at *3
14 (S.D. Cal. June 21, 2013) (Curiel, J.) (quoting Anderson v. United States, 612 F.2d
15 1112, 1115 (9th Cir. 1979)).
16 Qualcomm cannot meet this extreme standard because its proposed injunction
17 does not seek to preserve the status quo. The movants burden is greater in the
18 case of a mandatory injunction, which seeks to alter the status quo pendente lite.
19 Givemepower Corp. v. Pace Compumetrics, Inc., 2007 WL 951350, at *6 (S.D. Cal.
20 Mar. 23, 2007) (quoting Stanley v. Univ. of S. Cal., 13 F.3d 1313, 1320 (9th Cir.
21 1994)). The Ninth Circuit has emphasized that status quo ante litem does not
22 simply refer to any situation before the filing of a law suit, but the last, uncontested
23 status which preceded the pending controversy. Hardie, 2013 WL 12072530, at
24 *3 (quoting GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1210 (9th Cir.
25 2000)).
26 A. Qualcomm is Seeking Disputed Royalties from the CMs While
Ignoring the Rebates It Previously Paid to Apple.
27
28 Instead of seeking to implement the status quo, Qualcomm asks the Court, in
13
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1 the form of preliminary injunctive relief, to impose fanciful hopes and dreams of
2 licensing payments Qualcomm has never received and is not even remotely likely to
3 receive once the litigation is resolved. The amount of royalties that Qualcomm is
4 demanding from the CMs in its preliminary injunction motion is the gross royalty
5 amount for Apple products, not the net royalties it has actually retained after taking
6 into account the BCPA and Qualcomms other agreements with Apple. With regard
7 to the withheld BCPA funds, Qualcomm similarly seeks as preliminary relief all
8 monies withheld by the CMs, without mentioning its obligation to rebate these
9 disputed monies back to Apple. The result of granting Qualcomm the extraordinary
10 remedy of preliminary injunctive relief and ordering payment of these funds would
11 be a windfall to Qualcomm of monies that it has never retained during its decade-
12 long relationship with Apple.
13 Even accounting for the royalties rebates Qualcomm made to Apple, Apples
14 average net royalty to Qualcomm of approximately between 2007 and 2016
15 was above FRAND and the result of illegal monopoly pricing. (Watrous Decl.
16 1419, 22) This rate was more than the combined royalties Apple paid
17 to four of the largest non-Qualcomm SEP holders in 2016, despite the fact that
18 Qualcomm has declared a significantly smaller number of 4G cellular SEPs than
19 those companies combined declarations. (Id. 23)
20 But even this exorbitant average net royalty pales in comparison to the gross
21 royalty Qualcomm now seeks through a preliminary injunction. The average gross
22 royalty per iPhone and iPad without these rebatesrather than was about
23 in 2015 a total difference of over in that year alone. (Id. 21)
24 Qualcomm argues that its contracts with the CMs reflect a FRAND rate (QC
25 Counterclaims 313), but in this injunction action seeks to collect more than double
26 what it would have previously received in net royalties for Apple products.
27 (Watrous Decl. 42) Moreover, Qualcomms per-unit royalty demands for 2017 are
28 expected to average around more than what Apple paid four of the
14
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1 largest non-Qualcomm cellular SEP holders combined in 2016. (Id. 42)


2 Most of the royalties Qualcomm seeks in immediate injunctive relief are the
3 rebates Qualcomm stopped making to Apple in September 2016 in retaliation for
4 Apples response to information requests from competition agencies. (Pl. Br. 910)
5 Because Qualcomm was withholding monies owed to Apple, Apple began to hold
6 back from the CMs the same monies the CMs would otherwise pay to Qualcomm.
7 Qualcomms preliminary injunction motion does not seek to maintain the status quo,
8 it seeks to get back the BCPA monies that properly belong to Apple and that have
9 been withheld in retaliation for Apples cooperation with law enforcement
10 authorities.
11 B. Monies Never Received Before Are Not Irreparable Harm.
12 Given that Qualcomm is seeking payment of monies it has not previously
13 received, Qualcomm has no irreparable harm. Even if money damages could
14 somehow constitute irreparable harm, the money damages Qualcomm seeks here do
15 not constitute irreparable harm, or somehow threaten Qualcomms goodwill or R&D
16 budget because Qualcomm is seeking monies from the CMs that it previously
17 rebated. The withheld monies that Qualcomm seeks are round trip funds that
18 Qualcomm never planned on retaining. Qualcomm reported that fact to the markets
19 in an April 19, 2017 press release summarizing its second fiscal quarter results after
20 Apple withheld the funds: Apples contract manufacturers reported, but underpaid,
21 royalties in the second quarter of fiscal 2017. However, our revenues were not
22 negatively impacted as the contract manufacturers acknowledged the amounts are
23 due and the underpayment was equal to the amounts that Qualcomm has not paid
24 under our Cooperation Agreement that are currently in dispute. (Ex. 20, at 5)
25
26
27
28
15
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1 II. Qualcomm Has Not Established That It is Likely to Prevail on the


Merits.
2
A. Qualcomm Has No Likelihood of Success Because It Seeks to
3 Recover Money from the CMs that It Withheld from Apple in
Breach of Contract and for Purposes of Obstructing Justice.
4
5 Apples cooperation with law enforcement authorities did not breach the
6 BCPA, but even if the BCPA permitted Qualcomm to punish Apple for cooperating
7 with competition agencies, such an interpretation would contravene established
8 public policy in favor of full disclosure of concerns about unlawful conduct to
9 governmental investigators.4 This is true whether Qualcomm seeks to enforce the
10 BCPA directly against Apple or, as here, by collecting the monies through this
11 injunction action against Apples CMs.
12 Apple had a legal duty to comply with all subpoenas and civil investigative
13 demands from the FTC. 15 U.S.C. 49, 57b-1; 16 C.F.R. 2.7, 2.10, 2.11, 2.13.
14 The same was true in Korea. In re Ex Parte Application of Qualcomm Inc., 162 F.
15 Supp. 3d 1029, 1042 (N.D. Cal. 2016) (the KFTC stated that it relies heavily on
16 third parties to gain information relevant to ongoing investigations and to detect
17 anticompetitive activity in Korea); Korean Monopoly Regulation and Fair Trade
18 Act, Art. 23-2, 23-3 (Korean antitrust laws states that an investigative target cannot
19 retaliate against, or give any disadvantage to, another entrepreneur for
20 cooperating with investigations of unfair trade practices). FTC Rule of Practice
21 2.4 expressly encourages full disclosure in any competition investigation. 16 C.F.R.
22 2.4.5
23 4
Cariveau v. Halferty, 99 Cal. Rptr. 2d 417, 42225 (Ct. App. 2000) (contract void
24 as against public policy when nondisclosure provision prevented customer from
disclosing brokers misconduct to regulatory authorities); DArrigo Bros. of Cal. v.
25 United Farmworkers of Am., 169 Cal. Rptr. 3d 171, 18184 (Ct. App. 2014)
(settlement agreement would be void if interpreted to prevent labor union from
26 cooperating with an investigation by the California Agricultural Labor Relations
Board).
27 5
FTC v. Roca Labs, Inc., No. 8:15-cv-02231, Mot. for Temp. Restraining Order,
28 ECF No. 6, at 14, 2223, 29 (M.D. Fl. Sep. 24, 2015) (FTC challenge to a contract
where some consumers who lodged complaints have been unwilling to speak with
16
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1 To justify its remarkably blatant efforts to thwart government investigations


2 by punishing witnesses, Qualcomm has alleged that Apple breached its BCPA
3 obligations by assisting the government investigations into Qualcomm in three
4 ways. In each case, Qualcomm is making up contractual obligations that do not
5 (and could not legally) exist.
6 First, Qualcomm has alleged that a senior Apple executive encouraged
7 Samsung in the summer of 2015 to get aggressive in asking the KFTC to
8 continue to pursue Qualcomm. (QC Counterclaims 216) Regardless of this
9 assertion, the BCPA forbade Apple only from
10 (Ex. 1 7
11 (emphasis added))6 and Qualcomm was already under investigation by the KFTC
12 before the summer of 2015. (Ex. 21, at F-26 (reporting that Qualcomm was
13 contacted by the KFTC in March 2015)) Moreover, the BCPA gag order applied
14 only to FRAND and patent challenges, not competition claims. (Ex. 1 7)
15 Accordingly, this alleged conversation did not
16
17 and did not breach the BCPA.
18 Second, Qualcomm has alleged that Apple somehow improperly advocated
19 that the KFTC impose Worldwide Remedies (QC Counterclaims 230, ECF No.
20 70), but this allegation is also not based on the BCPA. In December 2016,
21
22 FTC staff because of the fear of legal action). In Roca Labs, the court entered an
injunction prohibiting the defendant from Retaliating, threatening to take, or taking
23 any adverse action against any person who communicates or cooperates with,
provides statements, documents, or information to, or testifies on behalf of, the FTC
24 or other party in connection with any law enforcement investigation or filed
litigation. Id., ECF. No. 38, at 8 (Oct. 29, 2015).
25 6
The plain meaning and dictionary definition of instigate is to cause an event or
26 situation to happen by your actions (Cambridge Dictionary,
http://dictionary.cambridge.org/us/dictionary/english/instigate (last visited July 17,
27 2017));
Macmillan Dictionary, To make something start, especially an official process
28 (www.macmillandictionary.com/us/dictionary/american/instigate, last visited July
17, 2017)).
17
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1 following an extensive investigation and seven public hearings, the KFTC found
2 Qualcomm to have engaged in abuse of market dominance, imposed a fine of over
3 $800 million, and ordered other remedies. (Ex. 2) The KFTC Order, similar to the
4 action brought by the FTC, addressed Qualcomms licensing conduct, including (1)
5 the Authorized Purchaser requirement, under which Qualcomm refuses to supply
6 chips to manufacturers who do not first enter into a separate patent license, (2)
7 Qualcomms refusal to license competitors, (3) Qualcomms insistence on licensing
8 SEPs only on a portfolio basis; and (4) Qualcomms requirement of a no-cost cross-
9 license as a condition of its licensing. (Id. at 49) The KFTC remedies include
10 requiring exhaustive licensing of Qualcomms SEPs and renegotiation of existing
11 licenses (including the CMs licenses). (Id. at 1314)
12 Qualcomm claims that Apple breached the BCPA because, in response to
13 KFTC requests for input about an appropriate remedy, Apple told the KFTC that to
14 protect Korean consumers and competition, the KFTCs relief should not be
15 limited to purchases or sales only in Korea. (QC Counterclaims 230) The
16 KFTC, in defining the application of its order, stated that the order applied to
17 Handset Companies and Modem Chipset Companies that are headquartered in
18 Korea, that sell handsets in Korea, or that supply handsets or modems to companies
19 that sell handsets in Korea. (Ex. 2, at 14) Thus, the remedy adopted by the KFTC is
20 extraterritorial only to the extent necessary to protect Korean consumers and the
21 Korean economy.
22 Regardless, an agencys extraterritorial remedy as the result of litigation is,
23 plain and simple, not an act of instigating litigation. Apples advocacy on the scope
24 of the remedy cannot establish a breach of the BCPA.
25 Third, Qualcomm has alleged that Apple made false and misleading
26 statements to antitrust authorities (QC Counterclaims 218225), but no section of
27 the BCPA permits Qualcomm to withhold payments based on the substance of
28 Apples responses to an agencys existing investigation. And Qualcomm does not
18
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1 allege that any information Apple provided to governmental authorities was


2 submitted other than in response to an inquiry or request connected to an ongoing
3 government investigation or proceeding. Apples statements to law enforcement
4 authorities have been as a third partya witnessasked to respond to government
5 inquiries. (Ex. 5) Qualcomm identifies no language in the BCPAand there is
6 nonethat permits it to withhold payments from Apple because it disagrees with
7 the substance of the information that Apple provided to governmental authorities in
8 response to their requests or inquiries.
9 Qualcomm is also wrong in its specific allegations of the two alleged
10 misrepresentations it raises in its Counterclaims against Apple. (QC Counterclaims
11 219222) Qualcomm alleges that Apple stated in an August 2016 presentation to
12 the KFTC that Apple has yet to add a [second chipset] supplier because of
13 Qualcomms exclusionary conduct, and that this was false because Apple had
14 already decided to use Intel chipsets by August and then launched in September.
15 (QC Counterclaims 219221) The Apple statement was true because no Apple
16 products using Intel chips were on the market at the time of the August hearing.
17 (QC Counterclaims 238239) Moreover, Apple had already disclosed to the
18 KFTC its future plans to use Intel to the KFTC in writing on July 11 (Ex. 22)
19 before the August 2016 presentationand Apple released the iPhone 7 with Intel
20 chips on September 16, 2016 (QC Counterclaims 238239), so the KFTC
21 unquestionably had complete information by the time it announced its decision in
22 December 2016. (Ex. 2)
23 Qualcomm also claims that Apples statement to the KFTC that Qualcomm
24 has never made a good faith offer for an unbundled license for cellular SEPs only
25 was false because one month earlier Qualcomm had made an offer to license its
26 cellular SEP portfolio. (QC Counterclaims 222) Qualcomm ignores the fact that
27 Apples Complaint describes with extensive detail why Qualcomms offers are not
28 good faith offers because they are above FRAND. (First Amended Complaint
19
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1 (Apple Complaint) 159193, Case No. 3:17-cv-00108-GPC-MDD, ECF No.


2 83) Apple is not alone in this conclusion. As Judge Koh wrote in denying
3 Qualcomms motion to dismiss the FTC Complaint, Qualcomms Authorized
4 Purchaser policy allows it to demand non-FRAND rates (such as those offered to
5 Apple): because Qualcomms no license-no chips policy prevents OEMs from
6 resorting to a neutral arbiter to determine a reasonable royalty rate, an OEMs
7 bilateral licensing negotiations with Qualcomm . . . thus do not adequately reflect a
8 reasonable FRAND royalty rate. FTC v. Qualcomm Inc., 2017 WL 2774406, at
9 *13. Qualcomm has admitted this year to the existence of this no license-no chips
10 policy, stating it does not sell modem chips to OEMs that do not have a license to
11 Qualcomms SEPs. (Qualcomms Mem. in Support of Motion to Dismiss, No.
12 5:17-cv-00220, ECF No. 69, at 6)
13 Even if Section 7 of the BCPA authorized Qualcomm to withhold $963
14 million for Apples cooperation with law enforcement authorities, as set forth above,
15 it would violate Californias public policy against unconscionable penalties. Cal.
16 Civ. Code 1671(b) (contract provision is invalid if party establishes that the
17 provision was unreasonable under the circumstances existing at the time the
18 contract was made). Qualcomms withholdings have no reasonable relationship
19 to the actual damages that would have been suffered as a result of the alleged
20 breach. Ridgley v. Topa Thrift & Loan Assn, 953 P.2d 484, 488 (Cal. 1998).7
21 Qualcomm cannot show that law enforcement authorities around the globe are
22 somehow acting at the behest of Apple and that Apple is a source of any damages,
23 much less $963 million in damages.
24 7
See Med. Sales & Consulting Grp. v. Plus Orthopedics USA, Inc., 2011 WL
25 5075970, at *7 (S.D. Cal. Oct. 25, 2011) (provision providing employee with
additional percentage of prior annual pay if employer breached contract was
26 unenforceable because payment bore no relationship to the damages that might
actually flow); Atel Fin. Corp. v. Quaker Coal Co., 132 F. Supp. 2d 1233, 123944
27 (N.D. Cal. 2001) (applying Ridgley and holding that contract requiring lessee to pay
all monies owed for the remainder of the lease term was an unenforceable penalty),
28 affd on other grounds, 321 F.3d 924 (9th Cir. 2003).
20
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1 Qualcomm cannot dodge the prohibition on illegal liquidated damages by


2 contending that its BCP payments are conditioned upon Apples performance.
3 However Qualcomm characterizes the withholding, $963 million in withheld BCP
4 Payments has no proportional relationship with the alleged breach of Section 7. See
5 Harbor Island Holdings v. Kim, 132 Cal. Rptr. 2d 406, 410 (Ct. App. 2003)
6 (contract deferment of rents contingent upon satisfaction of lease agreement
7 constituted liquidated damages where lessor demanded full payment disproportional
8 to a minor infraction).
9 B. Qualcomm Has Little Likelihood of Success on Its Claims for
Going-Forward Royalty Payments Because Its License Agreements
10 with the CMs Violate Qualcomms FRAND Commitment and the
Antitrust Laws and Are Unenforceable.
11
12 Qualcomms unlikelihood of success on the merits extends beyond the $963
13 million in disputed BCP Payments. Qualcomms license agreements with the CMs
14 are unenforceable because they were not offered on FRAND terms, in violation of
15 Qualcomms contractual obligations and the antitrust laws.
16 The FRAND promise is core to ensuring that the standardization of a
17 technology does not lead to anticompetitive abuse. The adoption of a patented
18 technology into a standard eliminates competitive alternatives to that technology.
19 Traditional patent law grants a lawful monopoly over the claimed invention, but the
20 value of such a monopoly is limited since alternative technologies exist. See
21 Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 10 n.8 (1958) (Often the patent
22 is limited to a unique form or improvement of the product and the economic power
23 resulting from the patent privileges is slight); see also Ill. Tool Works Inc. v. Indep.
24 Ink, Inc., 547 U.S. 28, 44 (2006) (a patent does not necessarily confer market
25 power). Thus, once a patented technology is incorporated into a standard, a
26 patents monopoly value increases significantly. Microsoft Corp. v. Motorola, Inc.,
27 2013 WL 2111217, at *10 (W.D. Wash. Apr. 25, 2013). Competitors may have no
28 choice but to implement a standard requiring the use of anothers patented
21
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1 technology. The patent holders standard essential patent portfolio may result in
2 demands for supra-competitive royalties. FRAND commitments exist to diffuse this
3 type of anti-competitive behavior.
4 Qualcomms anticompetitive behavior has allowed Qualcomm to avoid its
5 FRAND obligations. Qualcomm, which has market power in the markets for
6 CDMA and premium LTE chipsets, has bundled chipset supply and patent licenses
7 through its Authorized Purchaser (no license, no chip) requirement, under which
8 Qualcomm threatens device manufacturers supply of baseband processor chipsets
9 unless they accede to Qualcomms unfair license terms. Qualcomms portfolio-only
10 licensing policy and its historical bundling of SEPs and non-essential patents has
11 prevented licensees from fairly calculating a proper royalty rate for Qualcomms
12 SEPs. And Qualcomms imposition of gag clauses, such as section 7 of the BCPA,
13 has prevented licensees and chipset purchasers from challenging Qualcomms
14 compliance with FRAND.
15 The KFTC has already concluded that Qualcomms license agreements are
16 anticompetitive, and has ordered that Qualcomm must give device manufacturers,
17 including the CMs, the opportunity to renegotiate their license agreements on
18 FRAND terms.8 (Ex. 2) The FTC has also challenged the legality of Qualcomms
19 license agreements, and, as noted above, Judge Koh, in allowing the FTCs antitrust
20 case against Qualcomm to proceed, concluded that Qualcomms no license, no
21 chips policy has prevented the CMs from negotiating a reasonable FRAND royalty
22 rate. FTC v. Qualcomm Inc., 2017 WL 2774406, at *1516. Law enforcement
23 agencies in Europe and China have similarly concluded that Qualcomms licensing
24 practices are anticompetitive under those countries laws.
25 Given the broad consensus by law enforcement agencies in both the United
26 States and worldwide that Qualcomms license agreements are anticompetitive,
27 8
Qualcomm has sought to stay the KFTC order, and Qualcomms request for stay is
28 currently under review.
22
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1 Qualcomms likelihood of enforcing its contracts with the CMs is slim.


2 C. The CMs and Apples Patent-Related Counterclaims Prevent
3 Qualcomm From Showing a Likelihood of Success on Its Claims.
4 Qualcomms request for preliminary injunction ignores Apples challenges to
5 the infringement, validity, and enforceability of 18 declared essential patents in
6 Qualcomms portfolio, which the CMs now also assert in their Counterclaims.
7 (Apple Complaint, Counts VLVIII; CM Counterclaims, Counts XIIILXVI).
8 Moreover, Qualcomm has identified no valid and enforceable patent that is actually
9 essential to any cellular standard and which Apple products infringe. In its
10 Counterclaims against Apple, Qualcomm did not even allege the infringement of a
11 single SEP. (QC Counterclaims) Qualcomm instead has filed suit in this Court
12 alleging infringement of non-essential patents. (Complaint, Case No. 3:17-cv-
13 01375-JAH-NLS, ECF No. 1)
14 Alternatively, even if any of the Patents-in-Suit in this action or in Apple Inc.
15 v. Qualcomm Inc. are actually essential to a standard practiced by an Apple product
16 and infringed, Apple and the CMs have asked the Court to set the FRAND rate for
17 such patent. (Apple Complaint, Counts VLVIII; CM Counterclaims, Counts XIII
18 LXVI). The Court should not issue the extraordinary relief of a mandatory
19 injunction when the amount potentially due is unclear in light of these claims and
20 counterclaims.
21 CONCLUSION
22 For the foregoing reasons, Apple respectfully asks the Court to deny
23 Qualcomms request for a preliminary injunction.
24
Dated: July 18, 2017 Respectfully submitted,
25
26 By: /s/ Gabriel R. Schlabach

27 Juanita R. Brooks (SBN 75934)


brooks@fr.com
28 Seth M. Sproul (SBN 217711)
23
APPLES OPP. TO QUALCOMMS MOT. FOR PRELIM. INJ. CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80 Filed 07/18/17 PageID.2007 Page 30 of 31

sproul@fr.com
1 FISH & RICHARDSON P.C.
2 12390 El Camino Real
San Diego, CA 92130
3 Telephone: (619) 678-5070
Facsimile: (619) 678-5099
4
5 Ruffin B. Cordell (DC Bar No. 445801;
pro hac to be filed)
6 cordell@fr.com
Lauren A. Degnan (DC Bar No. 452421;
7 pro hac to be filed)
degnan@fr.com
8 Leah A. Edelman (DC Bar No. 1026830;
9 pro hac to be filed)
edelman@fr.com
10 FISH & RICHARDSON P.C.
The McPherson Building
11 901 15th Street, N.W., 7th Floor
12 Washington, DC 20005
Telephone: (202) 783-5070
13 Facsimile: (202) 783-2331
14 Benjamin C. Elacqua (TX SBN 24055443;
pro hac to be filed)
15 elacqua@fr.com
16 FISH & RICHARDSON P.C.
One Houston Center, 28th Floor
17 1221 McKinney
Houston, TX 77010
18 Telephone: (713) 654-5300
19 Facsimile: (713) 652-0109

20 Betty H. Chen (SBN 290588)


FISH & RICHARDSON P.C.
21 500 Arguello Street, Suite 500
Redwood City, CA 94063
22 Telephone: (650) 839-5070
23 Facsimile: (650) 839-5071
24 Aamir Kazi (GA SBN 104235;
pro hac to be filed)
25 kazi@fr.com
26 1180 Peachtree St. NE, 21st Floor
Atlanta, GA 30309
27 Telephone: (404) 892-5005
Facsimile: (404) 892-5002
28
24
APPLES OPP. TO QUALCOMMS MOT. FOR PRELIM. INJ. CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80 Filed 07/18/17 PageID.2008 Page 31 of 31

William A. Isaacson (DC Bar No. 414788;


1 pro hac to be filed)
2 wisaacson@bsfllp.com
Karen L. Dunn (DC Bar No. 1002520; pro
3 hac to be filed)
kdunn@bsfllp.com
4 Amy J. Mauser (DC Bar No. 424065; pro
5 hac to be filed)
amauser@bsfllp.com
6 Christopher G. Renner (DC Bar No.
1025699; pro hac to be filed)
7 crenner@bsfllp.com
BOIES SCHILLER FLEXNER LLP
8 1401 New York Avenue, N.W.
9 Washington, DC 20005
Telephone: (202) 237-2727
10 Facsimile: (202) 237-6131
11 Steven C. Holtzman (SBN 144177)
12 sholtzman@bsfllp.com
Gabriel R. Schlabach (SBN 304859)
13 gschlabach@bsfllp.com
BOIES SCHILLER FLEXNER LLP
14 1999 Harrison Street, Suite 900
Oakland, CA 94612
15 Telephone: (510) 874-1000
16 Facsimile: (510) 874-1460
17 Meredith R. Dearborn (SBN 268312)
mdearborn@bsfllp.com
18 BOIES SCHILLER FLEXNER LLP
19 425 Tasso Street, Suite 205
Palo Alto, CA 94307
20 Telephone: (650) 445-6400
Facsimile: (650) 329-8507
21
Attorneys for Third-Party Defendant
22 Apple Inc.
23
24
25
26
27
28
25
APPLES OPP. TO QUALCOMMS MOT. FOR PRELIM. INJ. CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80-1 Filed 07/18/17 PageID.2009 Page 1 of 6

1 Juanita R. Brooks, SBN 75934, brooks@fr.com


Seth M. Sproul, SBN 217711, sproul@fr.com
2 FISH & RICHARDSON P.C.
12390 El Camino Real
3 San Diego, CA 92130
Phone: 619-678-5070 / Fax: 619-678-5099
4
Ruffin B. Cordell, DC Bar No. 445801
5 Pro hac to be filed, cordell@fr.com
Lauren A. Degnan, DC Bar No. 452421
6 Pro hac to be filed, degnan@fr.com
FISH & RICHARDSON P.C.
7 The McPherson Building
901 15th Street, N.W., 7th Floor
8 Washington, D.C. 20005
Phone: 202-783-5070 / Fax: 202-783-2331
9
William A. Isaacson, DC Bar No. 414788
10 Pro hac to be filed, wisaacson@bsfllp.com
Karen L. Dunn, DC Bar No. 1002520
11 Pro hac to be filed, kdunn@bsfllp.com
BOIES SCHILLER FLEXNER LLP
12 1401 New York Avenue, N.W.
Washington, DC 20005
13 Phone: 202-237-2727 / Fax: 202-237-6131
14 Gabriel R. Schlabach (SBN 304859)
gschlabach@bsfllp.com
15 BOIES SCHILLER FLEXNER LLP
1999 Harrison Street, Suite 900
16 Oakland, CA 94612
Phone: 510-874-1000 / Fax: 510-874-1460
17
18 Attorneys for Third-Party Defendant Apple Inc.
19
UNITED STATES DISTRICT COURT
20
SOUTHERN DISTRICT OF CALIFORNIA
21
22 QUALCOMM INCORPORATED, Case No. 3:17-CV-01010-GPC-MDD
23 Plaintiff,
DECLARATION OF GABRIEL R.
24 v. SCHLABACH IN SUPPORT OF APPLE
INC.S OPPOSITION TO QUALCOMM
25 COMPAL ELECTRONICS, INC., FIH INCORPORATEDS MOTION FOR
MOBILE LTD., HON HAI PRELIMINARY INJUNCTION
26 PRECISION INDUSTRY CO., LTD,
PEGATRON CORPORATION, and
27 WISTRON CORPORATION, Date: August 15, 2017
Time: 1:00 p.m.
28 Defendants. Courtroom: 2D
Judge: Hon. Gonzalo P. Curiel

DECLARATION OF GABRIEL R. SCHLABACH CASE NO. 3:17-CV-01010-GPC-MDD


Case 3:17-cv-01010-GPC-MDD Document 80-1 Filed 07/18/17 PageID.2010 Page 2 of 6

1 COMPAL ELECTRONICS, INC.,


FIH MOBILE LTD., HON HAI
2 PRECISION INDUSTRY CO., LTD.,
PEGATRON CORPORATION, and
3 WISTRON CORPORATION,
Counterclaimants,
4
vs.
5 QUALCOMM INCORPORATED,
6 Counter Defendant.
7 COMPAL ELECTRONICS, INC.,
FIH MOBILE LTD., HON HAI
8 PRECISION INDUSTRY CO., LTD.,
PEGATRON CORPORATION, and
9 WISTRON CORPORATION,
10 Third-Party Plaintiffs,
v.
11
APPLE INC.,
12
Third-Party Defendant.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

DECLARATION OF GABRIEL R. SCHLABACH CASE NO. 3:17-CV-01010-GPC-MDD


Case 3:17-cv-01010-GPC-MDD Document 80-1 Filed 07/18/17 PageID.2011 Page 3 of 6

1 I, Gabriel R. Schlabach, declare as follows:


2 1. I am an Associate with the law firm Boies Schiller Flexner LLP,
3 attorneys of record in this action for Third-Party-Defendant Apple Inc. (Apple). I
4 am a member of good standing of the Bar of the State of California, and I am
5 admitted to practice before this Court. I have personal knowledge of the matters set
6 forth in this declaration, and if called upon to do so, I would testify competently to
7 them.
8 2. Attached hereto as Exhibit 1 is a true and correct copy of the Business
9 Cooperation and Patent Agreement between Apple and Qualcomm Incorporated
10 (Qualcomm), effective January 1, 2013.
11 3. Attached hereto as Exhibit 2 is a true and correct copy of an English
12 translation of a Korea Fair Trade Commission (KFTC) press release, entitled
13 Strict Sanctions on Qualcomms Abuse of Cellular SEPs and dated December 28,
14 2016. This unofficial translation is available for download from Qualcomms
15 website, at https://www.qualcomm.com/media/documents/files/kftc-issued-press-
16 release-dated-december-28-2016-unofficial-english-translation.pdf.
17 4. Attached hereto as Exhibit 3 is a true and correct copy of a letter from
18 Tony Blevins to Fabian Gonell, dated September 23, 2016.
19 5. Attached hereto as Exhibit 4 is a true and correct copy of a letter from
20 Fabian Gonell to Tony Blevins, dated October 9, 2016.
21 6. Attached hereto as Exhibit 5 is a true and correct copy of a letter from
22 Bruce Sewell to Derek Aberle, dated October 17, 2016.
23 7. Attached hereto as Exhibit 6 is a true and correct copy of a letter from
24 Alex Rogers to Bruce Sewell, dated October 31, 2016.
25 8. Attached hereto as Exhibit 7 is a true and correct copy of a letter from
26 Alex Rogers to BJ Watrous, dated December 2, 2016.
27 9. Attached hereto as Exhibit 8 is a true and correct copy of a European
28 Commission press release, titled Antitrust: Commission sends two Statements of

1
DECLARATION OF GABRIEL R. SCHLABACH CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80-1 Filed 07/18/17 PageID.2012 Page 4 of 6

1 Objections on exclusivity payments and predatory pricing to Qualcomm and dated


2 December 8, 2015.
3 10. Attached hereto as Exhibit 9 is a true and correct copy of the
4 Marketing Incentive Agreement between Apple and Qualcomm, effective January 8,
5 2007.
6 11. Attached hereto as Exhibit 10 is a true and correct copy of the First
7 Amendment to Transition Agreement Among Apple, Qualcomm, and Qualcomm
8 CDMA Technologies Asia Pacific Pte Ltd., effective January 1, 2013.
9 12. Attached hereto as Exhibit 11 is a true and correct copy of the
10 Addendum regarding Mobile Technology License Fees between Apple and Pegatron
11 Corp., effective October 1, 2016.
12 13. Attached hereto as Exhibit 12 is a true and correct copy of the
13 Addendum regarding Mobile Technology License Fees between Apple and Wistron
14 Corp., effective January 1, 2017.
15 14. Attached hereto as Exhibit 13 is a true and correct copy of the
16 Addendum regarding Mobile Technology License Fees for iPads between Apple
17 and Hon Hai Precision Industry Co. Ltd. (Hon Hai), effective January 1, 2017.
18 15. Attached hereto as Exhibit 14 is a true and correct copy of the
19 Addendum regarding Mobile Technology License Fees for iPhones between Apple
20 and Hon Hai, effective January 1, 2017.
21 16. Attached hereto as Exhibit 15 is a true and correct copy of the
22 Addendum regarding Mobile Technology License fees between Apple and Compal
23 Electronics, Inc., effective January 1, 2017.
24 17. Attached hereto as Exhibit 16 is a true and correct copy of a letter from
25 BJ Watrous to Alex Rogers, dated September 13, 2016.
26 18. Attached hereto as Exhibit 17 is a true and correct copy of a letter from
27 BJ Watrous to Alex Rogers, dated February 14, 2017.
28 19. Attached hereto as Exhibit 18 is a true and correct copy of a letter from

2
DECLARATION OF GABRIEL R. SCHLABACH CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80-1 Filed 07/18/17 PageID.2013 Page 5 of 6

1 Alex Rogers to BJ Watrous, dated March 8, 2017.


2 20. Attached hereto as Exhibit 19 is a true and correct copy of a letter from
3 Bruce Sewell to Donald Rosenberg, dated April 25, 2017.
4 21. Attached hereto as Exhibit 20 is a true and correct copy of a
5 Qualcomm press release, titled Qualcomm Announces Second Quarter Fiscal 2017
6 Results and dated April 19, 2017, available at https://www.qualcomm.com/news/
7 releases/2017/04/19/qualcomm-announces-second-quarter-fiscal-2017-results.
8 22. Attached hereto as Exhibit 21 is a true and correct copy of
9 Qualcomms Form 10-K for the fiscal year ending September 25, 2016.
10 23. Attached hereto as Exhibit 22 is a true and correct copy of an
11 unofficial English translation of Apples Response (2) to the KFTC Examiners
12 Request Dated June 13, 2016, dated July 11, 2016.
13 I declare under penalty of perjury under the laws of the United States that the
14 foregoing is true and correct.
15 Executed this 18th day of July, 2017, in Oakland, California.
16
17 By: /s/ Gabriel R. Schlabach
Gabriel R. Schlabach
18
19
20
21
22
23
24
25
26
27
28

3
DECLARATION OF GABRIEL R. SCHLABACH CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80-1 Filed 07/18/17 PageID.2014 Page 6 of 6

1 TABLE OF EXHIBITS

2 Exhibit No. Pages


3 1 117
2 1844
4 3 4549
5 4 5052
5 5355
6 6 5657
7 7 5864
8 6566
8
9 6776
9 10 7784
10 11 8591
12 9297
11 13 98104
12 14 105111
15 112118
13 16 119123
14 17 124129
18 130135
15 19 136137
16 20 138151
21 152296
17
22 297301
18
19
20
21
22
23
24
25
26
27
28

4
DECLARATION OF GABRIEL R. SCHLABACH CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2015 Page 1 of 232

EXHIBIT 1

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2016 Page 2 of 232

EXHIBIT 2
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2017 Page 3 of 232

[Unofficial Translation]

Press Release
Date of Distribution: Anti-Monopoly Bureau
Wednesday, Dec. 28, 2016 Anti-Monopoly Division
Responsible Manager:
This press release may be used Sang-Min Song (044-200-4484)
for reports starting from the Responsible Official:
Korea Fair Trade
morning paper of Thursday, Hyun-Jeong Bae (044-200-4497)
Commission
Dec. 29, 2016. Anti-Monopoly Bureau
Knowledge Industry Division
Broadcasting and internet media Responsible Manager:
may start using this press release Young-Wook Yoo (044-200-
from Wednesday, Dec. 28, 2016 4489)
12PM. Responsible Official:
Jung-Hyun Park (044-200-4488)

Strict Sanctions on Qualcomm's Abuse of Cellular SEPs


- Imposed the largest surcharge in the KFTC's history, KRW 1 trillion 30 billion and
the orders to rectify the unfair business model -

Korea Fair Trade Commission (Chaired by Jae-Chan Jeong) ("KFTC") decided in the
full-commission hearing on Wednesday, December 21, 2016 to impose remedial orders
and a surcharge of KRW 1 trillion 30 billion on the global modem chipset
company/patent license company, Qualcomm Incorporated (QI)* and its two affiliates**
(the three companies together as "Qualcomm") for abuse of market dominance.

* QI is Qualcomm's U.S. headquarters and is engaged in patent licensing business.

**Qualcomm Technologies Inc. (QTI) and Qualcomm CDMA Technologies Asia-


Pacific PTE (QCTAP) are engaged in cellular modem chipset business.

Qualcomm holds standard essential patents ("SEPs") for which it has made FRAND
commitments* to global SSOs such as ITU and ETSI in regards to cellular
communication standard technologies such as CDMA, WCDMA and LTE, and at the
same time, Qualcomm is a vertically integrated monopolistic enterprise that
manufactures and sells modem chipsets. In violation of the FRAND commitment,
Qualcomm engaged in the following acts:

* FRAND commitment: SEP holder's commitment to license patent users on fair,


reasonable, non-discriminatory terms

[Page 2]

(1) Despite requests by competing modem chipset companies, Qualcomm has refused to
license, or imposed restrictions on the license for, the cellular SEPs that are necessary
for the manufacture and sale of chipsets.

-1-

Exhibit 2
Page 18
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2018 Page 4 of 232

[Unofficial Translation]

(2) By linking the chipset supply with patent license agreements, Qualcomm has coerced
the execution and performance of unfair license agreements by using its chipset supply
as leverage, while circumventing FRAND commitment.

(3) Qualcomm has provided handset companies with only comprehensive portfolio
licenses and coerced unilaterally determined royalty terms without conducting a
procedure to calculate fair compensation, while coercing unfair agreements, e.g.,
demanding handset companies to license their patents for free.

The KFTC concluded its investigation regarding the above violations and sent the
Examiner's Report ("ER") to Qualcomm on November 13 of last year. Since July of
this year, the KFTC held 7 full-commission hearings in total, including hearings
regarding the consent decree process, and conducted an in-depth review of the case.

o Particularly, the KFTC reviewed this case from various angles through, for instance,
participation in the hearings by not only Korean companies such as Samsung
Electronics and LG Electronics, but also global ICT enterprises such as Apple,
Intel, Nvidia (all U.S.), MediaTek (Taiwan), Huawei (China), and Ericsson (Sweden).

This case is meaningful in that the KFTC is the first to rectify Qualcomm's unfair
business model, under which Qualcomm has refused to license competing chipset
companies while coercing unilateral license terms on handset companies in order to
strengthen its monopolistic power in the patent license market and the chipset market.

o Particularly, the measures are expected to change the exclusionary ecosystem in


which Qualcomm is the exclusive beneficiary to return to the open ecosystem in which
any industry participant enjoys its own innovation incentives, and will serve as the
trigger to restore fair competition in the cellular communication industry.

[Page 3]

1 Market Structure and Current Status

1. Market Structure

The cellular communication industry is largely comprised of the patent license


market, the components, including modem chipsets, market, the handset market, the
cellular communication service market, etc.

o Qualcomm is a vertically integrated monopolistic enterprise that operates


business in the patent license market and the modem chipset market, which are
upstream markets in the overall market structure.

<Overview of the Overall Market Structure of the Cellular Communication Industry>

-2-

Exhibit 2
Page 19
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2019 Page 5 of 232

[Unofficial Translation]

Patent SEP Holders (Qualcomm, Samsung, LG, etc.)


License

License License

Components Modem Chipset Companies (Qualcomm, Intel, MediaTek, Via, etc.)


(modem
chipsets)

Chipset Supply

Handsets
Handset Companies (Samsung, Apple, LG, Huawei, etc.)

2. Relevant Markets and Market Dominance

(Cellular SEP license market) Qualcomm holds the largest number of SEPs over
the cellular communication generations of 2G (CDMA), 3G (WCDMA), and 4G (LTE).

o As SEPs cannot be replaced by other technologies, a SEP holder gains complete


monopolistic power by holding even a single SEP.

Unlike CDMA, of which Qualcomm held most SEPs, Qualcomm's share


significantly decreased for the WCDMA standard (27%) and the LTE standard
(16%).

QC's Patent Share per Cellular Communication Standard LTE SEP Shares per Enterprise Qualcomm
Samsung
IDC
LG
90%
or Nokia
more
Ericsson
Huawei

Others

* Based on 2015 public data on ETSI website

[Page 4]

(Modem chipset market) Qualcomm holds a monopolistic position in the CDMA


modem chipset market, and has long maintained its market dominance in the
WCDMA and LTE markets.

Even today with the spread of LTE technology, Qualcomm still exclusively
supplies multimode CDMA-LTE chipsets that are backward compatible with
CDMA.

* Backward Compatibility:
Evolution of cellular communication does not simultaneously change communication

-3-

Exhibit 2
Page 20
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2020 Page 6 of 232

[Unofficial Translation]

standards at once because there are still users of handsets using the old standard and it
takes substantial time to replace base stations. Therefore, modem chipsets and handsets
have to support not only new standards but also the old standards.

In addition, Qualcomm holds an unrivaled position for the high-end premium


products.

<Qualcomm's Market Share Trend in Modem Chipset Market per Standard


(Based on Revenues)>
Yr 2008 Yr 2009 Yr 2010 Yr 2011 Yr 2012 Yr 2013 Yr 2014 Yr 2015
LTE - - 34.2% 58.8% 94.5% 96.0% 84.8% 69.4%
CDMA 98.4% 97.6% 96.4% 94.3% 92.4% 93.1% 91.6% 83.1%
WCDMA 38.8% 47.4% 45.7% 55.0% 50.4% 53.9% 48.8% 32.3%
* Source: Strategy Analytics

3. Current Status of Qualcomm's Revenues

Qualcomm's annual global modem chipset revenue and patent royalty revenue amount
to approximately USD 25.1 billion (as of 2015).

<Status of Qualcomm's Global Revenues (USD million)>

Yr 2013 Yr 2014 Yr 2015


Patent Royalty (QTL) 7,554 7,569 7,947
Modem Chipset Sales (QCT) 16,715 18,665 17,154
Total 24,269 26,234 25,101
* Based on Qualcomm's 10-K for Year 2015

Among such revenues, the revenues derived from the Korean market slightly differ
from year to year, but are approximately 20% of the total global revenues.

* The Proportion of the Korean Market per Year (2013: 20%; 2014: 23%; 2015: 16%)

[Page 5]

2 Conducts in Violation

(Overview of Qualcomm's business model) As the monopoly enterprise in both the


cellular SEP market and the modem chipset market, Qualcomm has established a
business model that skips the chipset level and licenses at the handset level.

To do so, Qualcomm has (1) refused to license or imposed restrictions on the


license for SEPs to competing chipset companies;

(2) by linking the chipset supply with patent license agreements, Qualcomm has
coerced the execution and performance of unfair license agreements by using its
chipset supply as leverage, while circumventing FRAND commitment; and then

(3) Qualcomm has provided handset companies with only comprehensive


portfolio licenses and coerced unilaterally determined royalty terms without

-4-

Exhibit 2
Page 21
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2021 Page 7 of 232

[Unofficial Translation]

conducting a procedure to calculate fair compensation, while demanding handset


companies to cross-license their patents for free.

<Overview of Qualcomms Business Structure>


Qualcomm has divided and is currently operating its license business (QTL) and
modem chipset business (QCT) as separate corporate entities (QI and QTI).

(1) QTL does not provide licenses to any chipset companies.

(2) While selling modem chipsets to handset companies, QCT demands the execution
and performance of license agreements with QTL. In other words, even after
dividing the corporate entities, Qualcomm has still linked its businesses.

(3) As a result, QTL can easily coerce unilateral license agreement terms on handset
companies, and through such, Qualcomm is able to obtain cross-licenses on
handset companies' patents, which in turn, allows QCT and customers of QCT to
use them for free.

Patent
Holders Qualcomm (QTL)

Conduct 1 Use of parent company's patents


Refusal to license/
Restricted license

Chipset
Conduct 3
Manufacturers Intel, MediaTek, Comprehensive
Qualcomm portfolio license
Via, etc.
(QCT) +
Unilateral transaction
terms
+
Conduct 2 Demand handset
Chipset supply only to companies to provide
Qualcomm's licensees their patents for free

Handset
Manufacturers Samsung, Apple, LG, Huawei, etc.

[Page 6]

1. Refusal/Restriction of Cellular SEP Licenses to Competing Chipset Makers

Qualcomm made the FRAND commitment to international SSOs such as ITU and
ESTI so that Qualcomms cellular technologies would be selected as the industry
standard.

However, in violation of the FRAND commitment, Qualcomm refused or restricted


the provision of cellular SEP licenses that are essential for the chipset manufacture and
sales, despite requests from chipset makers.

Samsung, Intel, and VIA, among others, requested license agreements for cellular
SEPs, but Qualcomm refused.*

-5-

Exhibit 2
Page 22
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2022 Page 8 of 232

[Unofficial Translation]

* Determined that if Qualcomm provides licenses to competing chipset companies, it would


be difficult to maintain model where Qualcomm receives royalties from handset
companies

Although competing chipset companies such as MediaTek requested complete


patent license agreements, the agreement entered into was an incomplete
agreement* that restricts the rights subject to the license.

* Representative examples are restrictions on to whom competing chipset companies can


sell or the right to use the modem chipset. Also, Qualcomm requested reports about
sensitive business information such as competing chipset companies sales amount by
product model, product model, name of customers, etc.

2. Coercing Patent License Agreements to Handset Companies While Holding


Hostage the Supply of Chipsets

Qualcomm established and strictly implemented a business policy where Qualcomm


does not supply modem chipsets to handset companies that are not licensed by
Qualcomm.

Incorporating the business policy into its modem chipset supply agreement,
Qualcomm prescribed that Qualcomm can, at any time, refuse/stop the supply of
chipsets when a handset company does not execute or perform a license agreement.

Qualcomm actually used the threat of terminating the supply of modem chipsets
as negotiation leverage in the process of license negotiations with handset
companies.

[Page 7]

3. Portfolio Licensing All of Qualcomms Patents Comprehensively, Unilaterally


Coercing Licensing Terms Without a Process for Calculating Fair Compensation,
and Requiring Free Cross-Licenses, etc. from Handset Companies

Providing only comprehensive portfolio licenses of all of Qualcomms patents at once,


instead of distinguishing between cellular SEPs practiced by the chipsets and other
patents, or distinguishing by cellular standards such as 2G/3G/4G (comprehensive
portfolio license)

Coercing unilaterally determined license terms without offering handset companies


the opportunity to properly evaluate the value of Qualcomms patents (unilateral
license terms)

While licensing its patents to around 200 handset companies, requiring them to cross-
license without providing fair compensation for the patents held by the counterparty
handset companies (royalty-free cross-grant)

-6-

Exhibit 2
Page 23
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2023 Page 9 of 232

[Unofficial Translation]

<Cross-License Structure between Qualcomm and Handset Companies>

(1) Comprehensive Portfolio License

Qualcomm Qualcomm
Patents Patents
(2) Unilateral License Terms
(3) Free cross-grants

4. Each of the Conducts Organically Combines Together to Form One Unfair


Business Model.

The 3 conducts above organically connect to complete Qualcomms overall


anticompetitive business model.

Qualcomm monopolizes the chipset market by refusing or restricting the


provision of licenses to competing chipset companies and forming competition
conditions that are unfavorable to competitors, and

Qualcomm increases its negotiating power in the license market by evading the
FRAND commitment through the use of its control over the chipset market that
if a handset company does not enter into or perform a license agreement,
Qualcomm restricts the chipset supply.

[Page 8]

Subsequently, Qualcomm uses this increased power to impose various


unfavorable terms, such as unilateral license terms and the term requiring free
cross grants.

And then, by once again using the above as a means to, for example, make its
chipsets more favorable than competitors chipsets (patent umbrella),
Qualcomm forms a feedback structure to maintain and strengthen its
monopoly power in the chipset market and patent license market.

-7-

Exhibit 2
Page 24
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2024 Page 10 of 232

[Unofficial Translation]

<Structure of Qualcomms Organic Feedback Business Model>

3 Anticompetitive Effects by Relevant Market

Due to Qualcomms illegal conducts, anticompetitive effects arise in the modem


chipset market and the cellular SEP license market. Also, Qualcomms illegal conducts
harm other enterprises R&D activity and distorts competition on R&D for cellular
technologies.

A. Modem Chipset Market

Qualcomm has maintained an inconsistent position where it receives licenses from


other patent holders such as handset companies but never licenses competitors (double
standard).

Accordingly, Qualcomms chipsets become products safe from patent attacks


while competitors chipsets become flawed products without patent licenses.
Thus, this creates a competition structure absolutely favorable to Qualcomm (un-
level playing field).

[Page 9]

The free cross-grants that Qualcomm acquired from handset companies and others
provide patent umbrella, which offers protection from patent infringement attacks
only to Qualcomms chipset customers. As a result, this allows Qualcomm to easily
gain competitive advantage.

When a handset company purchases chipsets from Qualcomm, it can benefit from
the patent umbrella effect whereby it is exempted from having to pay royalties
to around 200 other patent holders.

* Qualcomm itself has publicized that handset companies can save their IP costs, (i.e.,
royalties payable to other patent holders) significantly reduced by purchasing

-8-

Exhibit 2
Page 25
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2025 Page 11 of 232

[Unofficial Translation]

Qualcomm's chipsets. (Qualcomm has publicized this for more than 240 times in the
format of a white paper since 2004.)

On the other hand, if a handset company purchases chipsets from Qualcomms


competitors, then the handset company has to pay royalties for the patents of
other handset companies. In effect, the competing chipset companies are unable to
compete on the merit.

<Exclusionary Effect of Free Cross-Grants (Patent Umbrella)>

Qualcomms practice of refusing to license to competing chipset companies has limited


the competitors customers and has created a structure in which Qualcomm can
intervene in the transactions between the competitors and their respective customers.

A competing chipset company that sells chipsets to either handset companies that
have not entered into license agreements with Qualcomm or that have disputes
with Qualcomm is subject to unexpected patent attacks.

- Therefore, since competing chipset companies can only sell to handset


companies that have entered into license agreements with Qualcomm, it is
difficult for the competing chipset companies to actively develop new
customers.

In addition, Qualcomm has made it possible for itself to unfairly intervene in the
transactions between its competitors and handset companies by taking advantage
of the fact that the handset companies have no choice but to execute and perform
patent license agreements with itself.

[Page 10]

- When a handset company attempts to purchase chipsets from Qualcomms


competitors, Qualcomm can interfere with the competitors chipset sales by, for
example, conducting strict royalty audit on the handset company.

- Qualcomm can attract competitors customers by, for example, providing


conditional rebates to those handset companies that purchase chipsets from
Qualcomm.

The anticompetitive effect in the modem chipset market can indeed be verified through

-9-

Exhibit 2
Page 26
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2026 Page 12 of 232

[Unofficial Translation]

several indexes.

Market exits by major competing chipset makers and restrictions on new market
entry

Among the 11 major chipset companies selected by Deutsche Bank in 2008, 9


companies have exited the market

* EONEX, the only small and medium-sized modem chipset maker in Korea, also exited
the market in 2009.

Although the size of the entire modem chipset market has grown by more than
twice the market size in 2008, due to Qualcomms refusal to license and other
practices, no significant competitor has newly entered the market.

<Market Growth Trend in the Modem Chipset Market and Market Exit by Major
Chipset Companies>

Modem Chipset Exit (Imminent)


Maker Time
NXP August 2008
TI October 2008
Freescale October 2008
ST Micro February 2012
NEC February 2014
Broadcom June 2014
Ericsson September 2014
Nvidia May 2015
Marvell September 2015

[Page 11]

Qualcomms market share and market concentration in the modem chipset


market has steadily increased

Despite the decrease in the importance of the CDMA standard and the market
evolution that has transformed the market to a 4G LTE chipset-centric market,
Qualcomms market share in the entire chipset market has continued to be on the
rise.

The HHI, which shows the market concentration, has also significantly increased
from 2,224 in 2008 to 4,670 in 2014.

Changes of Market Shares in Worldwide Modem Chipset Market (2008~2015)

- 10 -

Exhibit 2
Page 27
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2027 Page 13 of 232

[Unofficial Translation]

B. Cellular SEP License Market

The process of setting a standard artificially grants monopoly power by selecting


specific technologies as standards and excluding competing technologies through the
agreements reached by enterprises on the basis of FRAND commitments.

FRAND commitments require the SEP holders to make promises to license on


fair, reasonable, and non-discriminatory terms to anyone in order to prevent abuse
of monopoly power by SEP-holders.

Therefore, if a SEP-holder fails to comply with the FRAND commitments, it will


harm the standard setting process and distort competition among technologies
as the standard technologies become exclusive properties of a small minority of
enterprises or patent-owners.

[Page 12]

As Qualcomm coerces the execution and performance of patent license agreements by


using modem chipset supply as a weapon, FRAND commitment that restrains abuse
of dominance in the SEP license market is in effect debilitated (FRAND commitment
is rendered meaningless).

As handset companies that cannot but use Qualcomm chipsets have to accept the
terms demanded by Qualcomm, they cannot negotiate SEP license terms on an
equal footing.

It is a structure under which handset companies have to bite the bullet and accept
Qualcomms license terms, even if they are unfair, because if the modem chipset
supply is suspended, handset companies would face the risk of their entire
business shutting down.

Major competition authorities* view the act of seeking an injunction in courts


based on a patent infringement claim against willing licensees itself as violation
of competition laws.

- 11 -

Exhibit 2
Page 28
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2028 Page 14 of 232

[Unofficial Translation]

* For example, the USFTC Google-Motorola case (2013), EC Motorola-Samsung case


(2014)

However, under Qualcomms structure, even without going through the process
of a private lawsuit in courts, Qualcomm uses as negotiation leverage the
means to immediately suspend handset companies businesses based on its own
discretion.

<Comparison of Injunction and Refusal / Suspension of Chipset Supply>


Refusal / Suspension of
Injunction
Chipset Supply
Determining Body Neutral institution, e.g., courts Qualcomm itself
Determination Standard Relevant laws, agreement terms, etc. Arbitrary determination
Point at which It Is Effective After the final decision Immediately effective
Scope of Effects Limited within jurisdiction Entire scope of business

Unfair patent agreements that actually violate FRAND commitment are executed
(patent holdup).

As Qualcomm provides only comprehensive portfolio licenses for its SEPs and
non-SEPs, even handset companies that wish to use only cellular SEPs
unavoidably license other unnecessary patents from Qualcomm.

[Page 13]

Despite that Qualcomm SEPs level of contribution has declined as the standards
developed from 2G 3G 4G, Qualcomm has kept the same royalty rate by
coercing comprehensive portfolio licenses during the long-term or perpetual
agreement period.

Qualcomm ignored the value of patents held by handset companies and allowed
Qualcomm as well as its modem chipset customers to use such patents for free.

C. Distortion of Competition on R&D Innovation

As Qualcomm demanded and received free cross-grants from handset companies, the
incentive for such handset companies to make investments in R&D has significantly
decreased.

From handset companies perspective, they cannot receive fair compensation for
their investments because even if they make active investments in R&D and
thereby obtain multiple cellular SEPs, they would be licensed for free to
Qualcomm.

As Qualcomm imposes royalty based on unilateral standards irrelevant to the contents


of the patented inventions, the incentive for the handset companies and chipset
companies to develop technology has decreased.

- 12 -

Exhibit 2
Page 29
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2029 Page 15 of 232

[Unofficial Translation]

Today, a smartphone is a comprehensive IT device that integrates various


technologies developed by handset companies, component companies such as
modem chipset companies, SW and application developers, etc.

However, the current structure is that if the above companies create new
demands and increase value added, then Qualcomm collects a significant
portion of such achievements.

4 Applicable Laws & Remedial Measures

A. Applicable Laws

Abuse of Market Dominance & Unfair Trade Practice (both provisions may apply)

Article 3-2(1) of the Monopoly Regulation and Fair Trade Act (MRFTA or the
Act), Article 5(3) of the Enforcement Decree of the MRFTA (Enforcement
Decree) (Abuse of Market Dominance: Unfair interference with anothers
business activities)

Article 23(1)(4) of the MRFTA, Article 36(1) of the Enforcement Decree (Unfair
Trade Practice: Abuse of Superior Trading Position)

[Page 14]

B. Remedial Orders

<Main Remedial Orders>

1. Upon modem chipset companies' request, Qualcomm shall engage in good-faith


negotiations for patent license agreements.

o In executing license agreements with modem chipset companies, Qualcomm shall


not demand unfair restrictive terms, such as a limitation on chipset customers,
restriction on the use right of chipsets.

<Negotiation Process>
Upon modem chipset companies' request for cellular SEP licenses, Qualcomm
shall send a draft license agreement, including royalty calculation method, etc.,
to the chipset companies.

Under the common industry practices and good faith, the parties sufficiently
negotiate for a period, the length of which is agreed upon by the parties, and draft
the final license agreement.

If the parties do not reach an agreement regarding the execution of the agreement,
the parties shall request an independent third party to make a determination and
follow such determination.

2. Qualcomm shall not coerce the execution of patent license agreements by using the

- 13 -

Exhibit 2
Page 30
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2030 Page 16 of 232

[Unofficial Translation]

modem chipset supply as leverage, and shall amend or delete relevant provisions in
agreements.

* However, an exception applies to handset companies that are clearly confirmed to be


unwilling licensees that, for instance, refuse to engage in good-faith negotiations for
license terms.

3. In executing a patent license agreement with handset companies, Qualcomm shall not
coerce unfair agreement terms* on handset companies, and upon handset companies'
request, Qualcomm shall re-negotiate existing patent license agreements.

* For example, a term regarding comprehensive portfolio licensing without any distinction
between SEPs and non-SEPs, or standards per generation and a term unilaterally
demanding cross-licenses without conducting a procedure calculating fair compensation

4. Qualcomm shall notify modem chipset companies and handset companies the fact that
the remedial orders have been imposed on Qualcomm, and report to the KFTC if
Qualcomm newly executes or amends agreements or deletes provisions in accordance
with the remedial orders.

[Page 15]

<Scope of Remedial Orders>

Considering the efficacy of the measures, principle of proportionality, international


comity, etc., the scope of the remedial orders covers transactions with the following
enterprises, which have effects in Korea.

(1) Handset manufacturers headquartered in Korea


(2) Handset manufacturers / sellers that sell handsets in
Handset Companies Korea
(3) Enterprises that supply handsets to a handset company
that sells handsets in Korea
(A) Chipset manufacturers headquartered in Korea
Modem Chipset Companies (B) Enterprises that supply modem chipsets to a handset
company that falls under (1)~(3) above

If in the future, a foreign competition authority or court makes a decision that


conflicts with these remedial orders and thus makes it impossible to comply with
both at the same time, Qualcomm may request for a reconsideration of theses
remedial orders.

<Surcharge>

KRW 1 trillion and 30 billion (*Can change later in the process of determining the
relevant revenue amount)

- 14 -

Exhibit 2
Page 31
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2031 Page 17 of 232

[Unofficial Translation]

5 Significance and Expected Effects

This Qualcomm case underwent in-depth reviews through a total of 7 oral hearings,*
which included 5 hearings focusing on main issues by the fields, such as economics,
law, and patents, and 2 hearings on Qualcomms application for the consent decree,
since the first full-session hearing was held last July.

* The full-session hearings for this case were held on the following dates: 1st hearing on July
20; 2nd hearing on August 17; 3rd hearing on September 5; 4th hearing on November 9, 5th
hearing on December 21. Qualcomm submitted an application for the commencement of
the consent decree process last November 18, but the application was ultimately dismissed
after 2 hearings (on December 5 and December 14).

This case required, in addition to analysis of the legal principles of abuse of market
dominance in the traditional competition law and economics, review and
determination of highly specialized and technical issues such as major issues in
patent law, analysis of communication technology, and international comity.

In addition, around 5 months of time for hearings was spent to conduct sufficient
discussions, which included guarantee of due process such as Qualcomms right
of defense and attendance by interested parties* from the cellular industry from
various countries around the world.

[Page 16]

* Not only Korean handset companies such as Samsung Electronics and LG Electronics but
also main ICT companies around the world such as Apple Intel Nvidia (all U.S.),
MediaTek (Taiwan); Huawei (China); Ericsson (Sweden) directly and indirectly cooperated
in the KFTCs investigation or participated in the hearings.

This case is meaningful in that it fundamentally remedies the business model that
made it possible for Qualcomm to unfairly maintain and expand its dominance for an
extended period of time in the cellular SEP license and modem chipset markets.

Competing modem chipset companies, such as MediaTek and Intel, will obtain the
proper right to use the patents, such as for chipset manufacture, sale and use.

- This will allow competing modem chipset companies to take part in


competition on the merits, based on technical skills, price, quality, etc., while
competing on an equal footing with Qualcomm.

Also, it is expected that handset companies will actually be guaranteed the


opportunity to negotiate on FRAND license terms in an equal position as
Qualcomm without any concern regarding Qualcomm chipset supply.

In addition, the KFTCs measures in this case are measures to change the exclusionary
ecosystem where Qualcomm is the exclusive beneficiary to return to an open ecosystem
where any industry participant can enjoy the incentives of the innovation that it has
accomplished.

- 15 -

Exhibit 2
Page 32
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2032 Page 18 of 232

[Unofficial Translation]

The measures restore fair competition on technological innovations in the cellular


industry through fair compensation for handset and chipset companies R&D
innovation achievements.

The measures remedy the acts of restricting competition in the product market
through license policies that violate the FRAND commitment and exclusively
enjoying the profits from being selected as the standard in the SEP licensing
market.

In the future, the KFTC will actively encourage the fair exercise of IPRs, but the KFTC
plans to respond strictly to conducts that unfairly restrict competition and harm
consumer welfare such as abuse of SEPs.

[Page 17]

<Annex 1> Progress of Case Investigation and Examination at Hearing

<Annex 2> Explanatory Materials on Standard Technologies, Standard-Setting


Organizations and FRAND Commitments

<Annex 3> Explanatory Materials on Mobile Communication Standard, Modem


Chipsets and Internal Structure of Handset

<Annex 4> Surcharge Sizes in Major Cases in the KFTCs History

<Annex 5> Trends in Antitrust Investigations on Qualcomm by Major Competition


Authorities

- 16 -

Exhibit 2
Page 33
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2033 Page 19 of 232

[Unofficial Translation]

[Page 18]

Annex 1 Progress of Case Investigation and Examination at Hearing

(Commencement of Investigation) Through the press and industry meeting, [the KFTC]
became aware of Qualcomms suspected restriction of competition based upon abusing its
cellular-SEPs and dominance in the modem chipset market, and the KFTC subsequently
commenced an investigation in earnest (from August 2014).

To identify the underlying facts, such as refusal/restriction of licenses to modem chip


companies and free cross-grants, etc., [the KFTC] issued a Request for Information
(RFI) to Qualcomm (August 2014).

For efficient and systematic investigation and reaction, [the KFTC] formed an ICT
Taskforce from February 2015 and commenced its investigation in earnest (from
February 2015).

- [The KFTC] conducted an on-site investigation of Qualcomm Korea (March 16


to March 18) and secured digital evidentiary materials worth eight hard disks
through a digital forensic investigation.

- [The KFTC] augmented its reasoning through documentary investigation of and


interviews with major interested parties, both in Korea and overseas, including
Samsung, LG, Intel, Apple and Huawei.

After concluding the examiner-level investigation, [the KFTC] issued its Examiners
Report [ER] on November 13, 2015.

- [The KFTC] reviewed tens of thousands of pages of relevant materials and


thousands of pages of legal opinions and legal doctrine memoranda for the
present case. The main text of the ER alone was approximately 400 pages and
the ER exceeded approximately 3,200 pages including the attached materials.

- After extending the due date for submission of the response opinion three times,
Qualcomm finally submitted its response opinion in late May (May 27, 2016).

(Case Examination) Since July 2016, a total of seven full-commission hearings were held,
including five hearings for the review on the merits of the present case and two hearings
to decide whether to commence a consent decree process.

[Page 19]

Unlike most of the other cases where the hearing process is concluded after one or two
hearings, the present case involved a total of five full-commission hearings, which
included in-depth analyses and reviews through listening to opinions of multiple
expert witnesses from each field and from industry personnel.

- The hearing was held by classifying the issues by each field (i.e., law, economics,
patent laws, patent technologies and international comity, etc.). Additionally,

- 17 -

Exhibit 2
Page 34
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2034 Page 20 of 232

[Unofficial Translation]

renowned academics and experts from Korea and overseas engaged in heated
arguments on behalf of the Examiner and Qualcomm.

- In addition to the Korean companies, i.e., Samsung and LG, interested parties
such as Apple, Intel, NVDIA (USA), MediaTek (Taiwan) and Huawei (China)
also participated in the examination, directly or indirectly, and provided
explanations on the anticompetitive effects caused by Qualcomms business
model in detail.

Meanwhile, Qualcomm applied for a consent decree after the fourth hearing on the
merits of the case. However, though the commencement of the consent decree process
was discussed at two full-commission hearings, Qualcomms application was
ultimately rejected by the KFTC.

* Application for commencement of consent decree process by Qualcomm (November 18)


Issuance of examiners report on whether to commence the consent decree process by the
Examiner (November 24) Hearing held to review whether to commence the consent
decree process (December 5) Hearing continued following Qualcomms announcement
of additional proposed improvements (December 14) Final decision to reject the
application

<Major Participants in the Case Examination for Examiner (Expert Witnesses)>


Classification Field Affiliation Name
Competition Law Expert Myungji Univ. Law School Prof. Myung-Su Hong
Sungshin Womens Univ.
Prof. Yang-Su Jin
Dept. of Economics
Economic Expert
Ewha Womens Univ.
Prof. Se-Hoon Bang
Dept. of Economics
Sungkyunkwan Univ. Law
Prof. Cha-Ho Jeong
School
Seoul National Univ. Law Prof. Young-Taek
Examiner School Shim
Patent Law Expert
KAIST MIP Adjunct
Prof. Jung-Joong Kim
Professor
Jae-Gwan Lee, Patent
Patent Law Firm Yi-Sang
Attorney
Inha Univ. Dept. of Prof. Kyung-Hee
Mobile Communication Electronic Engineering Chang
Technology Expert Gwangwoon Univ. Dept.
Prof. Hyuck-Jun Oh
of Electronic Engineering

[Page 20]

<Major Participants in the Case Examination for Qualcomm (Expert Witnesses)>


Classification Field Affiliation Name
Hannam Univ. Law School Prof. Gwan-Sik Kim
Patent Law Expert George Washington Univ.
Prof. John Whealan
School of Law
Qualcomm
Seoul National Univ. Dept.
Prof. In-Ho Lee
Economic Expert of Economics
Kookmin Univ. Dept. of Prof. Jong-Min Kim

- 18 -

Exhibit 2
Page 35
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2035 Page 21 of 232

[Unofficial Translation]

Economics
Univ. of Pennsylvania
Dept. of Economics
Prof. Aviv Nevo
(Former) Assistant Sec. of
U.S. Dept. of Justice
Linley Group Principal
Linley Gwennap
Analyst
(Former) Ericsson IPR and
License Division Eric Stasik
Executive
Patent Technology KAIST Dept. of Electrical
Prof. Hwang-Soo Lee
Expert and Electronic Engineering
Sangmyung Univ. Dept. of
Information Comm. Prof. Han-Ho Wang
Engineering
USC School of Law Andrew Guzman
International Commerce
Univ. of Intl Business and
Expert Dong Ling
Economics (China)

<Major Interested Parties Participating in the Case Examination>


Business Size (As of
Classification Interested Parties Expert
2015)
Prof. Matthew C. Valenti
Total Revenue: USD
Modem of Univ. of West Virginia
55.4 billion
Chipset Intel Inc. (Former) Texas Instrument
Modem Chipset: USD
Makers Senior VP, Richard C.
600 million (1.6%, 6th)
Donaldson
Total Revenue: USD
6.6 billion
MediaTek Inc.* -
Modem Chipset: USD
4.1 billion (19.4%, 2nd)
Total Revenue: KRW
200 trillion (approx.
USD 166 billion)
Handset Prof. Sang-Seung Yi of
Samsung Modem Chipset: USD
Makers Seoul National Univ.
1.2 billion (5.9%, 3rd)
Handset: 390 million
units (20.7%, 1st)
Total Revenue: USD
234 billion
Apple Inc.* -
Handset: 230 million
units (12.3%, 2nd)

* Although Apple and MediaTek did not have expert witnesses give presentations by directly
participating in the case examination, they had their respective executives (or legal counsels)
that participated in the hearing give presentations of the results of their preparation of
opinions collected from the employees who participated in the license negotiations with
Qualcomm and external experts.

- 19 -

Exhibit 2
Page 36
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2036 Page 22 of 232

[Unofficial Translation]

[Page 21]

Explanatory Materials on Standard Technologies, Standard-Setting


Annex 2
Organizations and FRAND Commitments

The term standard technologies generally refers to the technologies adopted as standards
by standard-setting organizations (SSOs) to prevent overlapping investments in certain
technical fields and to promote technological developments in the relevant fields.

SSOs are joint organizations formed around interested parties in the relevant industry to
discretionarily establish a specific standard.

The International Telecommunication Union (ITU), the Institute of Electrical and


Electronics Engineers (IEEE), the European Telecommunications Standards
Institute (ETSI) and the Telecommunications Industry Association (TIA) in the
U.S. are some of the representative SSOs in the mobile communication field. The
Telecommunications Technology Association (TTA) of Korea is also included in the
foregoing list of SSOs.

<Key Standardization Areas of Major Telecommunication SSOs>


International Region (Europe) USA Japan China
Classification ISO/IEC ATSI
ITU ETSI TTC/ARB CCSA
JTC 1 (T1)/TIA
Network
Network
performance,
performance
Fees and billing,
/Service
Telecommunicati Next
quality
on management, generation
Network
Electromagnetic network
Connection/Devic interface
protection, Information
e Communicatio Network/Switchi
Outdoor transmission
Legal monitoring n network ng
installation, Cable Signal control
Power line management Transmission
network, TV and Network
communication Wireless network (NGN)
voice management
Railway communicatio IP/Multimedia
transmission, DSL
communication n technology Network
Telecommunicati Signal method, Corporate
(N/A) Next generation Optical management
on Service quality, network
communication transmission Powerline
Next-generation Next
network Optical fiber communication
communication generation
Transmission Multimedia Network security
network, Optical home network
Electromagnetic access Electromagnetic
transmission Wireless
effect protection In-home effect protection
network, communicatio
Smart transport communicatio Home network
Multimedia n network
system n demands
device, management
In-home
Information IP based 3G
communicatio
protection and network
n cabling
SW, Wireless
installation
communication
Telematics
network
Broadband Mobile/Privat 3G Wireless
wireless e wireless communicatio
connection Point-to-point n
network communicatio Frequency
Spectrum
Broadcast n resources
management
Wireless Satellite Fixed Wireless
Radiowave Radiowave
- communication equipment/ communicatio communication
Broadcast Satellite service
Digital wireless system n Mobile IP
Broadcast service
communication Mobile/Privat Air & Ocean
Fixed base station
Fixed base station e Radiowave
3G Wireless communicatio environment
communication n system Broadcast,
Disaster Ground Space

- 20 -

Exhibit 2
Page 37
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2037 Page 23 of 232

[Unofficial Translation]

communication wireless communicatio


Ground radiowave multimedia n
cast
Telematics
Character
code
Information
exchange
technology
SW
Card and
identification
Programming
language
Digital
storage media
Computer
graphics
Information Information
device Technology(ECM
interconnectio A)
n GRID
Information Data security
Information Media
- security Electronic - -
Technology codification
Business signature
machine Smart card
Multimedia Dialogue
codification processing
Auto- /transmission
identification
and data
collection
Data
management
and exchange
Document
processing
language
User interface
Educational
information
technology
Biometrics
Environment,
Human factors, Environment
Others - - e-health -
Test method Protection
e-Health
* Source: TTA, Telecommunication Standardization Handbook, 2008 at 31.

[Page 22]

Standard Essential Patent (SEP) refers to a patent needed to realize the standard
technology, the license of which is essential for manufacturing a specific product or
supplying certain services.

In other words, it is technologically impossible to manufacture, sell and use a product


that embodies a standard technology without infringing on a SEP.

The FRAND commitment refers to the commitment by a SEP holder to guarantee a license
for its SEP to a patent user on fair, reasonable and non-discriminatory terms.

Prior to the adoption of a standard, SSOs demand a FRAND commitment to a SEP


holder and, if such demand is rejected, SSOs generally exclude the relevant technology
from the standard.

- 21 -

Exhibit 2
Page 38
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2038 Page 24 of 232

[Unofficial Translation]

<Competition Law Significance of FRAND Commitment>

Based on the fact that a standard-setting process is a practice of selecting a specific


technology as the standard upon joint agreement among enterprisers and of forcing
other competing technologies out of the market, it naturally entails the concern of
restricting competition if a SEP holder were to abuse its patents.

The FRAND commitment requires the SEP holder to commit to license its SEP to any
willing licensee that uses its standard technology on fair, reasonable and non-
discriminatory terms in order to dispel such anticompetitive concern.

If a SEP holder discriminates or selects its counterparty without complying with the
initial FRAND commitment, the standard technology would become an exclusive
property of a few enterprisers or the patent holder alone. In such case, since
competition may likely be impeded, intervention under the competition law is
demanded.

Among the patents, those that are not directly relevant to the standard are termed Non-
SEPs to distinguish them from SEPs.

Non-SEPs refer to the patents that are either not essential to the realization of the
standard or replaceable in their functionalities through design-around or avoidance
design.

Therefore, unlike SEPs, Non-SEPs entail no obligation to license on FRAND terms.

[Page 23]

Explanatory Materials on Mobile Communication Standard, Modem


Annex 3
Chipsets and Internal Structure of Handset

Operational mechanism of mobile communication and development of communication


standard

Process of Mobile Communication

(1) After audio and/or data signals are processed in accordance with certain rules in my
handset and such signals are sent to the base station in the vicinity,
(2) Such base station will receive such signals and retransmit them to the base station in the
vicinity of the user at the other end of the communication, and
(3) The handset of the user at the other end of the communication will receive the signals
and restore them to the original audio and data signals

In order to change such information to signals and restore such signals to the original
information, a standard that causes different handsets to follow the same promised
rules is necessary
Signal Processing
(Division, Analog
compression and
Converted to signals and mounted
Digitization error prevention) to electromagnetic waves

- 22 -

Exhibit 2
Page 39
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[Unofficial Translation]

Converted to Reverse signal Signal restored from


audio processing electromagnetic wages

Advancement in Mobile Communication

With a constant increase in the number of mobile communication users and the amount
of data, mobile communication technology has advanced for more efficient utilization of
limited frequency band and more expeditious processing of data, which has, in turn, led
to the evolution of mobile communication standards.

U.S. and Korea, etc.

Europe, etc. Analog Method Improvement in


speed of signal
(AMPS, etc.) processing
Evolution of mobile communication does not necessarily spark simultaneous
conversion of communication standards.

Since subscribers for older generation handsets remain, the older standard service
has to be maintained for some time. Additionally, simultaneous replacement of base
stations in all areas is difficult for mobile carriers.

Therefore, not only the new mobile communication standard, 4G LTE, but also the older
standards 2G CDMA and 3G WCDMA also still hold important positions in mobile
communications.

[Page 24]

Mobile Communications and Mobile Communications Chipsets (Modem Chipset)

Modem Chipsets are Key Components of Mobile Communication

Modem chipsets play a key role in processing data pursuant to the mobile
communication standards and converting them back to original data.

Multi-mode chips, which supports both the new standard (LTE) and the old standards
(CDMA and WCDMA), are the general modem chips available.

- 23 -

Exhibit 2
Page 40
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[Unofficial Translation]

Modem Chips

Structure of Handsets and Changes in Modem Chipsets

Handsets in the past effectively only had the function as a cellular phone and the key
functions of mobile communications were concentrated in the modem chipsets.

However, the smartphones of late are much more than just a telephone, and, rather, it is a
multi-functional IT device incorporating various components, including not only modem
chipsets for mobile communications, but also functions as a camera, computer and
multimedia devices.

Composition of
Smartphone

- 24 -

Exhibit 2
Page 41
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[Unofficial Translation]

[Page 25]

Internal Structure of Handset and Modem Chipsets

Structure of Handsets

Circuit Board

Structure of Handsets Main Components

Among the main components of a smartphone, the components in red are mobile
communication-related components
USIM/External Bluetooth/WIFI
Chip Camera
Camera Memory

Sensor
NFC Chip

Audio Codec
Camera Signal
Processor

Gravity/Accelerometer Modem Chip


Sensor

Multimedia Card
RF Chip Back Part Front Part

Power Increase
Module

- 25 -

Exhibit 2
Page 42
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[Unofficial Translation]

[Page 26]

Annex 4 Surcharge Sizes in Major Cases in the KFTCs History

Major cases in the KFTCs history and size of surcharges imposed

No. Case Name Surcharge Year Litigation Status


1 Case concerning abuse of Approx. 1 Dec. 2016 -
market dominance by trillion and 30
Qualcomm Incorporated and billion
others (Tentative)
2 Case concerning a cartel among KRW 668.9 Apr. 2010 Partial Win
six LPG suppliers billion
3 Case concerning a cartel among 28 KRW 347.8 Sept. 2014 Win
enterprisers participating in the billion
bidding for lowest bid-wins type
construction for 13 areas of
Honam High Speed Railroad,
including No. 2-1 Area new
roadbed and other constructions
4 Case concerning abuse of market KRW 273.1 Dec. 2009 Pending in
dominance by Qualcomm Inc., billion Supreme Court
Qualcomm Korea Co., Ltd. and
Qualcomm CDMA Technologies
Korea
5 Case concerning a cartel among KRW 199.2 Mar. 2016 Pending in High
seven cement manufacturers billion Court

* The above amounts are based on the initial decisions and some have been modified in the
process of objection applications and litigations.

[Page 27]

Trends in Antitrust Investigations on Qualcomm by Major Competition


Annex 5
Authorities

The Chinese NDRC ordered Qualcomm to remedy the excessive royalties charged to
handset OEMs and patent tie-in sales and imposed a fine of approximately KRW 1
trillion (February 2015)

<Comparison of Measures by Chinese NDRC and Measures by KFTC>


Measures by Chinese NDRC Measures by KFTC
Upon competing modem
chipset companies request,
[QC] shall engage in good-
Remedial Measures for faith negotiations to
(N/A)
Modem Chipset Companies execute a license
agreement and will refrain
from demanding unfair
restrictive conditions

- 26 -

Exhibit 2
Page 43
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2043 Page 29 of 232

[Unofficial Translation]

Calculate royalties based Refrain from linking


on 65% of the handset modem chipset purchase
price and patent license
Provide list of patents agreement
when executing a license Upon handset companies
agreement and refrain from request, amend or remove
imposing royalties on provision that links
expired patents licensing to supply of
Refrain from demanding modem chipset from the
free cross-licenses modem chipset supply
agreement
Refrain from tie-in sale of
cellular-SEPs and other Refrain from coercing
Remedial Measures for patent license terms that
patents
Handset Companies were unilaterally decided
- Comprehensive port-
folio license
- Free Cross-grant
- Coercion of unilateral
license terms without
the procedure of
calculating fair
compensation
Upon handset companies
request, engage in
renegotiation of existing
license agreement

The JFTC took measures to correct Qualcomms practice of demanding free cross-grants
from handset OEMs (September 2009; formal objection procedure pending)

The FTC and the Taiwanese FTC are also currently conducting investigations on
Qualcomms patent abuse.

The EU is currently investigating Qualcomms practice of excluding competitors through


the provision of conditional rebates (similar to the KFTCs measures in 2009) and
establishment of modem chipset prices below cost.

[End of Page 27 End of Document]

- 27 -

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EXHIBIT 3
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2045 Page 31 of 232

Exhibit 3
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Exhibit 3
Page 46
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Korea Fair Trade Commission

To (via) Apple Incorporation (Legal Counsel: Attorney Kyu Sik Kim at Bae, Kim & Lee LLC)

Re Request for Participation in Deliberation Procedures by Interested Party

1. The Korea Fair Trade Commiss ion is investigating the matter on abuse of market
dominant position by Qualcomm Incorporated, etc. (Case No: 2015ShiGam2118).

2. In order to identify the facts related to the present case, we hereby request your company, a
major customer of Qualcomm Incorporated, to attend deliberation procedures and make statements as
follows:

* Date, Time & Place: August 17, 2016 (Wednesday), at 10:30, at KFTC in Sejong

* Matters to be stated: Facts and Apples position relating to the following matters:

Qualcomms market dominant position

The process of negotiation of patent license and/or chipset purchase contracts between Apple
and Qualcomm

Whether Qualcomms conduct is anticompetitive, whether Qualcomm violated the FRAND


commitment

Whether Qualcomm refused to grant exhaustive licenses to chipset makers

Anticompetitive effects and other issues

* Requirements: 22 copies of presentation material (if it contains any non-public information,


an application for non-disclosure of a part thereof should be filed or a separate document containing
the non-public information should be submitted.) The End.

Exhibit 3
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Exhibit 3
Page 48
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Exhibit 3
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EXHIBIT 4

PUBLIC VERSION
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2051 Page 37 of 232

5775 Morehouse Drive, San Diego, California 92121


Fabian Gonell
Sr. Vice President & Division Counsel
fgonell@qualcomm.com
(858) 658-2763
Fax: (858) 658-2503

October 9, 2016

By Federal Express and Email

Tony Blevins
VP Operations
Apple Inc.
1 Infinite Loop, MS 74-2TB
Cupertino, CA 95014
tblevins@apple.com

Dear Tony:

I write in response to your September 23, 2016 letter regarding my telephone conversation with Aaron
Schafer from earlier that day and certain issues surrounding the Business Cooperation and Patent
Agreement (BCPA).

The BCPA includes an exchange of value between the parties. Qualcomm agreed to make certain
payments requested by Apple in exchange for Apple providing consideration, including certain business
cooperation, to Qualcomm. As you likely are aware, under Section 7 of the BCPA, Qualcomms
obligation to make BCP Payments to Apple applies only so long as Apple does not, among other things,

that includes any claim that Qualcomm


. The BCPA further states that

. Litigation is defined broadly to mean

(BCPA Attachment 1, Definitions, at 12.)

Section 10.2 of the BCPA contains virtually identical provisions. If triggered, Section 10.2 permits
Qualcomm, at its sole option, to terminate the BCPA on 30 days written notice.

These provisions reflect the parties agreement to work together in a good-faith and peaceful manner and
to explore new business opportunities, without the distractions that would be caused by one party
seeking commercial advantage by leveraging governmental authorities to attack the other partys
business. As is obvious from the contractual language itself, it was not the intent of these provisions to

Exhibit 4
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October 9, 2016
Page 2

interfere with any government agencys gathering of accurate, factual information. Rather, it was the
parties shared intent that any disputes between them would be resolved by our respective executives,
through negotiation and/or through the dispute resolution procedure set forth in the BCPA.

We believe that Apple is engaged in precisely the type of attack on Qualcomm's business that the parties
agreed to forego. Apple is engaged in a worldwide campaign urging agencies to find Qualcomm in
violation of competition laws for an alleged failure to offer FRAND licensing terms. This campaign has
gone well beyond merely responding to requests for information and has included making multiple false
and misleading statements to several agencies around the world. We also understand that at least one
senior Apple executive actively induced Samsung to complain to the KFTC and attack Qualcomms
licensing practices through legal proceedings.

Apples conduct goes against the parties intention to resolve their disputes through the agreed dispute
resolution mechanism. In fact, through these actions, Apple has effectively invoked, or induced another
to invoke,
against Qualcomm. Under Section 7 of the BCPA, Qualcomms obligations to make BCP
Payments have ceased from the time that Apple engaged in such conduct, and under Section 10.2,
Qualcomm has the right to terminate the BCPA. Further, we believe Apple has acted in bad faith, and
Qualcomm reserves all of its rights in this regard.

I want to be clear that it is not Qualcomms intent to dissuade Apple from providing truthful, factual
responses to inquiries from government agencies or to interfere with any government agencys gathering
of information. In fact, Sections 7 and 10.2 exempt

. However, these provisions do not apply to Apples conduct of


actively advocating legal action and seeking to induce legal action and extraterritorial remedies through
false statements. Furthermore, while we appreciate Apple providing the contents of the KFTCs ultimate,
formal request inviting Apple to attend the hearing (albeit without details of any preceding
communications between Apple and the KFTC), this does not excuse Apples behavior nor does it
address Apple's other actions around the world. It certainly does not put to rest Qualcomms concerns.

In order to resolve this dispute, Qualcomm hereby invokes the dispute resolution provisions outlined in
Attachment 2 to the BCPA. Please let us know by October 12, 2016 who will be acting as Apples
executive sponsor and provide available dates and times to meet and further discuss this issue. To help
us better understand Apples conduct, please provide us with: (a) the names of all senior Apple
executives who have communicated with Samsung or any other companies about any actual or potential
proceedings (regulatory or otherwise) against Qualcomm, (b) the dates of such communications, and
(c) the contents of such communications. In addition, if Apple is willing to address substantively the
issues raised herein, it should also share with us its communications with regulatory agencies about
Qualcomm.

In the meantime, Qualcomm will not make any further BCP Payments to Apple, including the second
quarter BCP Payment you reference in your letter.

Exhibit 4
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October 9, 2016
Page 3

Qualcomm reserves all of its rights, including, but not limited to the rights to (i) recover BCP Payments
made after the time Apple triggered Section 7 of the BCPA, and (ii) terminate the BCPA in its entirety in
accordance with Section 10.2.

Very truly yours,

Fabian Gonell

Exhibit 4
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EXHIBIT 5

PUBLIC VERSION
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Exhibit 5
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Exhibit 5
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Exhibit 5
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EXHIBIT 6
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2059 Page 45 of 232

Exhibit 6
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Exhibit 6
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EXHIBIT 7

PUBLIC VERSION
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2062 Page 48 of 232

Exhibit 7
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Exhibit 7
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Exhibit 7
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Exhibit 7
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Exhibit 7
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Exhibit 7
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Exhibit 7
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EXHIBIT 8
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2070 Page 56 of 232

European Commission - Press release

Antitrust: Commission sends two Statements of Objections on exclusivity


payments and predatory pricing to Qualcomm

Brussels, 8 December 2015

The Commission informed Qualcomm of its preliminary conclusions that the company may
have illegally paid a major customer for exclusively using its chipsets and sold chipsets
below cost with the aim of forcing a competitor out of the market

The European Commission has informed Qualcomm of its preliminary conclusions that the chipset
company illegally paid a major customer for exclusively using Qualcomm chipsets and sold chipsets
below cost with the aim of forcing its competitor Icera out of the market, in potential breach of EU
antitrust rules.
EU Commissioner in charge of competition policy Margrethe Vestager said: "Many consumers
enjoy high-speed internet on smartphones and other devices baseband chipsets are key components
that make this happen. I am concerned that Qualcomm's actions may have pushed
out competitors or prevented them from competing. We need to make sure that European
consumers continue to benefit from competition and innovation in an area which is at the heart of
today's economy."
Consumers increasingly access the internet through mobile devices therefore it is important that
effective competition takes place for the supply of one of the key components of such devices:
baseband chipsets process communication functions in smartphones, tablets and other mobile
broadband devices. They are used both for voice and data transmission.
The Commission has sent two Statements of Objections to Qualcomm in separate investigations,
outlining the Commission's preliminary view that the company has abused its dominant position in the
worldwide markets for 3G (UMTS) and 4G (LTE) baseband chipsets, in breach of EU antitrust rules, in
particular Article 102 of the Treaty on the Functioning of the European Union (TFEU).
Qualcomm is the world's largest supplier of baseband chipsets.
Under EU antitrust rules, dominant companies have a responsibility not to abuse their powerful market
position by restricting competition. The sending of a statement of objections does not prejudge the
outcome of the investigation.
Exclusivity payment Statement of Objections
The first Statement of Objections outlines that since 2011, Qualcomm has paid significant amounts to
a major smartphone and tablet manufacturer on condition that it exclusively use Qualcomm
baseband chipsets in its smartphones and tablets. The Commission takes the preliminary view that this
conduct has reduced the manufacturer's incentives to source chipsets from Qualcomm's competitors
and has harmed competition and innovation in the markets for UMTS and LTE baseband chipsets. The
contract between Qualcomm and the manufacturer containing the exclusivity clauses is still in force.
Predatory pricing Statement of Objections
The second Statement of Objections takes the preliminary view that between 2009 and 2011
Qualcomm engaged in 'predatory pricing' by selling certain baseband chipsets at prices below costs,
with the intention of hindering competition in the market. This conduct appears to have taken place at
a time when Icera posed a growing threat to Qualcomm in the leading edge segment of the market,
offering advanced data rate performance. In the Commission's preliminary view, Qualcomm reacted to
that threat by selling certain quantities of its UMTS baseband chipsets to two of its customers at prices
that did not cover Qualcomm's costs, with the aim of forcing Icera out of the market.
The Commission's investigations
In July 2015, the Commission opened two formal antitrust investigations to assess concerns that
Qualcomm may have abused a dominant position in the area of baseband chipsets through two
separate conducts.
The Commission has informed Qualcomm and the competition authorities of the Member States that it

Exhibit 8
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has issued Statements of Objections in these cases.
Qualcomm now has the opportunity to respond to the Commission's allegations outlined in the
Statements of Objections within 3 months as regards the exclusivity payment objections and 4 months
as regards the predatory pricing objections, and to ask for an oral hearing in each case.
Procedural background
Article 102 TFEU prohibits the abuse of a dominant position which may affect trade and prevent or
restrict competition in the Single Market. The implementation of these provisions is defined in the
Antitrust Regulation (Council Regulation No 1/2003), which can be applied by the Commission and by
the national competition authorities of EU Member States.
A statement of objections is a formal step in Commission investigations into suspected violations of EU
antitrust rules. The Commission informs the parties concerned in writing of the objections raised
against them and the parties can examine the documents in the Commission's investigation file, reply
in writing and request an oral hearing to present their comments on the case before representatives of
the Commission and national competition authorities.
There is no legal deadline to complete inquiries into anti-competitive conduct. The duration of an
antitrust investigation depends on a number of factors, including the complexity of the case, the extent
to which the undertaking concerned cooperates with the Commission and the exercise of the rights of
defence.
More information on this case will be available under the case numbers 39711 and 40220 in the public
case register on the Commissions competition website.
IP/15/6271

Press contacts:
Ricardo CARDOSO (+32 2 298 01 00)
Yizhou REN (+32 2 299 48 89)
Carolina LUNA GORDO (+32 2 296 83 86)
General public inquiries: Europe Direct by phone 00 800 67 89 10 11 or by email

Exhibit 8
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EXHIBIT 9

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 10

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 11

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 12

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 13

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 14

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 15

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 16

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 17

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 18

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
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EXHIBIT 19

PUBLIC VERSION
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April 25, 2017

Donald Rosenberg
EVP, General Counsel & Corporate Secretary
QUALCOMM Incorporated

Dear Don:

As you may have already heard from our contract manufacturers, Apple has not remitted
funds to those contract manufacturers for royalty payments for the quarter ending March 31,
2017. This should come as no surprise to Qualcomm. Derek and I have discussed this
eventuality at various times in the past few years. Qualcomms refusal to license on a fair,
reasonable, non-discriminatory basis is harming not only Apple, but our contract
manufacturers, other chipset companies and the wider industry. We believe Qualcomm is
charging the contract manufacturers, who in turn pass back to Apple and its customers,
royalties based on an illegal manipulation of the market for cellular enabled
chipsets. Withholding these royalty payments from the contract manufacturers is consistent
with the very public legal claims we have made against Qualcomm, and is also very
appropriate given the nature of our current dispute.

Our legal filings make clear that Qualcomm has been charging royalties for technologies they
have nothing to do with for years. The more Apple innovates with unique features the more
money Qualcomm collects for no reason, and the more expensive it becomes for Apple to
fund these innovations. Despite being just one of over a dozen companies that contributed to
basic cellular standards, Qualcomm forces the contract manufacturers and Apple to pay
many times more in royalty payments than all the other cellular patent licensors
combined! This is grossly unfair and needs to be reviewed by the courts and appropriate
antitrust agencies - activities which are now underway.

Until these matters are resolved Apple feels it has no choice but to take this step. As I have
said many times, Apple values its commercial relationship with Qualcomm but we also want
to continue innovating and providing our customers with the very best products we can at
prices that are fair. Qualcomm's refusal to meet its FRAND commitments and its insistence
on taxing our innovation is both illegal and anticompetitive. We cannot support this behavior.

Apple Inc.
1 Infinite Loop
Cupertino, CA 95014

T 408 996-1010
F 408 996-0275
www.apple.com
Exhibit 19
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Apple is not entitled to a free ride - we have never claimed that. We stand ready to pay a fair
and reasonable amount for the use of Qualcomms patented technologies. I specifically refer
you to the dollar annual bank guarantee posted by Apple, and confirmed by
Deutsche Bank, that was attached to the last offer we made to Qualcomm in January. We
believe this action shows our commitment to pay FRAND royalties once the amount is finally
determined by the courts on a fair, reasonable and non-discriminatory basis. This guarantee
does not expire until 2026, and we can provide larger or additional guarantees for future
years as needed.

Best regards,

Bruce Sewell
Senior Vice President and General Counsel
Apple Inc.

Apple Inc.
1 Infinite Loop
Cupertino, CA 95014

T 408 996-1010
F 408 996-0275
www.apple.com
Exhibit 19
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EXHIBIT 20
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FOR IMMEDIATE RELEASE
Qualcomm Contact:
John Sinnott
Vice President, Investor Relations
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com

Qualcomm Announces Second Quarter Fiscal 2017 Results


GAAP Revenues $5.0 billion, Non-GAAP Revenues $6.0 billion
GAAP EPS $0.50, Non-GAAP EPS $1.34

SAN DIEGO - April 19, 2017 - Qualcomm Incorporated (NASDAQ: QCOM) today announced results for
its fiscal second quarter ended March 26, 2017.

We delivered strong results this quarter, with healthy year-over-year growth across our QTL licensing
and QCT semiconductor businesses, especially in the important automotive, networking and IoT growth
areas, said Steve Mollenkopf, CEO of Qualcomm Incorporated. Our performance reflects continued
execution of our strategy to lead the mobile industry across a broad set of technologies, including
advanced LTE and 5G, and accelerate our growth opportunities beyond mobile into automotive, IoT,
security and networking.

Mr. Mollenkopf added, We will continue to protect the value of our technologies, which enables todays
robust mobile communications ecosystem, and invest in R&D that will drive the leading edge of mobile
computing and connectivity for decades to come - focusing on areas where our technologies will have the
most impact and generate the best returns. With our leading technology roadmap and pending acquisition
of NXP, we are positioned to address a larger set of opportunities ahead than any other time in our
history.

Second Quarter Results (GAAP)*


Q2 Fiscal Q2 Fiscal Year-Over- Q1 Fiscal Sequential
2017 2016 Year Change 2017 Change
Revenues $5.0B $5.6B (10%) $6.0B (16%)
Operating income $0.7B $1.4B (48%) $0.8B (6%)
1
Net income $0.7B $1.2B (36%) $0.7B +10%
1
Diluted earnings per share $0.50 $0.78 (36%) $0.46 +9%
Operating cash flow $0.8B $0.7B +11% $1.4B (41%)
1
Throughout this news release, net income and diluted earnings per share are attributable to Qualcomm (i.e., after adjustments for
noncontrolling interests), unless otherwise stated.

Exhibit 20
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Second Quarter Results (Non-GAAP)*
Q2 Fiscal Q2 Fiscal Year-Over- Q1 Fiscal Sequential
2017 2016 Year Change 2017 Change
Revenues $6.0B $5.5B +8% $6.0B
Operating income $2.2B $1.9B +18% $2.1B +7%
Net income $2.0B $1.6B +28% $1.8B +12%
Diluted earnings per share $1.34 $1.04 +29% $1.19 +13%

Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based
compensation, acquisition-related items, tax items and other items. Further discussion regarding the
Companys use of Non-GAAP financial measures and detailed reconciliations between GAAP and Non-
GAAP results are included within this news release.

* The following should be considered in regards to the sequential and year-over-year comparisons:
The second quarter of fiscal 2017 GAAP results included:
$974 million reduction to revenues, or $0.48 per share, which was accrued, related to the BlackBerry
arbitration decision.
The first quarter of fiscal 2017 GAAP results included:
$868 million charge, or $0.49 per share, which was accrued, related to the Korea Free Trade Commission
(KFTC) investigation (additional second quarter of fiscal 2017 impact of $53 million of related foreign
exchange losses, resulting in a total charge of $921 million in the first six months of fiscal 2017).
The second quarter of fiscal 2016 GAAP and Non-GAAP results included:
$266 million of revenues, or $0.13 per share, due to the termination of an infrastructure license agreement
resulting from the merger of two licensees.

Exhibit 20
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Second Quarter Segment Results
Q2 Fiscal Q2 Fiscal Year-Over-Year Q1 Fiscal Sequential
2017 2016 Change (1) 2017 Change (1)
QCT
Revenues $3,676M $3,337M +10% $4,101M (10%)
Earnings before taxes (EBT) $475M $170M +179% $724M (34%)
EBT as % of revenues 13% 5% +8% 18% (5%)
TM
MSM chip shipments 179M 189M (5%) 217M (18%)
QTL
Revenues $2,249M $2,135M +5% $1,811M +24%
EBT $1,959M $1,857M +5% $1,532M +28%
EBT as % of revenues 87% 87% 85% 2%
Total reported device sales (2) (3) $82.6B $70.1B +18% $62.9B +31%
Est. reported 3G/4G device
shipments 398M - 402M 335M - 339M +19% 331M - 335M +20%
Est. reported 3G/4G average
selling price $204 - $210 $205 - $211 $186 - $192 +10%

(1) The year-over-year and sequential changes for estimated reported 3G/4G device shipments and average selling prices are calculated at the midpoints. The
midpoints of the estimated ranges are used for comparison purposes only and do not indicate a higher degree of confidence in the midpoints.
(2) Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based, OFDMA-based
and CDMA/OFDMA multimode subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a
particular period (collectively, 3G/4G devices). The reported quarterly estimated ranges of average selling prices (ASPs) and unit shipments are
determined based on the information as reported to us by our licensees during the relevant period and our own estimates of the selling prices and unit
shipments for licensees that do not provide such information. Not all licensees report sales, selling prices and/or unit shipments the same way (e.g., some
licensees report sales net of permitted deductions, including transportation, insurance, packing costs and other items, while other licensees report sales
and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to
time. In addition, certain licensees may not report (in the quarter in which they are contractually obligated to report) their sales of certain types of
subscriber units, which (as a result of audits, legal actions or for other reasons) may be reported in a subsequent quarter. Accordingly, total reported device
sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that was not reported by the licensee until
such particular period.
(3) Total reported device sales for the second quarter of fiscal 2016 and 2017 are based on sales by our licensees in the December quarter as reported to us in
the March quarter, and the first quarter of fiscal 2017 is based on sales by our licensees in the September quarter as reported to us in the December
quarter.

Cash and Marketable Securities


Our cash, cash equivalents and marketable securities totaled $28.9 billion at the end of the second quarter
of fiscal 2017, compared to $30.0 billion a year ago and $29.8 billion at the end of the first quarter of
fiscal 2017. In February 2017, we completed the formation of a joint venture, RF360 Holdings Singapore
Pte. Ltd., which resulted in a cash payment of $1.2 billion, net of cash acquired, in the second quarter of
fiscal 2017.

Exhibit 20
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Announced Agreement to Acquire NXP
On October 27, 2016, we announced a definitive agreement to acquire NXP Semiconductors N.V. for
estimated total cash to be paid to shareholders of $38 billion. NXP is a leader in high-performance,
mixed-signal semiconductor electronics in automotive, broad-based microcontrollers, secure
identification, network processing and RF power products. The transaction is expected to close by the end
of calendar 2017 and is subject to receipt of regulatory approvals in various jurisdictions and other closing
conditions. We intend to fund the transaction with cash held by foreign entities, which will result in the
use of a substantial portion of our cash, cash equivalents and marketable securities, and new debt.

Return of Capital to Stockholders


During the second quarter of fiscal 2017, we returned $1.1 billion to stockholders, including $782 million,
or $0.53 per share, of cash dividends paid and $283 million through repurchases of 4.8 million shares of
common stock. On April 12, 2017, we announced a cash dividend of $0.57 per share payable on June 21,
2017 to stockholders of record as of the close of business on May 31, 2017, which represents a 7.5 percent
increase over our prior quarterly dividend.

Effective Income Tax Rates


Our fiscal 2017 annual effective income tax rates are estimated to be approximately 17 percent for both
GAAP and Non-GAAP. The effective income tax rates for the second quarter of fiscal 2017 were 13
percent for GAAP and 15 percent for Non-GAAP. Our estimated annual tax rates for fiscal 2017 GAAP
and Non-GAAP decreased from our prior estimates of 22% and 18%, respectively, primarily as a result of
a decrease in our estimate of income from United States operations. Additionally, our estimated annual
2017 effective income tax rates for GAAP included the tax impact of the $921 million charge related to
the fine imposed by the KFTC, which is not deductible for tax purposes, and the tax impact of the $974
million reduction to revenues related to the BlackBerry arbitration decision, which is deductible for tax
purposes.

Exhibit 20
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Business Outlook
The following statements are forward looking, and actual results may differ materially. The Note
Regarding Forward-Looking Statements in this news release provides a description of certain risks that
we face, and our most recent quarterly report on file with the Securities and Exchange Commission (SEC)
provides a more complete description of risks.

Our outlook does not include provisions for future asset impairments or for pending legal matters, other
than future legal amounts that are probable and estimable. Further, due to their nature, certain income and
expense items, such as realized investment and certain derivative gains or losses, cannot be accurately
forecast. Accordingly, we only include such items in our financial outlook to the extent they are
reasonably certain; however, actual results may differ materially from the outlook.

Apples contract manufacturers reported, but underpaid, royalties in the second quarter of fiscal 2017.
However, our revenues were not negatively impacted as the contract manufacturers acknowledged the
amounts are due and the underpayment was equal to the amounts that Qualcomm has not paid Apple
under our Cooperation Agreement that are currently in dispute. The Cooperation Agreement expired
December 31, 2016. It is not clear whether Apples contract manufacturers will underpay royalties owed
under their contracts with us in the third quarter of fiscal 2017, which could have a negative impact on our
financial results. Our guidance range for fiscal third quarter EPS is wider than our typical practice
primarily due to this uncertainty. We have considered a variety of scenarios within this range, but have not
included a scenario where no payment is made by the contract manufacturers. We will update our
guidance if we subsequently learn of any action that would take us outside of the announced guidance
range.

We have not included any estimates related to any proposed acquisitions in our third quarter of fiscal 2017
outlook.

Exhibit 20
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The following table summarizes GAAP and Non-GAAP guidance based on the current outlook. The Non-
GAAP outlook presented below is consistent with the presentation of Non-GAAP results included
elsewhere herein.

Qualcomms Business Outlook Summary and Reconciliation

Q3 FY16 Current Guidance


Results Q3 FY17 Estimates
Revenues $6.0B $5.3B - $6.1B
Year-over-year change decrease 12% - increase 1%
GAAP diluted earnings per share (EPS) $0.97 $0.67 - $0.92
Year-over-year change decrease 31% - 5%
Less diluted EPS attributable to QSI $0.00 $0.02
Less diluted EPS attributable to share-based compensation ($0.13) ($0.13)
Less diluted EPS attributable to other items (1) ($0.06) ($0.12)
Non-GAAP diluted EPS $1.16 $0.90 - $1.15
Year-over-year change decrease 22% - 1%
Metrics
MSM chip shipments 201M 180M - 200M
Year-over-year change decrease 10% - flat
Total reported device sales* approx. $62.6B approx. $59.0B - $67.0B (2)
Year-over-year change decrease 6% - increase 7%
*Est. sales in March quarter, reported in June quarter

(1) Our guidance for diluted EPS attributable to other items for the third quarter of fiscal 2017 is primarily attributable to acquisition-related items.
(2) Our guidance range for the third quarter of fiscal 2017 total reported device sales reflects estimated 3G/4G total reported device sales that we currently
expect to be reported to us, which includes an estimate of some prior period activity (i.e., devices shipped in prior periods) that may be reported to us.

Sums may not equal total due to rounding.

Exhibit 20
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Reconciliations of GAAP Results to Non-GAAP Results
The following tables reconcile our GAAP results to our Non-GAAP results ($ in millions, except per share data):

Less Share-
Based Less Other Non-GAAP
GAAP Results Less QSI Compensation Items (a) (b) Results
Q2 FISCAL 2017
Revenues $5,016 $ $ ($974) (c) $5,990
Operating income (loss) 729 (17) (246) (1,228) 2,220
EBT 857 (246) (1,239) 2,342
EBT as % of revenues 17% 39%
Net income (loss) 749 (210) (1,030) 1,989
Diluted EPS $0.50 $0.00 ($0.14) ($0.69) $1.34
Diluted shares 1,489 1,489 1,489 1,489 1,489
Q1 FISCAL 2017
Revenues $5,999 $14 $ $ $5,985
Operating income (loss) 778 (2) (239) (1,054) 2,073
EBT 870 (17) (239) (1,065) 2,191
EBT as % of revenues 15% 37%
Net income (loss) 682 (11) (190) (900) 1,783
Diluted EPS $0.46 ($0.01) ($0.13) ($0.60) $1.19
Diluted shares 1,495 1,495 1,495 1,495 1,495
Q2 FISCAL 2016
Revenues $5,551 $12 $ $ $5,539
Operating income (loss) 1,415 3 (247) (226) 1,885
EBT 1,470 46 (247) (226) 1,897
EBT as % of revenues 26% 34%
Net income (loss) 1,164 30 (220) (198) 1,552
Diluted EPS $0.78 $0.02 ($0.15) ($0.13) $1.04
Diluted shares 1,498 1,498 1,498 1,498 1,498

(a) At fiscal year end, the quarterly tax provision (benefit) for each column equals the annual tax provision (benefit) for each column computed in accordance
with GAAP. In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and this difference is included in the
tax provision (benefit) in the Other Items column. See the Reconciliations of GAAP Tax Rates to Non-GAAP Tax Rates herein for further details.
(b) Details of amounts included in the Other Items column for the current period are included in the Supplemental Information and Reconciliations and
the Reconciliations of GAAP Tax Rates to Non-GAAP Tax Rates. Details of amounts included in the Other Items column for prior periods are
included in the news releases for those periods.
(c) Other items excluded from Non-GAAP results consisted of a $974 million reduction to revenues related to the BlackBerry arbitration decision.

Sums may not equal totals due to rounding.

Supplemental Information and Reconciliations


(Unaudited)

Q2 FISCAL 2017
GAAP Less Share-Based Less Other Non-GAAP
($ in millions) Results Less QSI Compensation Items (a) Results
Cost of revenues $2,208 $13 $10 $106 $2,079
Research and development (R&D) expenses 1,386 155 13 1,218
Selling, general and administrative (SG&A) expenses 615 4 81 57 473
Other expenses 78 78
Interest expense 107 24 83
Investment income, net 235 17 13 205 (b)

(a) Other items excluded from Non-GAAP EBT included $200 million of acquisition-related charges, $40 million of net foreign currency losses related to the
fine imposed by the KFTC and $25 million of restructuring and restructuring-related charges related to our Strategic Realignment Plan.
(b) Included $148 million in interest and dividend income, $67 million in net realized gains on investments, partially offset by $10 million in other net
investment losses.

Exhibit 20
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Reconciliations of GAAP Tax Rates to Non-GAAP Tax Rates
(Unaudited)

GAAP Less Share-Based Less Other Non-GAAP


Results Less QSI Compensation Items (c)(d) Results
Q2 FISCAL 2017 ($ in millions)
Income (loss) before income taxes $ 857 $ $ (246) $ (1,239) $ 2,342
Income tax (expense) benefit (108) 36 209 (353)
Net income (loss) (a) $ 749 $ $ (210) $ (1,030) $ 1,989

Tax rate 13% 0% (b) 0% (b) (2%) (b) 15%


FISCAL 2017
Estimated annual tax rate 17% 0% (b) 0% (b) 0% (b) 17%

(a) Before adjustments for noncontrolling interests.


(b) The incremental effect of our adjustments to the Non-GAAP tax rate is calculated by allocating the difference between (i) the tax expense (benefit)
calculated based on the GAAP tax rate and (ii) the actual or estimated tax expense (benefit) for each column.
(c) In the second quarter of fiscal 2017, the tax benefit in the Other Items column included a $38 million tax benefit for the tax effect of acquisition-related
items in EBT and a $339 million benefit for the combined tax effect of other items in EBT, partially offset by a $155 million tax expense to reconcile the
tax provision for each column to the total GAAP tax provision for the quarter primarily due to the impact of the KFTC and BlackBerry charges and a $13
million tax expense related to an increase in unrecognized tax benefits.
(d) In fiscal 2017, the estimated annual effective tax rate for the Other Items column includes a $112 million tax benefit for the tax effect of acquisition-
related items in EBT and a $364 million tax benefit for the combined tax effect of other items in EBT, partially offset by a $13 million tax expense related
to an increase in unrecognized tax benefits.

Conference Call
Qualcomms fiscal second quarter 2017 earnings conference call will be broadcast live on April 19, 2017,
beginning at 1:45 p.m. Pacific Time (PT) at http://investor.qualcomm.com/events.cfm. This conference
call will include a discussion of Non-GAAP financial measures as defined in Regulation G. The most
directly comparable GAAP financial measures and information reconciling these Non-GAAP financial
measures to the Companys financial results prepared in accordance with GAAP, as well as other financial
and statistical information to be discussed on the conference call, will be posted at www.qualcomm.com/
investor immediately prior to the commencement of the call. An audio replay will be available at http://
investor.qualcomm.com/events.cfm and via telephone following the live call for 30 days thereafter. To
listen to the replay via telephone, U.S. callers may dial (855) 859-2056 and international callers may dial
(404) 537-3406. Callers should use reservation number 95200877.

Note Regarding Use of Non-GAAP Financial Measures


The Non-GAAP financial information presented herein should be considered in addition to, not as a
substitute for or superior to, financial measures calculated in accordance with GAAP. In addition, Non-
GAAP is not a term defined by GAAP, and as a result, the Companys measure of Non-GAAP results
might be different than similarly titled measures used by other companies. Reconciliations between
GAAP and Non-GAAP results are presented herein.

Exhibit 20
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The Company uses the Non-GAAP financial information: (i) to evaluate, assess and benchmark the
Companys operating results on a consistent and comparable basis; (ii) to measure the performance and
efficiency of the Companys ongoing core operating businesses, including the QCT (Qualcomm CDMA
Technologies) and QTL (Qualcomm Technology Licensing) segments; and (iii) to compare the
performance and efficiency of these segments against competitors. Non-GAAP measurements used by the
Company include revenues, cost of revenues, R&D expenses, SG&A expenses, other income or expenses,
operating income, interest expense, net investment income, income or earnings before income taxes,
effective tax rate, net income and diluted earnings per share. The Company is able to assess what it
believes is a more meaningful and comparable set of financial performance measures for the Company
and its business segments by using Non-GAAP information. In addition, the Compensation Committee of
the Board of Directors uses certain Non-GAAP financial measures in establishing portions of the
performance-based incentive compensation programs for our executive officers. The Company presents
Non-GAAP financial information to provide greater transparency to investors with respect to its use of
such information in financial and operational decision-making. This Non-GAAP financial information is
also used by institutional investors and analysts in evaluating the Companys business and assessing trends
and future expectations.

Non-GAAP information used by management excludes QSI and certain share-based compensation,
acquisition-related items, tax items and other items.
QSI is excluded because the Company expects to exit its strategic investments in the foreseeable
future, and the effects of fluctuations in the value of such investments and realized gains or losses are
viewed by management as unrelated to the Companys operational performance.
Share-based compensation expense primarily relates to restricted stock units. Management believes
that excluding non-cash share-based compensation from the Non-GAAP financial information allows
management and investors to make additional comparisons of the operating activities of the
Companys ongoing core businesses over time and with respect to other companies.
Certain other items are excluded because management views such expenses as unrelated to the
operating activities of the Companys ongoing core businesses, as follows:
Acquisition-related items include amortization of certain intangible assets, recognition of the
step-up of inventories to fair value and the related tax effects of these items, as well as any
effects from restructuring the ownership of such acquired assets. Additionally, the Company
excludes expenses related to the termination of contracts that limit the use of the acquired
intellectual property, third-party acquisition and integration services costs and costs related to

Exhibit 20
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temporary debt facilities and letters of credit executed prior to the close of an acquisition.
Starting with acquisitions in the second quarter of fiscal 2017, the Company excludes
recognition of the step-up of property, plant and equipment from the net book value based on
the original cost basis to fair value. Such change related to acquisitions that were completed
prior to the second quarter of fiscal 2017 continue to be allocated to the segments, and such
amounts are not material.
The Company excludes certain other items that management views as unrelated to the
Companys ongoing business, such as major restructuring and restructuring-related costs,
goodwill and indefinite- and long-lived asset impairments and awards, settlements and/or
damages arising from legal or regulatory matters.
Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in
order to provide a clearer understanding of the Companys ongoing Non-GAAP tax rate and
after tax earnings.

About Qualcomm
Qualcomms technologies powered the smartphone revolution and connected billions of people. We
pioneered 3G and 4G - and now we are leading the way to 5G and a new era of intelligent, connected
devices. Our products are revolutionizing industries, including automotive, computing, IoT, healthcare
and data center, and are allowing millions of devices to connect with each other in ways never before
imagined. Qualcomm Incorporated includes our licensing business, QTL, and the vast majority of our
patent portfolio. Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated, operates, along
with its subsidiaries, all of our engineering, research and development functions, and all of our products
and services businesses, including, our QCT semiconductor business. For more information, visit
www.qualcomm.com.

Exhibit 20
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Note Regarding Forward-Looking Statements


In addition to the historical information contained herein, this news release contains forward-looking
statements that are inherently subject to risks and uncertainties, including but not limited to statements
regarding: our business strategies; our intent to continue to protect the value of our technologies; our
intent to continue to invest in R&D, as well as the focus of that R&D; our being positioned to address a
larger set of opportunities than any other time in our history; our uncertainty regarding whether Apples
contract manufacturers will underpay royalties owed to us, and the potential impact of any such
underpayment on our guidance and financial results; our proposed acquisition of NXP, including our
expectations regarding the timing of the closing and the funding of that transaction; our fiscal 2017
effective income tax rates; our business outlook; and our estimates and guidance related to revenues,
GAAP and Non-GAAP diluted earnings per share, MSM chip shipments and total reported device sales.
Forward-looking statements are generally identified by words such as estimates, guidance, expects,
anticipates, intends, plans, believes, seeks and similar expressions. Actual results may differ
materially from those referred to in the forward-looking statements due to a number of important factors,
including but not limited to: risks associated with our proposed acquisition of NXP; commercial network
deployments, expansions and upgrades of CDMA, OFDMA and other communications technologies, our
customers and licensees sales of products and services based on these technologies and our customers
demand for our products and services; competition in an environment of rapid technological change; our
dependence on a small number of customers and licensees; our dependence on the premium-tier device
segment; attacks on our licensing business model, including current and future legal proceedings or
actions of governmental or quasi-governmental bodies or standards or industry organizations; potential
requirements to change our patent licensing practices due to governmental investigations and/or private
legal proceedings challenging those practices; government regulations and policies, or adverse rulings in
enforcement or other proceedings; the enforcement and protection of our intellectual property rights; the
commercial success of our new technologies, products and services, including our ability to extend our
products into new and expanded product areas and adjacent industry segments; risks associated with
operation and control of manufacturing facilities acquired through the formation of our joint venture,
RF360; the continued and future success of our licensing programs and the need to extend license
agreements that are expiring; our dependence on a limited number of third-party suppliers; claims by third
parties that we infringe their intellectual property; strategic acquisitions, transactions and investments; our
use of open source software; our stock price and earnings volatility; our indebtedness; foreign currency
fluctuations; global regional or local economic conditions that impact the industries in which we operate;
our ability to attract and retain qualified employees; failures in our products or services or in the products
or services of our customers or licensees, including those resulting from security vulnerabilities, defects or
errors; security breaches of our information technology systems; and potential tax liabilities. These and
other risks are set forth in the Companys Quarterly Report on Form 10-Q for the fiscal second quarter
ended March 26, 2017 filed with the SEC. Our reports filed with the SEC are available on our website at
www.qualcomm.com. We undertake no obligation to update, or continue to provide information with
respect to, any forward-looking statement or risk factor, whether as a result of new information, future
events or otherwise.

###
Qualcomm, Snapdragon and MSM are trademarks of Qualcomm Incorporated, registered in the United States and other
countries. All other trademarks are the property of their respective owners.

Qualcomm Snapdragon and MSM are products of Qualcomm Technologies, Inc.

Exhibit 20
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Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)

March 26, September 25,


2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 7,124 $ 5,946
Marketable securities 2,858 12,702
Accounts receivable, net 4,201 2,219
Inventories 2,066 1,556
Other current assets 659 558
Total current assets 16,908 22,981
Marketable securities 18,876 13,702
Deferred tax assets 2,458 2,030
Property, plant and equipment, net 3,065 2,306
Goodwill 6,497 5,679
Other intangible assets, net 4,084 3,500
Other assets 4,191 2,161
Total assets $ 56,079 $ 52,359

LIABILITIES AND STOCKHOLDERS EQUITY


Current liabilities:
Trade accounts payable $ 1,289 $ 1,858
Payroll and other benefits related liabilities 895 934
Unearned revenues 513 509
Short-term debt 1,998 1,749
Other current liabilities 5,450 2,261
Total current liabilities 10,145 7,311
Unearned revenues 2,220 2,377
Long-term debt 9,939 10,008
Other liabilities 2,441 895
Total liabilities 24,745 20,591

Stockholders equity:
Qualcomm stockholders equity:
Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding
Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,477 and 1,476
shares issued and outstanding, respectively 346 414
Retained earnings 30,768 30,936
Accumulated other comprehensive income 230 428
Total Qualcomm stockholders equity 31,344 31,778
Noncontrolling interests (10) (10)
Total stockholders equity 31,334 31,768
Total liabilities and stockholders equity $ 56,079 $ 52,359

Exhibit 20
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Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)

Three Months Ended Six Months Ended


March 26, March 27, March 26, March 27,
2017 2016 2017 2016
Revenues:
Equipment and services $ 3,689 $ 3,349 $ 7,828 $ 7,436
Licensing 1,327 2,202 3,187 3,890
Total revenues 5,016 5,551 11,015 11,326
Costs and expenses:
Cost of revenues 2,208 2,141 4,651 4,675
Research and development 1,386 1,301 2,697 2,653
Selling, general and administrative 615 619 1,206 1,198
Other 78 75 954 (299)
Total costs and expenses 4,287 4,136 9,508 8,227
Operating income 729 1,415 1,507 3,099
Interest expense (107) (72) (197) (145)
Investment income, net 235 127 417 226
Income before income taxes 857 1,470 1,727 3,180
Income tax expense (108) (306) (296) (520)
Net income 749 1,164 1,431 2,660
Net loss attributable to noncontrolling interests 2
Net income attributable to Qualcomm $ 749 $ 1,164 $ 1,431 $ 2,662

Basic earnings per share attributable to Qualcomm $ 0.51 $ 0.78 $ 0.97 $ 1.78
Diluted earnings per share attributable to Qualcomm $ 0.50 $ 0.78 $ 0.96 $ 1.77
Shares used in per share calculations:
Basic 1,477 1,487 1,478 1,495
Diluted 1,489 1,498 1,492 1,507

Dividends per share announced $ 0.53 $ 0.48 $ 1.06 $ 0.96

Exhibit 20
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Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

Three Months Ended Six Months Ended


March 26, March 27, March 26, March 27,
2017 2016 2017 2016
Operating Activities:
Net income $ 749 $ 1,164 $ 1,431 $ 2,660
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense 342 372 671 736
Indefinite and long-lived asset impairment charges 2 45 34 47

Income tax provision less than income tax payments (117) (86) (230) (189)
Gain on sale of wireless spectrum (380)
Non-cash portion of share-based compensation expense 246 247 485 494
Incremental tax benefits from share-based compensation (2) (37) (2)
Net realized gains on marketable securities and other investments (88) (24) (236) (73)
Impairment losses on marketable securities and other investments 5 43 148 106
Other items, net 101 60 97 47
Changes in assets and liabilities:
Accounts receivable, net (1,822) (392) (1,691) 254
Inventories 109 (212) (245) 79
Other assets 123 55 107 121
Trade accounts payable (469) 87 (677) 137
Payroll, benefits and other liabilities 1,632 (708) 2,417 (610)
Unearned revenues 4 86 (80) 49
Net cash provided by operating activities 815 737 2,194 3,476
Investing Activities:
Capital expenditures (122) (125) (251) (253)
Purchases of available-for-sale securities (4,685) (4,038) (8,802) (7,775)
Proceeds from sales and maturities of available-for-sale securities 6,255 2,693 13,146 5,806
Purchases of trading securities (28) (177)
Proceeds from sales and maturities of trading securities 635 756
Proceeds from sales of other marketable securities 250 450
Deposits of investments designated as collateral (50) (2,000)
Acquisitions and other investments, net of cash acquired (1,325) (173) (1,382) (623)
Proceeds from sale of wireless spectrum 232
Other items, net 6 67 49 149
Net cash provided (used) by investing activities 79 (719) 760 (1,435)
Financing Activities:
Proceeds from short-term debt 2,386 3,239 5,113 4,328
Repayment of short-term debt (2,137) (2,290) (4,864) (3,380)
Proceeds from issuance of common stock 159 172 290 271
Repurchases and retirements of common stock (283) (1,548) (727) (3,598)
Dividends paid (783) (710) (1,567) (1,427)
Incremental tax benefits from share-based compensation 2 37 2
Other items, net (10) (20) (52) (18)
Net cash used by financing activities (666) (1,157) (1,770) (3,822)
Effect of exchange rate changes on cash and cash equivalents 11 1 (6) (4)
Net increase (decrease) in cash and cash equivalents 239 (1,138) 1,178 (1,785)
Cash and cash equivalents at beginning of period 6,885 6,913 5,946 7,560
Cash and cash equivalents at end of period $ 7,124 $ 5,775 $ 7,124 $ 5,775

Exhibit 20
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Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2100 Page 86 of 232

EXHIBIT 21
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2101 Page 87 of 232

QUALCOMM INC/DE

FORM 10-K
(Annual Report)

Filed 11/02/16 for the Period Ending 09/25/16

Address 5775 MOREHOUSE DR


SAN DIEGO, CA 92121
Telephone 8585871121
CIK 0000804328
Symbol QCOM
SIC Code 3663 - Radio and Television Broadcasting and Communications Equipment
Industry Communications & Networking
Sector Technology
Fiscal Year 09/25

http://www.edgar-online.com
Copyright 2016, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this documentExhibit 21 EDGAR Online, Inc. Terms of Use.
restricted under
Page 152
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2102 Page 88 of 232

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(Markone)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 25, 2016


OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 0-19528

QUALCOMM Incorporated
(Exact name of registrant as specified in its charter)



Delaware 95-3685934
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

5775 Morehouse Dr.
92121-1714
San Diego, California
(Zip Code)
(Address of Principal Executive Offices)

(858) 587-1121
(Registrants telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:



Title of Each Class Name of Each Exchange on Which Registered
Commonstock,$0.0001parvalue NASDAQStockMarketLLC

Securities registered pursuant to Section 12(g) of the Act:

None
Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.
Yesx
Noo
IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.Yeso
Nox
Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934during
thepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthe
past90days.Yesx
Noo
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredto
besubmittedandpostedpursuanttoRule405ofRegulationS-T(232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthatthe
registrantwasrequiredtosubmitandpostsuchfiles).Yesx
Noo
IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-K(229.405ofthischapter)isnotcontainedherein,andwillnot
becontained,tothebestofregistrantsknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10-Korany
amendmenttothisForm10-K.o
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,orasmallerreportingcompany.Seethe
Exhibit 21
definitionsoflargeacceleratedfiler,acceleratedfilerandsmallerreportingcompanyinRule12b-2oftheExchangeAct.(Checkone):

Page 153
Case 3:17-cv-01010-GPC-MDD
Largeacceleratedfiler x Document 80-2 Filed 07/18/17 PageID.2103 Page 89 of 232
Acceleratedfiler o
Non-acceleratedfiler o (Donotcheckifasmallerreportingcompany) Smallerreportingcompany o
Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).Yeso
Nox


Theaggregatemarketvalueofthevotingandnon-votingcommonequityheldbynon-affiliatesoftheregistrantatMarch27,2016(thelastbusinessdayofthe
registrantsmostrecentlycompletedsecondfiscalquarter)was$74,547,554,964,basedupontheclosingpriceoftheregistrantscommonstockonthatdateas
reportedontheNASDAQGlobalSelectMarket.
Thenumberofsharesoutstandingoftheregistrantscommonstockwas1,476,886,684atOctober31,2016.
DOCUMENTS INCORPORATED BY REFERENCE
PortionsoftheregistrantsDefinitiveProxyStatementinconnectionwiththeregistrants2017AnnualMeetingofStockholders,tobefiledwiththe
CommissionsubsequenttothedatehereofpursuanttoRegulation14A,areincorporatedbyreferenceintoPartIIIofthisReport.

Exhibit 21
Page 154
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2104 Page 90 of 232
QUALCOMM INCORPORATED
Form 10-K
For the Fiscal Year Ended September 25, 2016
Index

Page

PART I

Item1. Business 4
Item1A. RiskFactors 17
Item1B. UnresolvedStaffComments 31
Item2. Properties 31
Item3. LegalProceedings 32
Item4. MineSafetyDisclosures 32

PART II

Item5. MarketforRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities 33
Item6. SelectedFinancialData 35
Item7. ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations 36
Item7A. QuantitativeandQualitativeDisclosuresaboutMarketRisk 49
Item8. FinancialStatementsandSupplementaryData 50
Item9. ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure 50
Item9A. ControlsandProcedures 50
Item9B. OtherInformation 51

PART III

Item10. Directors,ExecutiveOfficersandCorporateGovernance 51
Item11. ExecutiveCompensation 51
Item12. SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters 51
Item13. CertainRelationshipsandRelatedTransactions,andDirectorIndependence 51
Item14. PrincipalAccountingFeesandServices 51

PART IV

Item15. ExhibitsandFinancialStatementSchedules 51
Item16. Form10-KSummary 55

Exhibit 21
Page 155
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2105 Page 91 of 232

TRADEMARKS

Qualcomm,Snapdragon,MSM,AdrenoandWirelessReacharetrademarksofQualcommIncorporated,registeredintheUnitedStatesandothercountries.
QualcommHavenandRF360aretrademarksofQualcommIncorporated.CSRisatrademarkofQualcommTechnologiesInternational,Ltd.,registeredinthe
UnitedStatesandothercountries.

Otherproductsandbrandnamesmaybetrademarksorregisteredtrademarksoftheirrespectiveowners.

Exhibit 21
Page 156
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2106 Page 92 of 232
Inthisdocument,thewordsQualcomm,we,our,oursandusreferonlytoQUALCOMMIncorporatedanditssubsidiariesandnotanyotherperson
orentity.ThisAnnualReport(including,butnotlimitedto,thesectionregardingManagementsDiscussionandAnalysisofFinancialConditionandResultsof
Operations)containsforward-lookingstatementsregardingourbusiness,investments,financialcondition,resultsofoperationsandprospects.Wordssuchas
expects,anticipates,intends,plans,believes,seeks,estimatesandsimilarexpressionsorvariationsofsuchwordsareintendedtoidentifyforward-
lookingstatements,butarenottheexclusivemeansofidentifyingforward-lookingstatementsinthisAnnualReport.Additionally,statementsconcerningfuture
matterssuchasthedevelopmentofnewproducts,enhancementsortechnologies,industryandmarkettrends,saleslevels,expenselevelsandotherstatements
regardingmattersthatarenothistoricalareforward-lookingstatements,butarenottheexclusivemeansofidentifyingforward-lookingstatementsinthisAnnual
Report.
Althoughforward-lookingstatementsinthisAnnualReportreflectourgoodfaithjudgment,suchstatementscanonlybebasedonfactsandfactorscurrently
knownbyus.Consequently,forward-lookingstatementsareinherentlysubjecttorisksanduncertaintiesandactualresultsandoutcomesmaydiffermaterially
fromtheresultsandoutcomesdiscussedinoranticipatedbytheforward-lookingstatements.Factorsthatcouldcauseorcontributetosuchdifferencesinresults
andoutcomesincludewithoutlimitationthosediscussedundertheheadingRiskFactorsbelow,aswellasthosediscussedelsewhereinthisAnnualReport.
Readersareurgednottoplaceunduerelianceontheseforward-lookingstatements,whichspeakonlyasofthedateofthisAnnualReport.Weundertakeno
obligationtoreviseorupdateanyforward-lookingstatementsinordertoreflectanyeventorcircumstancethatmayariseafterthedateofthisAnnualReport.
ReadersareurgedtocarefullyreviewandconsiderthevariousdisclosuresmadeinthisAnnualReport,whichattempttoadviseinterestedpartiesoftherisksand
factorsthatmayaffectourbusiness,financialcondition,resultsofoperationsandprospects.

PART I

Item 1. Business

Weincorporatedin1985underthelawsofthestateofCalifornia.In1991,wereincorporatedinthestateofDelaware.Weoperateandreportusinga52-53
weekfiscalyearendingonthelastSundayinSeptember.Our52-weekfiscalyearsconsistoffourequalfiscalquartersof13weekseach,andour53-weekfiscal
yearsconsistofthree13-weekfiscalquartersandone14-weekfiscalquarter.Thefinancialresultsforour53-weekfiscalyearsandour14-weekfiscalquarterswill
notbeexactlycomparabletoour52-weekfiscalyearsandour13-weekfiscalquarters.ThefiscalyearsendedSeptember25,2016,September27,2015and
September28,2014included52weeks.

Overview

WeledthedevelopmentandcontinuetobealeaderinthecommercializationofadigitalcommunicationtechnologycalledCDMA(CodeDivisionMultiple
Access),andwealsocontinueasaleaderinthedevelopmentandcommercializationoftheOFDMA(OrthogonalFrequencyDivisionMultipleAccess)familyof
technologies,includingLTE(LongTermEvolution),anOFDM(OrthogonalFrequencyDivisionMultiplexing)-basedstandardthatusesOFDMAandsingle-
carrierFDMA(FrequencyDivisionMultipleAccess),forcellularwirelesscommunicationapplications.Weownsignificantintellectualpropertyapplicableto
productsthatimplementanyversionofCDMAandOFDMA,includingpatents,patentapplicationsandtradesecrets.Themobilecommunicationsindustry
generallyrecognizesthatacompanyseekingtodevelop,manufactureand/orsellproductsthatuseCDMA-and/orLTE-basedstandardswillrequireapatent
licensefromus.CDMAandOFDMAaretwoofthemaintechnologiescurrentlyusedindigitalwirelesscommunicationsnetworks(alsoknownaswireless
networks).Basedonwirelessconnections,CDMA,OFDMAandTDMA(TimeDivisionMultipleAccess,ofwhichGSM(GlobalSystemforMobile
Communications)istheprimarycommercialform)aretheprimarydigitaltechnologiescurrentlyusedtotransmitawirelessdeviceusersvoiceordataoverradio
wavesusingapubliccellularwirelessnetwork.

Wealsodevelopandcommercializenumerousotherkeytechnologiesusedinhandsetsandtabletsthatcontributetoend-userdemand,andweownsubstantial
intellectualpropertyrelatedtothesetechnologies.Someofthesewerecontributedtoandarebeingcommercializedasindustrystandards,suchascertainvideo
codec,audiocodec,wirelessLAN(localareanetwork),memoryinterfaces,wirelesspower,GPS(globalpositioningsystem)andpositioning,broadcastand
streamingprotocols,andshortrangecommunicationfunctionalities,includingNFC(nearfieldcommunication)andBluetooth.Othertechnologieswidelyusedby
wirelessdevicesthatwehavedevelopedarenotrelatedtoanyindustrystandards,suchasoperatingsystems,userinterfaces,graphicsandcameraprocessing
functionality,integratedcircuitpackagingtechniques,RF(radiofrequency)andantennadesign,sensorsandsensorfusionalgorithms,powerandthermal
managementtechniquesandapplicationprocessorarchitectures.Ourpatentscoverawiderangeoftechnologiesacrosstheentirewirelesssystem,includingthe
device(suchashandsetsandtablets)andnotjustwhatisembodiedinthechipsets.

Inadditiontolicensingportionsofourintellectualpropertyportfolio,whichincludescertainpatentrightsessentialtoand/orusefulinthemanufactureand
saleofcertainwirelessproducts,wedesign,manufacture,havemanufacturedonour

Exhibit 21
Page 157
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2107 Page 93 of 232
behalfandmarketproductsandservicesbasedonCDMA,OFDMAandotherdigitalcommunicationstechnologies.Ourproductsprincipallyconsistofintegrated
circuits(alsoknownaschipsorchipsets)andsystemsoftwareusedinmobiledevices,wirelessnetworks,broadbandgatewayequipmentandconsumerelectronic
devices.Wealsosellotherproductsandservices,whichinclude,amongothers:wirelessmedicaldevicesandsoftwareproductsandservicesdesignedforhealth
carecompanies;engineeringservices;andproductsdesignedfortheimplementationofsmallcells.Inaddition,wecontinuetoinvestinnewandexpandedproduct
areas,suchasradiofrequencyfront-end(RFFE),andinadjacentindustrysegments,suchasautomotive,InternetofThings(IoT),datacenter,networking,mobile
computing,theconnectedhome,smartcities,mobilehealth,machinelearning,includingroboticsandwearables,amongothers.

Industry Trends

Themobileindustryhasexperiencedtremendousgrowthoverthepast20plusyears,growingfromlessthan60millionglobalconnectionsin1994(WCIS+,
October2016)toapproximately7.4billionglobalconnectionsinSeptember2016(GSMAIntelligence,October2016).Asthelargesttechnologyplatforminthe
world,mobilehasmadepeopleslivesmoreconnected,transformingthewayweinteractwithoneanotherandwiththeworld.Thescaleandpaceofinnovationin
mobile,especiallyaroundconnectivityandcomputingcapabilities,isalsoimpactingindustriesbeyondwireless.

Extending
connectivity.
3G/4G(thirdgeneration/fourthgeneration)multimodemobilebroadbandtechnologyhasbeenakeydriverofthegrowthofmobile,
providinguserswithfast,reliable,always-onconnectivity.AsofSeptember2016,therewereapproximately4.0billion3G/4Gconnectionsglobally(CDMA-
based,OFDMA-basedandCDMA/OFDMAmultimode)representingnearly54%oftotalmobileconnections.By2020,global3G/4Gconnectionsareprojectedto
reach6.4billion,withmorethan80%oftheseconnectionscomingfromemergingregions(GSMAIntelligence,October2016).

3G/4GmultimodemobilebroadbandhasalsoemergedasanimportantplatformforextendingthereachandpotentialoftheInternet.In2010,thenumberof
broadbandconnectionsusingmobiletechnologysurpassedthoseusingfixedtechnologies,makingmobilenetworkstheprimarymethodofaccesstotheInternet
formanypeoplearoundtheworld.Theimpactisfurtheramplifiedinemergingregions,where3G/4Gconnectionsareapproximatelysixtimesthenumberoffixed
Internetconnections(GSMAIntelligenceandWBIS,October2016).InChina,3G/4GLTEmultimodeserviceshaveexperiencedstrongadoptionsincebeing
launchedinthefourthquarterofcalendar2013,withmorethan655millionconnectionsreportedasofSeptember2016(GSMAIntelligence,October2016).In
India,mobileoperatorsarerollingout3G/4GLTEmultimodeservices,providingconsumerswiththebenefitsofadvancedmobilebroadbandconnectivitywhile
creatingnewopportunitiesfordevicemanufacturersandothermembersofthemobileecosystem.3G/4Gmobilebroadbandmaybethefirstand,inmanycases,
theonlywaythatpeopleintheseregionsaccesstheInternet.

Lookingahead,thewirelessindustryisactivelydevelopingandstandardizing5G(fifthgeneration)technology,whichisthenextgenerationofwireless
technologyexpectedtobecommerciallydeployedstartingin2019.Whilethe5Gstandardisstillbeingdefined,itisexpectedtoprovideaunifiedconnectivity
networkforallspectrumandservicetypesbasedonOFDMtechnology.5Gisexpectedtosupportfasterdataratesandwiderbandwidthsofspectrum.
Incorporatingmanyoftheinnovationsdevelopedfor4G,5Gisalsoexpectedtobescalableandadaptableacrossavarietyofusecases,whichinclude,among
others:enablingnewindustriesandservices,suchasautonomousvehiclesandremotemedicalprocedures,throughultra-reliable,ultra-lowlatencycommunication
links;andconnectingasignificantnumberofthings(alsoknownastheInternetofThingsorIoT),suchasconsumerelectronics,includingwearables,
appliances,sensorsandmedicaldevices,withconnectivitydesignedtomeetultra-lowpower,complexityandcostrequirements.5Gisalsoexpectedtoenhance
mobilebroadbandservices,includingultra-highdefinition(4K)videostreamingandvirtualreality,withmulti-gigabitspeeds.

Most5Gdevicesareexpectedtoincludemultimodesupportfor3G,4GandWi-Fi,enablingservicecontinuitywhere5Ghasyettobedeployedand
simultaneousconnectivityacross4GandWi-Fitechnologies,whilealsoallowingmobileoperatorstoutilizecurrentnetworkdeployments.Atthesametime,4G
willcontinuetoevolveinparallelwiththedevelopmentof5Gandisexpectedtopioneermanyofthekey5Gtechnologies,suchassupportforunlicensed
spectrumandgigabitLTEuserdatarates.Thefirstphaseof5Gnetworksareexpectedtosupportmobilebroadbandservicesbothinlowerspectrumbandsbelow6
Ghzaswellashigherbandsabove6GHz,includingmillimeterwave(mmWave).

Growth
in
smartphones.
Smartphoneadoptioncontinuestoexpandglobally,fueledby3G/4GLTEmultimodeconnectivity,powerfulapplicationprocessors
andadvancedmultimediaandlocationawarenesscapabilities,amongothers.In2015,morethan1.4billionsmartphonesshippedglobally,representingayear-
over-yearincreaseofapproximately14%,andcumulativeshipmentsofsmartphonesbetween2016and2020areprojectedtoreachapproximately8.3billion
(Gartner,September2016).Mostofthisgrowthishappeninginemergingregions,wheresmartphonesaccountedforapproximately70%ofhandsetshipmentsin
2015andareexpectedtoreachapproximately92%in2020(Gartner,September2016).Growthinsmartphoneshasnotonlybeendrivenbythesuccessof
premium-tierdevices,butalsobythenumberofaffordable

Exhibit 21
Page 158
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2108 Page 94 of 232
handsetsthatarefuelingshipmentsinemergingregionsandthevarietyofflexibleandaffordabledataplansbeingofferedbymobileoperators.

Consumerdemandfornewtypesofexperiencesenabledby3G/4GLTEconnectivity,combinedwiththeneedsofmobileoperatorsanddevicemanufacturers
toprovidedifferentiatedfeaturesandservices,isdrivingcontinuedinnovationwithinthesmartphone.Thisinnovationishappeningacrossmultipletechnology
dimensions,includingconnectivity,computing,camera,audio,video,display,location,sensorsandsecurity.Asaresult,thesmartphonehas,inmanyways,
becomethego-todeviceforsocialnetworking,music,gaming,emailandwebbrowsing,amongothers.Itisalsoreplacingmanytraditionalconsumerelectronics
devicesduetoadvancedcapabilities,includingdigitalcameras,videocameras,GlobalPositioningSystem(GPS)unitsandmusicplayers,combinedwithan
alwaysonandconnectedmobileplatform.

Expansion
into
new
adjacent
opportunities.
Anumberofindustriesbeyondmobileareleveragingtechnologyinnovationsfoundinsmartphonestobring
advancedconnectivityandcomputingcapabilitiestoabroadarrayofend-devicesandaccesspoints,whichmakeuptheedgeofthenetwork.Withbillionsof
connecteddevicesprojectedtobeaddedtotheInternetoverthecomingyears,enhancingthecapabilitiesandperformanceattheedgeofthenetworkwillbevital
toimprovingitsscalabilityasitentersthisnewphaseofgrowth.Theseenhancementsarehelpingtotransformindustrysegments,includingnetworking,
automotive,mobilecomputingandtheIoT,andenablingcompaniestocreatenewproductsandservices.

Theproliferationofintelligentlyconnectedthingsisalsoenablingnewtypesofuserexperiences,assmartphonesareabletointeractwithandcontrolmoreof
thethingsaroundus.Throughtheadditionofembeddedsensors,connectedthingsareabletocollectandsenddataabouttheirenvironment,providinguserswith
contextuallyrelevantinformationandfurtherincreasingtheirutilityandvalue.

Wireless Technologies

Thegrowthintheuseofwirelessdevicesworldwide,suchassmartphonesandtablets,andthedemandfordataservicesandapplicationsrequirescontinuous
innovationtofurtherimprovetheuserexperience,enablenewservices,increasenetworkcapacity,makeuseofdifferentfrequencybandsandenabledense
networkdeployments.Tomeettheserequirements,differentwirelesscommunicationstechnologiescontinuetoevolve.Fornearlythreedecades,wehaveinvested
andcontinuetoinvestheavilyinresearchanddevelopmentofcellularwirelesscommunicationtechnologies,includingCDMAandOFDMA.Asaresult,wehave
developedandacquired(andcontinuetodevelopandacquire)significantrelatedintellectualproperty.Thisintellectualpropertyhasbeenincorporatedintothe
mostwidelyacceptedanddeployedcellularwirelesscommunicationstechnologystandards,andwehavelicensedittomorethan330licensees,includingleading
wirelessdeviceandinfrastructuremanufacturers.Relevantcellularwirelesstechnologiescanbegroupedintothefollowingcategories.

TDMA-based.
TDMA-basedtechnologiesarecharacterizedbytheiraccessmethodallowingseveraluserstosharethesamefrequencychannelbydividingthe
signalintodifferenttimeslots.Mostofthesesystemsareclassifiedas2G(secondgeneration)technology.ThemainexamplesofTDMA-basedtechnologiesare
GSM(deployedworldwide),IS-136(deployedintheAmericas)andPersonalDigitalCellular(PDC)(deployedinJapan).

Todate,GSMhasbeenmorewidelyadoptedthanCDMA-basedstandards;however,CDMAtechnologiesarethebasisforall3Gwirelesssystems.
AccordingtoGSMAIntelligenceestimatesasofSeptember30,2016,therewereapproximately3.4billionGSMconnectionsworldwide,representing
approximately46%oftotalcellularconnections.Thetransitionofwirelessdevicesfrom2Gto3G/4Gcontinuedaroundtheworldwith3G/4Gconnectionsup18%
year-over-year(GSMAIntelligence,October2016).

CDMA-based.
CDMA-basedtechnologiesarecharacterizedbytheiraccessmethodallowingseveraluserstosharethesamefrequencyandtimebyallocating
differentorthogonalcodestoindividualusers.MostoftheCDMA-basedtechnologiesareclassifiedas3Gtechnology.

ThereareanumberofvariantsofCDMA-basedtechnologiesdeployedaroundtheworld,inparticularCDMA2000,EV-DO(EvolutionDataOptimized),
WCDMA(WidebandCDMA)andTD-SCDMA(TimeDivision-SynchronousCDMA)(deployedexclusivelyinChina).CDMA-basedtechnologiesprovidevastly
improvedcapacityforvoiceandlow-ratedataservicesascomparedtoanalogtechnologiesandsignificantimprovementsoverTDMA-basedtechnologiessuchas
GSM.Todate,thesetechnologieshaveseenmanyrevisions,andtheycontinuetoevolve.Newfeaturescontinuetobedefinedinthe3rdGenerationPartnership
Project(3GPP).ThefollowingaretheCDMA-basedtechnologiesandtheirstandardsrevisions:

CDMA2000revisionsAthroughE

1xEV-DOrevisionsAthroughC

Exhibit 21
Page 159
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WCDMA/HSPAreleases4through13

TD-SCDMAreleases4through12

CDMAtechnologiesusheredinasignificantincreaseinbroadbanddataservicesthatcontinuetogrowglobally.AccordingtoGSMAIntelligenceestimatesas
ofOctober2016,therewereapproximately2.5billionCDMA-basedconnectionsworldwide,representingapproximately33%oftotalcellularconnections.

OFDMA-based.
OFDMA-basedtechnologiesarecharacterizedbytheiraccessmethodallowingseveraluserstosharethesamefrequencybandandtimeby
allocatingdifferentsubcarrierstoindividualusers.MostoftheOFDMA-basedtechnologiestobedeployedthrough2016areclassifiedas4Gtechnology.Itis
expectedthat5GwillheavilyleverageOFDM-basedtechnologies.WecontinuetoplayasignificantroleinthedevelopmentofLTEandLTEAdvanced,which
arethepredominant4Gtechnologiescurrentlyinuse,andtheirevolutiontoLTEAdvancedPro.

LTEisincorporatedin3GPPspecificationsstartingfromrelease8andusesOFDMAinthedownlinkandsinglecarrierFDMA(SC-FDMA)intheuplink.
LTEhastwomodes,FDD(frequencydivisionduplex)andTDD(timedivisionduplex),tosupportpairedandunpairedspectrum,respectively,andisbeing
developedby3GPP.TheprincipalbenefitofLTEisitsabilitytoleverageawiderangeofspectrum(bandwidthsof10MHzormore).LTEisdesignedto
seamlesslyinterworkwith3Gthrough3G/4Gmultimodedevices.MostLTEdevicesrelyon3Gforvoiceservicesacrossthenetwork,aswellasforubiquitous
dataservicesoutsidetheLTEcoverageareaandon4GfordataservicesinsidetheLTEcoveragearea.LTEsvoicesolution,VoLTE(voiceoverLTE),isbeing
commerciallydeployedinagrowingnumberofnetworks.

Carrieraggregation,oneofthesignificantimprovementsofLTEAdvanced,wascommerciallylaunchedinJune2013andcontinuestoevolvetoaggregate
additionalcarriersintheuplinkaswellasthedownlink.Alongwithcarrieraggregation,LTEAdvancedbringsmanymoreenhancements,includingadvanced
antennatechniquesandoptimizationforsmallcells.Apartfromimprovingtheperformanceofexistingnetworks,thesereleasesalsobringnewenhancements
undertheumbrellaofLTEAdvancedPro,suchasLTEDirectforproximity-baseddevice-to-devicediscovery,improvedLTEbroadcast,optimizationsof
narrowbandcommunicationsdesignedforIoT(knownasNB-IoT)andtheabilitytouseLTEAdvancedinunlicensedspectrum(LTEUnlicensed).Therewillbe
multipleoptionsfordeployingLTEUnlicensedfordifferentdeploymentscenarios.

LTE-U,whichreliesonanLTEcontrolcarrierbasedon3GPPRelease12,usescarrieraggregationtocombineunlicensedandlicensedspectrumandwill
beusedinearlymobileoperatordeploymentsincountriessuchastheUnitedStates,KoreaandIndia.

LicensedAssistedAccess(LAA),introducedaspartof3GPPRelease13,alsoaggregatesunlicensedandlicensedspectrum.

MulteFireoperatessolelyinunlicensedspectrumwithoutalicensedanchorcontrolchannel.

TherealsohavebeenongoingeffortstomaketheinterworkingbetweenLTEandWi-Fimoreseamlessandcompletelytransparenttotheusers.Theseamless
interworkingisalsointendedtoenablethedevicetousethebestpossiblelinkorlinksdependingonconditionsoftheLTEandWi-Filinksastheapplicationsrun
ondevices.FurtherintegrationisachievedwithLTE+Wi-FilinkAggregation(LWA),whichwillutilizeexistingandnewcarrierWi-Fideployments.

LTEreleasesareoftencombinedandgivenmarketingortradenamesthatalsoindicatetheirbenefits.ThenameLTEcoversreleases8and9.Releases10
andbeyondarereferredtoasLTEAdvanced.AccordingtoGSMAIntelligenceestimatesasofSeptember30,2016,therewereapproximately1.5billionglobal
3G/4Gmultimodeconnectionsworldwide,representingapproximately21%oftotalcellularconnections.

AccordingtotheGlobalmobileSuppliersAssociation(GSA),asofOctober2016,morethan770wirelessoperatorshavecommerciallydeployedorstarted
testingLTE.Inaddition,LTEAdvancedstandardsfeaturingcarrieraggregationhavebeguntobedeployed.AsofOctober2016,212operatorswereinvestingin
LTEAdvancedcarrieraggregationacross88countries,and166operatorshavelaunchedcommerciallyin76countries(GSA,October2016).

Aswelookforward,thewirelessindustryisactivelybuildingthenextgenerationofcellulartechnologiesunderthename5Gin3GPP.While5Gisstillbeing
defined,itisexpectedthat5Gwilltransformtheroleofwirelesstechnologiesandincorporateadvancementson3G/4Gfeaturesavailabletoday,includingfurther
enhancedmobilebroadbandservices,device-to-devicecapabilitiesanduseofbothlicensedandunlicensedspectrumandconnectivityofasignificantnumberof
things.5Gisalsoexpectedtoincludeoperationinemerginghigherfrequencybandssuchasthoseinthemillimeterwaverangetosignificantlyincreasethedata
rateofferedtousers.Furthermore,5Gisexpectedtooffertechniquesthatwillenabletheexpansionofcellularnetworksintonewverticalproductsegmentsand
definearadiolinkwithmuchhigherlevelsofreliabilityforcontrolofvehiclesandmachines.Thisdevelopment,whichbuildsonthevarious3Gand4Gfeatures

Exhibit 21
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addressingIoT,willfurthersustainthetrendofenablingcellularconnectivitytonon-handsetcategoriesofdevices.Wecontinuetoplayasignificantroleindriving
5Gfromstandardizationtocommercialization,includingcontributingto3GPPstandardizationactivitiestodefinethe5Gstandardandcollaboratingwithindustry
participantson5Gdemonstrationsandtrialstoprepareforcommercialnetworklaunches.

Other
(non-cellular)
wireless
technologies.
Thereareother,non-cellularwirelesstechnologiesthathavealsobeenbroadlyadopted.

Wireless
Local
Area
Networks.
Wirelesslocalareanetworks(WLAN),suchasWi-Fi,linktwoormorenearbydeviceswirelesslyandusuallyprovide
connectivitythroughanaccesspoint.Wi-FisystemsarebasedonstandardsdevelopedbytheInstituteofElectricalandElectronicsEngineers(IEEE)inthe802.11
familyofstandards.802.11ac,whichincludesadvancedfeaturessuchasmultipleusermultiplein/multipleout(MUMIMO)andsupportforlargebandwidthsand
higherordermodulation,primarilytargetsbroadbandconnectivityformobiledevices,laptopsandconsumerelectronicsdevicesusing5GHzspectrum.802.11ad
providesmulti-gigabitdataratesforshortrangecommunicationusing60GHzspectrum.802.11ah,whichisstillunderdevelopmentandtargetssub-1GHz
spectrum,isenvisionedtobeasolutionforconnectedhomeapplicationsthatrequirelongbatterylife.Weplayedaleadingroleinthedevelopmentof802.11ac,
802.11adand802.11ah,andweareactivelyinvolvedinthedevelopmentof802.11ax,whichisanevolutionfrom802.11acandwillcoverboththe2.4GHzand
5GHzunlicensedbands.

Bluetooth.
Bluetoothisawirelesspersonalareanetworkthatprovideswirelessconnectivitybetweendevicesovershortdistancesrangingfromafew
centimeterstoafewmeters.Bluetoothtechnologyprovideswirelessconnectivitytoawiderangeoffixedormobileconsumerelectronicsdevices.Bluetooth
functionalitiesarestandardizedbytheBluetoothSpecialInterestGroupinvariousversionsofthespecification(from1.0to4.0),whichincludedifferent
functionalities,suchasenhanceddatarateorlowenergy(knownasBluetoothSmart).InAugust2015,weacquiredCSRplc,aleadingcontributortoBluetooth
evolutionintheareasofmobiledevices,HID(humaninterfacedevice),A/V(audio/video)andSmartMeshtechnologies.

Location
Positioning
Technologies.
Locationpositioningtechnologieshaveevolvedrapidlyintheindustryoverthepastfewyearsinordertodeliveran
enhancedlocationexperience.Inthepast,satellitenavigationsystemswerepredominantlyusedtoprovidetheaccuratelocationofmobiledevices.Wewereakey
developeroftheAssisted-GPS(A-GPS)positioningtechnologyusedinmostcellularhandsetstoday.ForusesrequiringthebestaccuracyforE911servicesand
navigationalbasedservices,A-GPSprovidedaleading-edgesolution.

Theindustryhasnowevolvedtosupportadditionalinputsforimprovingthelocationexperience.Wenowsupportmultipleconstellations,includingGPS,
GLONASS(GlobalNavigationSatelliteSystem)andBeiDou;terrestrial-basedpositioningusingWWAN(WirelessWideAreaNetwork)andWi-Fi-basedinputs;
Wi-FiRSSI(receivedsignalstrengthindication)andRTT(round-triptime)signalsforindoorlocation;andthird-partysensorscombinedwithGNSS(Global
NavigationSatelliteSystem)measurementstoprovideinterimsupportforlocation-basedservicesinruralareasandindoors,whereothersignalinputsmaynotbe
available.

Other Significant Technologies used in Cellular and Certain Consumer Electronic Devices and Networks

Wehaveplayedaleadingroleindevelopingmanyoftheothertechnologiesusedincellularandcertainconsumerelectronicdevicesandnetworks,including:

graphicsanddisplayprocessingfunctionality;

videocodingbasedonHEVC(HighEfficiencyVideoCodec)standard,whichwillbedeployedtosupport4Kvideocontent;

audiocoding,includingEVS(EnhancedVoiceServices);

thelatestversionof3GPPscodecformultimediauseandforvoice/speechuse,whichisbeingdeployedcommercially;

cameraandcamcorderfunctions;

systemuserandinterfacefeatures;

securityandcontentprotectionsystems;

volatile(LP-DDR2,3,4)andnon-volatile(eMMC)memoryandrelatedcontrollers;and

powermanagementsystems.

Exhibit 21
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Operating Segments

Weconductbusinessprimarilythroughtworeportablesegments,QCT(QualcommCDMATechnologies)andQTL(QualcommTechnologyLicensing),and
ourQSI(QualcommStrategicInitiatives)reportablesegmentmakesstrategicinvestments.Revenuesinfiscal2016,2015and2014forourreportablesegments
wereasfollows(inmillions,exceptpercentagedata):

QCT QTL QSI


2016 $ 15,409 $ 7,664 $ 47
As
a
percent
of
total 65% 33%
2015 $ 17,154 $ 7,947 $ 4
As
a
percent
of
total 68% 31%
2014 $ 18,665 $ 7,569 $
As
a
percent
of
total 70% 29%

QCT
Segment.
QCTisaleadingdeveloperandsupplierofintegratedcircuitsandsystemsoftwarebasedonCDMA,OFDMAandothertechnologiesforuse
inwirelessvoiceanddatacommunications,networking,applicationprocessing,multimediaandglobalpositioningsystemproducts.QCTsintegratedcircuit
productsaresold,anditssystemsoftwareislicensed,tomanufacturersthatuseourproductsinmobilephones,tablets,laptops,datamodules,handheldwireless
computersandgamingdevices,accesspointsandrouters,datacardsandinfrastructureequipment,broadbandgatewayequipmentandotherconsumerelectronics.
OurMobileStationModem(MSM)integratedcircuits,whichincludetheMobileDataModem,QualcommSingleChipandQualcommSnapdragonprocessors
andLTEmodems,performthecorebasebandmodemfunctionalityinwirelessdevicesprovidingvoiceanddatacommunications,aswellasmultimedia
applicationsandglobalpositioningfunctions.Inaddition,ourSnapdragonprocessorsprovideadvancedapplicationandgraphicsprocessingcapabilities.Because
ofourexperienceindesigninganddevelopingCDMA-andOFDMA-basedproducts,wedesignboththebasebandintegratedcircuitandthesupportingsystemas
well,includingtheRF(RadioFrequency),PM(PowerManagement)andwirelessconnectivityintegratedcircuits.Thisapproachenablesustooptimizethe
performanceofthewirelessdevicewithimprovedproductfeaturesandintegrationwiththenetworksystem.OurportfolioofRFproductsincludesQFE
(QualcommFrontEnd)radiofrequencyfront-endcomponentsthataredesignedtosimplifytheRFdesignforLTEmultimode,multibandmobiledevices,reduce
powerconsumptionandimproveradioperformance.QCTssystemsoftwareenablestheotherdevicecomponentstointerfacewiththeintegratedcircuitproducts
andisthefoundationsoftwareenablingmanufacturerstodevelopdevicesutilizingthefunctionalitywithintheintegratedcircuits.Wealsoprovidesupport,
includingreferencedesignsandtools,toassistourcustomersinreducingthetimerequiredtodesigntheirproductsandbringtheirproductstomarket.Weplanto
addadditionalfeaturesandcapabilitiestoourintegratedcircuitproductstohelpourcustomersreducethecostandsizeoftheirproducts,tosimplifyour
customersdesignprocessesandtosupportmorewirelessdevicesandservices.

QCToffersabroadportfolioofproducts,includingbothwirelessdeviceandinfrastructureintegratedcircuits,insupportofCDMA20001Xand1xEV-DO,as
wellastheEV-DORevisionA/BevolutionsofCDMA2000technology.LeveragingourexpertiseinCDMA,wealsodevelopandofferintegratedcircuits
supportingtheWCDMAversionof3Gformanufacturersofwirelessdevices.Morethan80devicemanufacturershaveselectedourWCDMAproductsthat
supportGSM/GPRS,WCDMA,HSDPA(High-SpeedDownlinkPacketAccess),HSUPA(High-SpeedUplinkPacketAccess)andHSPA+fortheirdevices.QCT
alsosellsmultimodeproductsfortheLTEstandard,whicharedesignedtosupportseamlessbackwardcompatibilitytoexisting3Gtechnologies.Ourintegrated
circuitproductsareincludedinabroadrangeofdevices,fromlow-tier,entry-leveldevicesforemergingregions,whichmayuseourQualcommReferenceDesign
(QRD)products,topremium-tierdevices.Infiscal2016,QCTshippedapproximately842millionMSMintegratedcircuitsforwirelessdevicesworldwide,
comparedtoapproximately932millionand861millioninfiscal2015and2014,respectively.

Ourmodemsarebuilttoworkwithincreasinglycomplexnetworks.Theysupportthelatestcommunicationtechnologiesandadapttonetworkconditionsand
userneedsinrealtimetoenabledeliveryoffaster,smootherdataandvoiceconnections.Our3G/4Gmodemroadmapdeliversthelatestnetworktechnologies
acrossmultipleproducttiersanddevices.Thisroadmapistheresultofouryearsofresearchintoemergingnetworkstandardsandthedevelopmentofchipsetsthat
takeadvantageofthesenewstandards,whilemaintainingbackwardcompatibilitywithexistingstandards.

EachSnapdragonprocessorisahighlyintegrated,mobileoptimizedsystemonachipincorporatingouradvancedtechnologies,includingaSnapdragon
modemforfastreliablemobilebroadbandconnectivity,ahighperformancecentralprocessingunit(CPU),digitalsignalprocessor(DSP),graphicsprocessingunit
(GPU),imagesignalprocessor,multimediasubsystems,includinghighfidelityaudio,high-definitionvideoandadvancedimagingcapabilities,ourhardware-based
suite

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ofQualcommHavenSecuritySolutions,andaccuratelocationpositioningengines.OurCPUcoresaredesignedtodeliverhighlevelsofcomputeperformanceat
lowpower,allowingmanufacturerstodesignpowerful,slimandpower-efficientdevices.OurQualcommAdrenoGPUsarealsodesignedtodeliverhighquality
graphicsperformanceforvisuallyrich3Dgaminganduserinterfaces.TheheterogeneouscomputearchitectureofourSnapdragonprocessorsisdesignedtohelp
ensurethattheCPU,DSPandGPUworkefficientlytogether,eachbeingutilizedonlywhenneeded,whichenhancestheprocessingcapacity,speedandefficiency
ofourSnapdragonprocessorsandthebatterylifeofdevicesusingourprocessors.

OurwirelessproductsalsoconsistofintegratedcircuitsandsystemsoftwareforWLAN,Bluetooth,BluetoothSmart,frequencymodulation(FM)andnear
fieldcommunicationsaswellastechnologiesthatsupportlocationdataandservices,includingGPS,GLONASSandBeiDou.OurWLAN,BluetoothandFM
productshavebeenintegratedwiththeSnapdragonprocessorstoprovideadditionalconnectivityformobilephones,tabletsandconsumerelectronics.QCTalso
offersstandaloneWLAN,Bluetooth,BluetoothSmart,applicationsprocessorandEthernetproductsformobiledevices,consumerelectronics,computers,
automotiveinfotainment,IoTapplicationsandotherconnecteddevices.OurnetworkingproductsincludeWLAN,PowerlineandEthernetchips,network
processorsandsoftware.Theseproductshelpenablehomeandbusinessnetworkstosupportthegrowingnumberofconnecteddevices,digitalmedia,dataservices
andothersmarthomeapplications.

QCTcurrentlyutilizesafablessproductionmodel,whichmeansthatwedonotownoroperatefoundriesfortheproductionofsiliconwafersfromwhichour
integratedcircuitsaremade.Integratedcircuitsarediecutfromsiliconwafersthathavecompletedthepackageassemblyandtestmanufacturingprocesses.The
semiconductorpackagesupportstheelectricalcontactsthatconnecttheintegratedcircuittoacircuitboard.Diecutfromsiliconwafersaretheessential
componentsofallofourintegratedcircuitsandasignificantportionofthetotalintegratedcircuitcost.Weemploybothturnkeyandtwo-stagemanufacturing
modelstopurchaseourintegratedcircuits.Undertheturnkeymodel,ourfoundrysuppliersareresponsiblefordeliveringfullyassembledandtestedintegrated
circuits.Underthetwo-stagemanufacturingmodel,wepurchasedieinsingularorwaferformfromsemiconductormanufacturingfoundriesandcontractwith
separatethird-partysuppliersformanufacturingservicessuchaswaferbump,probe,assemblyandfinaltest.

Werelyonindependentthird-partysupplierstoperformthemanufacturingandassembly,andmostofthetesting,ofourintegratedcircuitsbasedprimarilyon
ourproprietarydesignsandtestprograms.Oursuppliersalsoareresponsiblefortheprocurementofmostoftherawmaterialsusedintheproductionofour
integratedcircuits.Theprimaryfoundrysuppliersforourvariousdigital,analog/mixed-signal,RFandPMintegratedcircuitsareGlobalFoundriesInc.,Samsung
ElectronicsCo.Ltd.,SemiconductorManufacturingInternationalCorporation,TaiwanSemiconductorManufacturingCompanyandUnitedMicroelectronics
Corporation.TheprimarysemiconductorassemblyandtestsuppliersareAdvancedSemiconductorEngineering,AmkorTechnology,SiliconwarePrecision
IndustriesandSTATSChipPAC.ThemajorityofourfoundryandsemiconductorassemblyandtestsuppliersarelocatedintheAsia-Pacificregion.

QCTssalesareprimarilymadethroughstandardpurchaseordersfordeliveryofproducts.QCTgenerallyallowscustomerstorescheduledeliverydates
withinadefinedtimeframeandtocancelorderspriortoshipmentwithorwithoutpaymentofapenalty,dependingonwhentheorderiscanceled.Theindustryin
whichQCToperatesisintenselycompetitive.QCTcompetesworldwidewithanumberofUnitedStatesandinternationaldesignersandmanufacturersof
semiconductors.Asaresultofglobalexpansionbyforeignanddomesticcompetitors,technologicalchanges,devicemanufacturerconcentrationsandthepotential
forfurtherindustryconsolidation,weanticipatetheindustrytoremainverycompetitive.Webelievethattheprincipalcompetitivefactorsforourproductsinclude
performance,levelofintegration,quality,compliancewithindustrystandards,price,time-to-market,systemcost,designandengineeringcapabilities,newproduct
innovationandcustomersupport.QCTalsocompetesinbothsingle-andmulti-modeenvironmentsagainstalternativecommunicationstechnologiesincluding,but
notlimitedto,GSM/GPRS/EDGEandTDMA.

QCTscurrentcompetitorsinclude,butarenotlimitedto,companiessuchasBroadcomLimited,CirrusLogic,Ericsson,HiSiliconTechnologies,Intel,
MarvellTechnology,MaximIntegratedProducts,MediaTek,MicrochipTechnologyInc.,Nvidia,RealtekSemiconductor,SamsungElectronics,Skyworks
SolutionsInc.andSpreadtrumCommunications(whichiscontrolledbyTsinghuaUnigroup).QCTalsofacescompetitionfromproductsinternallydevelopedby
ourcustomers,includingsomeofourlargestcustomers,andfromsomeearly-stagecompanies.Ourcompetitorsdevotesignificantamountsoftheirfinancial,
technicalandotherresourcestodevelopandmarketcompetitiveproductsand,insomecases,todevelopandadoptcompetitivedigitalcommunicationorsignal
processingtechnologies,andthoseeffortsmaymateriallyandadverselyaffectus.Althoughwehaveattainedasignificantpositionintheindustry,manyofour
currentandpotentialcompetitorsmayhaveadvantagesoverusthatinclude,amongothers:motivationbyourcustomersincertaincircumstancestoutilizetheir
owninternally-developedintegratedcircuitproducts,touseourcompetitorsintegratedcircuitproducts,ortochoosealternativetechnologies;lowercoststructures
and/orawillingnessandabilitytoacceptlowerpricesandlowerornegativemarginsfortheirproducts,particularlyinChina;foreigngovernmentsupportofother
technologiesorcompetitors;

10

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betterknownbrandnames;ownershipandcontrolofmanufacturingfacilitiesandgreaterexpertiseinmanufacturingprocesses;moreextensiverelationshipswith
localdistributioncompaniesandoriginalequipmentmanufacturersinemerginggeographicregions(suchasChina);and/oramoreestablishedpresenceincertain
regions.

QTL
Segment
.QTLgrantslicensesorotherwiseprovidesrightstouseportionsofourintellectualpropertyportfolio,which,amongotherrights,include
certainpatentrightsessentialtoand/orusefulinthemanufactureandsaleofcertainwirelessproducts,including,withoutlimitation,productsimplementing
CDMA2000,WCDMA,CDMATDDand/orLTEstandardsandtheirderivatives.Ourlicenseesmanufacturewirelessproductsincludingmobiledevices(also
knownassubscriberunits,whichincludehandsets),otherconsumerdevices(e.g.,tabletsandlaptops),machine-to-machinedevices(e.g.,telematicsdevices,meter
readingdevices),plug-inenduserdatamodemcards,certainembeddedmodulesforincorporationintoenduserproducts,infrastructureequipmentrequiredto
establishandoperateanetworkandequipmenttotestnetworksandsubscriberunits.QTLlicensingrevenuesincludelicensefeesandroyaltiesbasedonsalesby
licenseesofproductsincorporatingorusingourintellectualproperty.Licensefeesarefixedamountspaidinoneormoreinstallments.Royaltiesaregenerally
baseduponapercentageofthewholesale(i.e.,licensees)sellingpriceofcompletelicensedproducts,netofcertainpermissibledeductions(including
transportation,insurance,packingcostsandotheritems).Revenuesgeneratedfromroyaltiesaresubjecttoquarterlyandannualfluctuations.Thevastmajorityof
QTLrevenueshavebeengeneratedthroughourlicenseessalesofCDMA2000-andWCDMA-basedproducts,suchasfeaturephonesandsmartphones.Wehave
investedandcontinuetoinvestinboththeacquisitionanddevelopmentofOFDMAtechnologyandintellectualpropertyandhavegeneratedtheindustryleading
patentportfolioapplicabletoLTEandLTEAdvanced.Nevertheless,wefacecompetitioninthedevelopmentofintellectualpropertyforfuturegenerationsof
digitalwirelesscommunicationstechnologiesandservices.

InFebruary2015,wereachedaresolutionwiththeNationalDevelopmentandReformCommission(NDRC)inChinaregardingitsinvestigationandagreed
toimplementarectificationplanthatmodifiescertainofourbusinesspracticesinChina.Therectificationplanprovides,amongotherthings,thatforlicensesof
onlyour3Gand4GessentialChinesepatentsforbrandeddevicessoldforuseinChinastartingonJanuary1,2015(andreportedtousinthethirdquarteroffiscal
2015),wewillchargerunningroyaltiesatroyaltyratesof5%for3GCDMAorWCDMAdevices(includingmultimode3G/4Gdevices)and3.5%for4Gdevices
thatdonotimplementCDMAorWCDMA(including3-modeLTE-TDDdevices),ineachcaseusingaroyaltybaseof65%ofthenetsellingprice.

Separateandapartfromlicensingmanufacturersofwirelessdevicesandnetworkequipment,wehaveenteredintocertainarrangementswithcompetitorsof
ourQCTsegment,suchasBroadcomandMediaTek.AprincipalpurposeofthesearrangementsistoprovideourQCTsegmentandthecounterpartiescertain
freedomofoperationwithrespecttoeachpartysintegratedcircuitsbusiness.Ineverycase,theseagreementsexpresslyreservetherightforQTLtoseekroyalties
fromthecustomersofsuchintegratedcircuitsupplierswithrespecttosuchsupplierscustomerssalesofCDMA-,WCDMA-andOFDMA-basedwirelessdevices
intowhichsuchsuppliersintegratedcircuitsareincorporated.

UpontheinitialdeploymentofOFDMA-basednetworks,theproductsimplementingsuchtechnologiesgenerallyhavebeenmultimodeandimplement
CDMA-basedtechnologies.ThelicensesgrantedunderourexistingCDMAlicenseagreementsgenerallycovermultimodeCDMA/OFDMA(3G/4G)devices,and
ourlicenseesareobligatedtopayroyaltiesundertheirCDMAlicenseagreementsforsuchdevices.Further,over210companies(includingHuawei,LG,
Microsoft,Oppo,Samsung,Sony,vivo,XiaomiandZTE)haveroyalty-bearinglicensesunderourpatentportfolioforuseinLTEorotherOFDMA-basedproducts
thatdonotimplementanyCDMA-basedstandards.

Sinceourfoundingin1985,wehavefocusedheavilyontechnologydevelopmentandinnovation.Theseeffortshaveresultedinaleadingintellectualproperty
portfoliorelatedto,amongotherthings,wirelesstechnology.WehaveanextensiveportfolioofUnitedStatesandforeignpatents,andwecontinuetopursuepatent
applicationsaroundtheworld.Ourpatentshavebroadcoverageinmanycountries,includingBrazil,China,India,Japan,SouthKorea,Taiwanandcountriesin
Europeandelsewhere.Asubstantialportionofourpatentsandpatentapplicationsrelatetodigitalwirelesscommunicationstechnologies,includingpatentsthatare
essentialormaybeimportanttothecommercialimplementationofCDMA2000,WCDMA(UMTS),TD-SCDMA,TD-CDMA(TimeDivisionCDMA)and
OFDMA/LTEproducts.Ourpatentportfolioisthemostwidelyandextensivelylicensedintheindustry,withover330licensees.Additionally,wehavea
substantialpatentportfoliorelatedtokeytechnologiesusedincommunicationsandotherdevicesand/orrelatedservices,someofwhichweredevelopedin
industrystandardsdevelopmentbodies.Theseincludecertainvideocodec,audiocodec,wirelessLAN,memoryinterfaces,wirelesspower,GPSandpositioning,
broadcastandstreamingprotocols,andshortrangecommunicationfunctionalities,includingNFCandBluetooth.Ourpatentscoverawiderangeoftechnologies
acrosstheentirewirelesssystem,includingthedevice(handsetsandtablets)andnotjustwhatisembodiedinthechipsets.Overtheyears,anumberofcompanies
havechallengedourpatentposition,butatthistime,companiesinthemobilecommunicationsindustrygenerally

11

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232
recognizethatanycompanyseekingtodevelop,manufactureand/orsellsubscriberunitsorinfrastructureequipmentthatuseCDMA-based,and/orOFDMA-based
technologieswillrequirealicenseorotherrightstouseourpatents.

Wehavelicensedorotherwiseprovidedrightstouseourpatentstohundredsofcompaniesonindustry-acceptedterms.Unlikesomeothercompaniesinour
industrythatholdbackcertainkeytechnologies,weoffercompaniessubstantiallyourentirepatentportfolioforuseincellularsubscriberdevicesandcellsite
infrastructureequipment.Ourstrategytomakeourpatentedtechnologiesbroadlyavailablehasbeenacatalystforindustrygrowth,helpingtoenableawiderange
ofcompaniesofferingabroadarrayofwirelessproductsandfeatureswhileincreasingthecapabilitiesofand/ordrivingdownaverageandlow-endsellingprices
for3Ghandsetsandotherwirelessdevices.Bylicensingorotherwiseprovidingrightstouseourpatentstoawiderangeofequipmentmanufacturers,encouraging
innovativeapplications,supportingequipmentmanufacturerswithintegratedchipsetandsoftwareproductsandfocusingonimprovingtheefficiencyoftheairlink
forwirelessoperators,wehavehelped3GCDMAevolveandgrowandreduceddevicepricing,allatafasterpacethanthe2GtechnologiessuchasGSMthat
precededit.

Standardsbodieshavebeeninformedthatweholdpatentsthatmightbeessentialforall3GstandardsthatarebasedonCDMA.Wehavecommittedtosuch
standardsbodiesthatwewilloffertolicenseouressentialpatentsfortheseCDMAstandardsonafair,reasonableandnon-discriminatorybasis.Wehavealso
informedstandardsbodiesthatweholdpatentsthatmightbeessentialforcertainstandardsthatarebasedonOFDM/OFDMAtechnology(e.g.,LTE,including
FDDandTDDversions)andhavecommittedtooffertolicenseouressentialpatentsfortheseOFDMAstandardsonafair,reasonableandnon-discriminatory
basis.Wehavemadesimilarcommitmentswithrespecttocertainothertechnologiesimplementedinindustrystandards.

Ourlicenseagreementsalsomayprovideuswithrightstousecertainofourlicenseestechnologyandintellectualpropertytomanufactureandsellcertain
components(e.g.,Application-SpecificIntegratedCircuits)andrelatedsoftware,subscriberunitsand/orinfrastructureequipment.

QSI
Segment.
QSImakesstrategicinvestmentsthatarefocusedonopeningneworexpandingopportunitiesforourtechnologiesandsupportingthedesign
andintroductionofnewproductsandservices(orenhancingexistingproductsorservices)forvoiceanddatacommunications.Manyofthesestrategicinvestments
areinearly-stagecompaniesinavarietyofindustries,including,butnotlimitedto,digitalmedia,e-commerce,healthcareandwearabledevices.Investments
primarilyincludenon-marketableequityinstruments,whichgenerallyarerecordedusingthecostmethodortheequitymethod,andconvertibledebtinstruments,
whicharerecordedatfairvalue.QSIalsoheldwirelessspectrum,whichwassoldinthefirstquarteroffiscal2016foragainofapproximately$380million.In
addition,QSIsegmentresultsincluderevenuesandrelatedcostsassociatedwithdevelopmentcontractswithoneofourequitymethodinvestees.Aspartofour
strategicinvestmentactivities,weintendtopursuevariousexitstrategiesforeachofourQSIinvestmentsintheforeseeablefuture.

Other
Businesses.
Nonreportablesegmentsincludeourmobilehealth,datacenter,smallcellandotherwirelesstechnologyandserviceinitiatives.Our
nonreportablesegmentsdevelopandsellproductsandservicesthatinclude,butarenotlimitedto:development,otherservicesandrelatedproductstoU.S.
governmentagenciesandtheircontractors;productsandservicesformobilehealth;licenseofchipsettechnologyandproductsfordatacenters;softwareproducts
andcontentandpush-to-talkenablementservicestowirelessoperators;andproductsdesignedforimplementationofsmallcellstoaddressthechallengeof
meetingtheincreaseddemandfordata.

AdditionalinformationregardingouroperatingsegmentsisprovidedinthisAnnualReportinNotestoConsolidatedFinancialStatements,Note8.Segment
Information.InformationregardingseasonalityisprovidedinthisAnnualReportinPartII,Item7.ManagementsDiscussionandAnalysisofFinancial
ConditionandResultsofOperations,OurBusinessandOperatingSegmentsundertheheadingSeasonality.

Strategic Realignment Plan

Inthefourthquarteroffiscal2015,weannouncedaStrategicRealignmentPlandesignedtoimproveexecution,enhancefinancialperformanceanddrive
profitablegrowthasweworktocreatesustainablelong-termvalueforstockholders.AspartofthisStrategicRealignmentPlan,amongotheractions,we
implementedacostreductionplan,whichincludedaseriesoftargetedreductionsacrossourbusinesses,particularlyinQCT,andareductiontoannualshare-based
compensationgrants.AdditionalinformationregardingourStrategicRealignmentPlanisprovidedinthisAnnualReportinManagementsDiscussionand
AnalysisofFinancialConditionandResultsofOperation,Fiscal2016OverviewandNotestoConsolidatedFinancialStatements,Note10.Strategic
RealignmentPlan.

12

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232
Acquisitions

InJanuary2016,weannouncedthatwehadreachedanagreementwithTDKCorporationtoformajointventure,underthenameRF360HoldingsSingapore
Pte.Ltd.,toenabledeliveryofRFFEmodulesandRFfiltersintofullyintegratedproductsformobiledevicesandIoTapplications,amongothers.Thejointventure
willinitiallybeowned51%byusand49%byTDK.Certainintellectualproperty,patentsandfilterandmoduledesignandmanufacturingassetswillbecarvedout
ofexistingTDKbusinessesandbeacquiredbythejointventure,withcertainassetsacquiredbyus.Thepurchasepriceofourinterestinthejointventureandthe
assetstobetransferredtousis$1.2billion,tobeadjustedforworkingcapital,outstandingindebtednessandcertaincapitalexpenditures,amongotherthings.
Additionally,wehavetheoptiontoacquire(andTDKhasanoptiontosell)TDKsinterestinthejointventurefor$1.15billion30monthsaftertheclosingdate.
TDKwillbeentitledtouptoatotalof$200millioninpaymentsbasedonsalesofRFfilterfunctionsoverthethree-yearperiodaftertheclosingdate,whichisa
substituteforandinlieuofanyrightofTDKtoreceiveanyprofitsharing,distributions,dividendsorotherpaymentsofanykindornature.Thetransactionis
subjecttoreceiptofregulatoryapprovalsandotherclosingconditionsandisexpectedtocloseinearlycalendar2017.

OnOctober27,2016,weannouncedadefinitiveagreementunderwhichQualcommRiverHoldings,B.V.,anindirect,whollyownedsubsidiaryof
QualcommIncorporated,willacquireNXPSemiconductorsN.V.Pursuanttothedefinitiveagreement,QualcommRiverHoldingswillcommenceatenderofferto
acquirealloftheissuedandoutstandingcommonsharesofNXPfor$110pershareincash,forestimatedtotalcashconsiderationof$38billion.NXPisaleader
inhigh-performance,mixed-signalsemiconductorelectronicsinautomotive,broad-basedmicrocontrollers,secureidentification,networkprocessingandRFpower
products.

Thetransactionisexpectedtoclosebytheendofcalendar2017andissubjecttoreceiptofregulatoryapprovalsinvariousjurisdictionsandotherclosing
conditions,includingthetenderofspecifiedpercentages(whichvaryfrom70%to95%basedoncertaincircumstancesasprovidedinthedefinitiveagreement)of
theissuedandoutstandingcommonsharesofNXPintheoffer.AnExtraordinaryGeneralMeetingofNXPsshareholderswillbeconvenedinconnectionwiththe
offertoadopt,amongotherthings,certainresolutionsrelatingtothetransaction.Thetenderofferisnotsubjecttoanyfinancingcondition;however,weintendto
fundthetransactionwithcashheldbyforeignentitiesandnewdebt.Asaresult,wesecured$13.6billionincommittedfinancinginconnectionwithsigningthe
definitiveagreement.

QualcommRiverHoldingsandNXPmayterminatethedefinitiveagreementundercertaincircumstances.IfthedefinitiveagreementisterminatedbyNXPin
certaincircumstances,includingterminationbyNXPtoenterintoasuperiorproposalforanalternativeacquisitiontransactionoraterminationfollowingachange
ofrecommendationbytheNXPboardofdirectors,NXPwillberequiredtopayQualcommRiverHoldingsaterminationfeeof$1.25billion.Ifthedefinitive
agreementisterminatedbyQualcommRiverHoldingsundercertaincircumstancesinvolvingthefailuretoobtaintherequiredregulatoryapprovalsorthefailure
ofNXPtocompletecertainpre-closingreorganizationstepsinallmaterialrespects,QualcommRiverHoldingswillberequiredtopayNXPaterminationfeeof
$2.0billion.

Corporate Structure

Weoperateourbusinessesthroughourparentcompany,QUALCOMMIncorporated,andmultipledirectandindirectsubsidiaries.Wehavedevelopedour
corporatestructureinordertoaddressvariouslegal,regulatory,tax,contractualcompliance,operationsandothermatters.Substantiallyallofourproductsand
servicesbusinesses,includingQCT,andsubstantiallyallofourengineering,researchanddevelopmentfunctions,areoperatedbyQUALCOMMTechnologies,
Inc.(QTI),awholly-ownedsubsidiaryofQUALCOMMIncorporated,andQTIssubsidiaries.QTLisoperatedbyQUALCOMMIncorporated,whichownsthe
vastmajorityofourpatentportfolio.NeitherQTInoranyofitssubsidiarieshasanyright,powerorauthoritytograntanylicensesorotherrightsunderortoany
patentsownedbyQUALCOMMIncorporated.

Revenue Concentrations, Significant Customers and Geographical Information

Consolidatedrevenuesfrominternationalcustomersandlicenseesasapercentageoftotalrevenueswere98%,99%and99%infiscal2016,2015and2014,
respectively.Duringfiscal2016,57%,17%and12%ofourrevenueswerefromcustomersandlicenseesbasedinChina(includingHongKong),SouthKoreaand
Taiwan,respectively,comparedto53%,16%and13%duringfiscal2015,respectively,and50%,23%and11%duringfiscal2014,respectively.Wereport
revenuesfromexternalcustomersbycountrybasedonthelocationtowhichourproductsorservicesaredelivered,whichforQCTisgenerallythecountryin
whichourcustomersmanufacturetheirproducts,orforlicensingrevenues,theinvoicedaddressesofourlicensees.Asaresult,therevenuesbycountrypresented
hereinarenotnecessarilyindicativeofeitherthecountryinwhichthedevicescontainingourproductsand/orintellectualpropertyareultimatelysoldtoconsumers
orthecountryinwhichthecompaniesthatsellthedevicesareheadquartered.Forexample,Chinarevenuescouldincluderevenuesrelatedtoshipmentsof
integratedcircuitstoacompanythatisheadquarteredinSouthKoreabutthatmanufacturesdevicesinChina,

13

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232
whichdevicesarethensoldtoconsumersinEuropeand/ortheUnitedStates.AdditionalgeographicinformationisprovidedinthisAnnualReportinNotesto
ConsolidatedFinancialStatements,Note8.SegmentInformation.

Asmallnumberofcustomers/licenseeshistoricallyhaveaccountedforasignificantportionofourconsolidatedrevenues.Infiscal2016,2015and2014,
revenuesfromSamsungElectronicsandfromHonHaiPrecisionIndustryCo.,Ltd./Foxconn,itsaffiliatesandothersupplierstoAppleInc.eachcomprisedmore
than10%ofconsolidatedrevenues.

Research and Development

Thecommunicationsindustryischaracterizedbyrapidtechnologicalchange,evolvingindustrystandardsandfrequentnewproductintroductions,requiringa
continuousefforttoenhanceexistingproductsandtechnologiesandtodevelopnewproductsandtechnologies.Wehavesignificantengineeringresources,
includingengineerswithsubstantialexpertiseinCDMA,OFDMAandabroadrangeofothertechnologies.Usingtheseengineeringresources,weexpectto
continuetoinvestinresearchanddevelopmentinavarietyofwaysinanefforttoextendthedemandforourproductsandservices,includingcontinuingthe
developmentofCDMA,OFDMAandothertechnologies,developingalternativetechnologiesforcertainspecializedapplications,participatingintheformulation
ofnewvoiceanddatacommunicationstandardsandtechnologiesandassistingindeployingdigitalvoiceanddatacommunicationsnetworksaroundtheworld.
Ourresearchanddevelopmentteamhasademonstratedtrackrecordofinnovationinvoiceanddatacommunicationtechnologiesandapplicationprocessor
technology,amongothers.Ourresearchanddevelopmentexpendituresinfiscal2016,2015and2014totaledapproximately$5.2billion,$5.5billionand$5.5
billion,respectively.

Wecontinuetoinvestsignificantresourcestowardsadvancementsin4GOFDMA-basedtechnologies(includingLTE)and5G-basedtechnologies.Wealso
makeacquisitionstomeetcertaintechnologyneeds,toobtaindevelopmentresourcesortopursuenewbusinessopportunities.

Wemakeinvestmentstoprovideourintegratedcircuitcustomerswithchipsetsdesignedonleading-edgetechnologynodesthatcombinemultipletechnologies
foruseinconsumerdevices(e.g.,smartphones,tablets,laptops),consumerelectronicsandotherproducts(e.g.,accesspointsandrouters,datacardsand
infrastructureequipment).Inadditionto3Gand4GLTEtechnologies,ourchipsetssupportotherwirelessandwiredconnectivitytechnologies,includingWLAN,
Bluetooth,Ethernet,GPS,GLONASS,BeiDouandPowerlinecommunication.Ourintegratedchipsetsoftenincludemultipletechnologies,includingadvanced
multimodemodems,applicationprocessorsandgraphicsengines,aswellasthetoolstoconnectthesediversetechnologies.WecontinuetosupportAndroid,
Windowsandothermobileclientsoftwareenvironmentsinourchipsets.

Wedeveloponourown,andwithourpartners,innovationsthatareintegratedintoourproductportfoliotofurtherexpandtheopportunityforwireless
communicationsandenhancethevalueofourproductsandservices.Theseinnovationsareexpectedtoenableourcustomerstoimprovetheperformanceorvalue
oftheirexistingservices,offertheseservicesmoreaffordablyandintroducerevenue-generatingbroadbanddataservicesaheadoftheircompetition.

Wehaveresearchanddevelopmentcentersinvariouslocationsthroughouttheworldthatsupportourglobaldevelopmentactivitiesandongoingeffortsto
developand/oradvance4GOFDMA,5Gandabroadrangeofothertechnologies.Wecontinuetouseoursubstantialengineeringresourcesandexpertiseto
developnewtechnologies,applicationsandservicesandmakethemavailabletolicenseestohelpgrowthecommunicationsindustryandgeneratenewor
expandedlicensingopportunities.

Wealsomakeinvestmentsinopportunitiesthatleverageourexistingtechnicalandbusinessexpertisetodeploynewandexpandedproductareas,suchas
RFFE,andenterintoadjacentindustrysegments,suchasproductsforautomotive,theIoT,includingtheconnectedhome,smartcitiesandwearables,datacenter,
networking,mobilecomputing,mobilehealthandmachinelearning,includingrobotics,amongothers.

Sales and Marketing

SalesandmarketingactivitiesofouroperatingsegmentsarediscussedunderOperatingSegments.Othermarketingactivitiesincludepublicrelations,
advertising,digitalmarketingandsocialmedia,participationintechnicalconferencesandtradeshows,developmentofbusinesscasesandwhitepapers,
competitiveanalyses,industryintelligenceandothermarketingprograms,suchasmarketingdevelopmentfundswithourcustomers.OurCorporateMarketing
departmentprovidescompanyinformationonourInternetsiteandthroughotherchannelsregardingourproducts,strategiesandtechnologytoindustryanalysts
andmedia.

14

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Competition

CompetitionfacedbyouroperatingsegmentsisdiscussedunderOperatingSegments.Competitioninthecommunicationsindustrythroughouttheworld
continuestoincreaseatarapidpaceasconsumers,businessesandgovernmentsrealizethepotentialofwirelesscommunicationsproductsandservices.Wehave
facilitatedcompetitioninthewirelesscommunicationsindustrybylicensingourtechnologiesto,andthereforeenabling,alargenumberofmanufacturers.
Althoughwehaveattainedasignificantpositionintheindustry,manyofourcurrentandpotentialcompetitorsmayhaveadvantagesoverusthatinclude,among
others:motivationbyourcustomersincertaincircumstancestoutilizetheirowninternally-developedintegratedcircuitproducts,touseourcompetitorsintegrated
circuitproducts,ortochoosealternativetechnologies;lowercoststructuresand/orawillingnessandabilitytoacceptlowerpricesandlowerornegativemargins
fortheirproducts,particularlyinChina;foreigngovernmentsupportofothertechnologiesorcompetitors;betterknownbrandnames;ownershipandcontrolof
manufacturingfacilitiesandgreaterexpertiseinmanufacturingprocesses;moreextensiverelationshipswithlocaldistributioncompaniesandoriginalequipment
manufacturersinemerginggeographicregions(suchasChina);and/oramoreestablishedpresenceincertainregions.Theserelationshipsmayaffectcustomers
decisionstopurchaseproductsorlicensetechnologyfromus.Accordingly,newcompetitorsoralliancesamongcompetitorscouldemergeandrapidlyacquire
significantmarketpositionstoourdetriment.

Weexpectcompetitiontoincreaseasourcurrentcompetitorsexpandtheirproductofferingsandintroducenewtechnologiesandservicesinthefutureandas
additionalcompaniescompetewithourproductsorservicesbasedon3G,4Gorothertechnologies.Althoughweintendtocontinuetomakesubstantial
investmentsindevelopingnewproductsandtechnologiesandimprovingexistingproductsandtechnologies,ourcompetitorsmayintroducealternativeproducts,
servicesortechnologiesthatthreatenourbusiness.Itisalsopossiblethatthepriceswechargeforourproductsandservicesmaycontinuetodeclineascompetition
continuestointensify.

Corporate Responsibility and Sustainability

Westrivetobetterourlocalandglobalcommunitiesthroughethicalbusinesspractices,sociallyempoweringtechnologyapplications,educationaland
environmentalprogramsandemployeediversityandvolunteerism.

Our
Governance.
Weaimtodemonstrateaccountability,transparency,integrityandethicalbusinesspracticesthroughoutouroperationsandinteractions
withourstakeholders.

Our
Products.
Westrivetomeetorexceedindustrystandardsforproductresponsibilityandsuppliermanagement.

Our
Workplace.
Weendeavortoprovideasafeandhealthyworkenvironmentwherediversityisembracedandvariousopportunitiesfortraining,growth
andadvancementareencouragedforallemployees.

Our
Community.
Wehavestrategicrelationshipswithawiderangeoflocalorganizationsandprogramsthatdevelopandstrengthencommunities
worldwide.

Our
Environment.
Weaimtoexpandouroperationswhileminimizingourcarbonfootprint,conservingwaterandreducingwaste.

Qualcomm
Wireless
Reach.
Weinvestinstrategicprogramsthatfosterentrepreneurship,aidinpublicsafety,enhancedeliveryofhealthcare,enrich
teachingandlearningandimproveenvironmentalsustainabilitythroughtheuseofadvancedwirelesstechnologies.

Employees

AtSeptember25,2016,weemployedapproximately30,500full-time,part-timeandtemporaryemployees.Duringfiscal2016,thenumberofemployees
decreasedbyapproximately2,500primarilyduetoactionsinitiatedundertheStrategicRealignmentPlan.

Available Information

OurInternetaddressiswww.qualcomm.com.Therewemakeavailable,freeofcharge,ourannualreportonForm10-K,quarterlyreportsonForm10-Q,
currentreportsonForm8-Kandanyamendmentstothosereports,assoonasreasonablypracticableafterweelectronicallyfilesuchmaterialwith,orfurnishitto,
theSecuritiesandExchangeCommission(SEC).WealsomakeavailableonourInternetsitepublicfinancialinformationforwhichareportisnotrequiredtobe
filedwithorfurnishedtotheSEC.OurSECreportsandotherfinancialinformationcanbeaccessedthroughtheinvestorrelationssectionofourInternetsite.The
informationfoundonourInternetsiteisnotpartofthisoranyotherreportwefilewithorfurnishtotheSEC.

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Executive Officers

Ourexecutiveofficers(andtheiragesatSeptember25,2016)areasfollows:

PaulE.Jacobs,age53,hasservedasExecutiveChairmansinceMarch2014.HehasservedasChairmanoftheBoardofDirectorssinceMarch2009andasa
directorsinceJune2005.HeservedasChiefExecutiveOfficerfromJuly2005toMarch2014andasGroupPresidentofQualcommWireless&Internetfrom
July2001toJune2005.Inaddition,heservedasanExecutiveVicePresidentfromFebruary2000toJune2005.Dr.JacobsholdsaB.S.degreeinElectrical
EngineeringandComputerScience,anM.S.degreeinElectricalEngineeringandaPh.D.degreeinElectricalEngineeringandComputerSciencefromthe
UniversityofCalifornia,Berkeley.

SteveMollenkopf,age47,hasservedasChiefExecutiveOfficersinceMarch2014andasadirectorsinceDecember2013.HeservedasChiefExecutive
Officer-electandPresidentfromDecember2013toMarch2014andasPresidentandChiefOperatingOfficerfromNovember2011toDecember2013.In
addition,heservedasExecutiveVicePresidentandGroupPresidentfromSeptember2010toNovember2011,asExecutiveVicePresidentandPresidentofQCT
fromAugust2008toSeptember2010,asExecutiveVicePresident,QCTProductManagementfromMay2008toAugust2008,asSeniorVicePresident,
EngineeringandProductManagementfromJuly2006toMay2008andasVicePresident,EngineeringfromApril2002toJuly2006.Mr.Mollenkopfjoined
Qualcommin1994asanengineerandthroughouthistenureatQualcommhasheldseveralothertechnicalandleadershippositions.Mr.MollenkopfholdsaB.S.
degreeinElectricalEngineeringfromVirginiaTechandanM.S.degreeinElectricalEngineeringfromtheUniversityofMichigan.

DerekK.Aberle,age46,hasservedasPresidentsinceMarch2014.HeservedasExecutiveVicePresidentandGroupPresidentfromNovember2011to
March2014,asPresidentofQTLfromSeptember2008toNovember2011andasSeniorVicePresidentandGeneralManagerofQTLfromOctober2006to
September2008.Mr.AberlejoinedQualcomminDecember2000andpriortoOctober2006heldpositionsrangingfromLegalCounseltoVicePresidentand
GeneralManagerofQTL.Mr.AberleholdsaB.A.degreeinBusinessEconomicsfromtheUniversityofCalifornia,SantaBarbaraandaJ.D.degreefromthe
UniversityofSanDiego.

CristianoR.Amon,age46,hasservedasExecutiveVicePresident,QualcommTechnologies,Inc.(QTI,asubsidiaryofQualcommIncorporated)and
PresidentofQualcommCDMATechnologies(QCT)sinceNovember2015.HeservedasExecutiveVicePresident,QTIandCo-PresidentofQCTfromOctober
2012toNovember2015,SeniorVicePresident,QualcommIncorporatedandCo-PresidentofQCTfromJune2012toOctober2012,asSeniorVicePresident,
QCTProductManagementfromOctober2007toJune2012andasVicePresident,QCTProductManagementfromSeptember2005toOctober2007.Mr.Amon
joinedQualcommin1995asanengineerandthroughouthistenureatQualcommheldseveralothertechnicalandleadershippositions.Mr.AmonholdsaB.S.
degreeinElectricalEngineeringfromUNICAMP,theStateUniversityofCampinas,Brazil.

GeorgeS.Davis,age58,hasservedasExecutiveVicePresidentandChiefFinancialOfficersinceMarch2013.PriortojoiningQualcomm,Mr.Daviswas
ChiefFinancialOfficerofAppliedMaterials,Inc.,aproviderofmanufacturingequipment,servicesandsoftwaretothesemiconductor,flatpaneldisplay,solar
photovoltaicandrelatedindustries,fromNovember2006toMarch2013.Mr.DavisheldseveralotherleadershippositionsatAppliedMaterialsfromNovember
1999toNovember2006.PriortojoiningAppliedMaterials,Mr.Davisserved19yearswithAtlanticRichfieldCompanyinanumberoffinanceandother
corporatepositions.Mr.DavisholdsaB.A.degreeinEconomicsandPoliticalSciencefromClaremontMcKennaCollegeandanM.B.A.degreefromthe
UniversityofCalifornia,LosAngeles.

MatthewS.Grob,age50,hasservedasExecutiveVicePresident,QualcommTechnologies,Inc.andChiefTechnologyOfficersinceOctober2012.Heserved
asExecutiveVicePresident,QualcommIncorporatedandChiefTechnologyOfficerfromJuly2011toOctober2012andasSeniorVicePresident,Engineering
fromJuly2006toJuly2011.Mr.GrobjoinedQualcomminAugust1991asanengineerandthroughouthistenureatQualcommheldseveralothertechnicaland
leadershippositions.Mr.GrobholdsaB.S.degreeinElectricalEngineeringfromBradleyUniversityandanM.S.degreeinElectricalEngineeringfromStanford
University.

BrianT.Modoff,age57,hasservedasExecutiveVicePresident,StrategyandMergers&AcquisitionssinceOctober2015.PriortojoiningQualcomm,Mr.
ModoffwasaManagingDirectorinEquityResearchatDeutscheBankSecuritiesInc.(DeutscheBank),aprovideroffinancialservices,fromMarch1999to
October2015.PriortojoiningDeutscheBank,Mr.ModoffwasaresearchanalystatseveralfinancialinstitutionsfromNovember1993toMarch1999.Mr.
ModoffholdsaB.A.degreeinEconomicsfromCaliforniaStateUniversity,FullertonandaMasterofInternationalManagementfromtheThunderbirdSchoolof
GlobalManagement.

AlexanderH.Rogers,age59,hasservedasExecutiveVicePresidentandPresidentofQTLsinceOctober2016.HeservedasSeniorVicePresidentand
President,QTLfromSeptember2016toOctober2016,SeniorVicePresident,Deputy

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GeneralCounselandGeneralManagerofQTLfromMarch2016toSeptember2016,SeniorVicePresidentandDeputyGeneralCounselfromOctober2015to
March2016andSeniorVicePresidentandLegalCounselfromApril2007toOctober2015.Mr.RogersjoinedQualcomminJanuary2001asSeniorLegal
CounselandthroughouthistenureatQualcommheldseveralotherleadershippositionsinthelegaldepartment.PriortojoiningQualcomm,Mr.Rogerswasa
partneratthelawfirmofGray,Cary,Ware&Friedenrich(nowDLAPiper).Mr.RogersholdsM.A.andB.A.degreesinEnglishLiteraturefromGeorgetown
UniversityandaJ.D.degreefromGeorgetownUniversityLawCenter.

DonaldJ.Rosenberg,age65,hasservedasExecutiveVicePresident,GeneralCounselandCorporateSecretarysinceOctober2007.HeservedasSeniorVice
President,GeneralCounselandCorporateSecretaryofAppleInc.fromDecember2006toOctober2007.FromMay1975toNovember2006,Mr.Rosenbergheld
numerouspositionsatIBMCorporation,includingSeniorVicePresidentandGeneralCounsel.Mr.Rosenberghasservedasamemberoftheboardofdirectorsof
NuVasive,Inc.sinceFebruary2016.Mr.RosenbergholdsaB.S.degreeinMathematicsfromtheStateUniversityofNewYorkatStonyBrookandaJ.D.degree
fromSt.JohnsUniversitySchoolofLaw.

MichelleSterling,age49,hasservedasExecutiveVicePresidentofHumanResourcessinceMay2015.SheservedasSeniorVicePresident,Human
ResourcesfromOctober2007toApril2015.Ms.SterlingjoinedQualcommin1994andthroughouthertenureatQualcommhasheldseveralotherleadership
positions.Ms.SterlingholdsaB.S.degreeinBusinessManagementfromtheUniversityofRedlands.

JamesH.Thompson,age52,hasservedasExecutiveVicePresident,EngineeringforQualcommTechnologies,Inc.sinceOctober2012.HeservedasSenior
VicePresident,EngineeringforQualcommIncorporatedfromJuly1998toOctober2012.Dr.ThompsonjoinedQualcommin1992asaseniorengineerand
throughouthistenureatQualcommheldseveralothertechnicalandleadershippositions.Dr.ThompsonholdsB.S.,M.S.andPh.D.degreesinElectrical
EngineeringfromtheUniversityofWisconsin.

Item 1A. Risk Factors

Youshouldconsidereachofthefollowingfactorsinevaluatingourbusinessandourprospects.Therisksanduncertaintiesdescribedbelowarenottheonly
onesweface.Additionalrisksanduncertaintiesnotpresentlyknowntousorthatwecurrentlyconsiderimmaterialmayalsoimpairourbusinessoperations.Ifany
oftheserisksoccur,ourbusinessandfinancialresultscouldbeharmed.Inthatcase,thetradingpriceofourcommonstockcoulddecline.Youshouldalso
considertheotherinformationsetforthinthisAnnualReportinevaluatingourbusinessandourprospects,includingbutnotlimitedtoourfinancialstatementsand
therelatednotes,andPartII,Item7.ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations.

Risks Related to Our Businesses

Our
proposed
acquisition
of
NXP
involves
a
number
of
risks,
including,
among
others,
the
risk
that
we
fail
to
complete
the
acquisition,
in
a
timely
manner
or
at
all,
regulatory
risks,
risks
associated
with
our
use
of
a
significant
portion
of
our
cash
and
our
taking
on
significant
indebtedness,
other
financial
risks,
integration
risks,
and
risk
associated
with
the
reactions
of
customers,
suppliers
and
employees.
OurandNXPsobligationstoconsummatetheproposedtransactionaresubjecttothesatisfactionorwaiverofcertainconditions,including,amongothers:(i)
thetenderofaminimumnumberofNXPsoutstandingcommonsharesinthetenderoffertobecommencedbyasubsidiaryofQualcommIncorporated;(ii)the
expirationorterminationofanywaitingperiodsundertheHart-Scott-RodinoAntitrustImprovementsActof1976,asamended;(iii)thereceiptofregulatory
clearanceunderEuropeanUnionandcertainotherforeignantitrustlaws;(iv)theabsenceofanylawororderprohibitingtheproposedtransaction;(v)therebeing
noeventthatwouldhaveamaterialadverseeffectonNXP;(vi)theaccuracyoftherepresentationsandwarrantiesofNXP,subjecttocertainexceptions,and
NXPsmaterialcompliancewithitscovenants,inthedefinitiveagreement;(vii)theapprovalofcertaingovernance-relatedresolutionsatanextraordinarygeneral
meetingofNXPsshareholders;and(viii)thecompletionofcertaininternalreorganizationstepswithrespecttoNXPandthedispositionofcertainnon-coreassets
ofNXP.Wecannotprovideassurancethattheconditionstothecompletionoftheproposedtransactionwillbesatisfiedinatimelymanneroratall,andifthe
proposedtransactionisnotcompleted,wewouldnotrealizeanyoftheexpectedbenefits.

Theregulatoryapprovalsrequiredinconnectionwiththeproposedtransactionmaynotbeobtainedormaycontainmateriallyburdensomeconditions.Ifany
conditionsorchangestothestructureoftheproposedtransactionarerequiredtoobtaintheseregulatoryapprovals,theymayhavetheeffectofjeopardizingor
delayingcompletionoftheproposedtransactionorreducingouranticipatedbenefits.Ifweagreetoanymaterialconditionsinordertoobtainanyapprovals
requiredtocompletetheproposedtransaction,ourbusinessandresultsofoperationsmaybeadverselyaffected.

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Inaddition,theuseofasignificantportionofourcashandtheincurrenceofsubstantialindebtednessinconnectionwiththefinancingoftheproposed
transactionmayhaveanadverseimpactonourliquidity,limitourflexibilityinrespondingtootherbusinessopportunitiesandincreaseourvulnerabilitytoadverse
economicandindustryconditions.SeetheRiskFactorentitledThere
are
risks
associated
with
our
indebtedness
.

Iftheproposedtransactionisnotcompleted,ourstockpricecouldfalltotheextentthatourcurrentpricereflectsanassumptionthatwewillcompleteit.
Furthermore,iftheproposedtransactionisnotcompletedandthepurchaseagreementisterminated,wewouldnotrealizeanyoftheexpectedbenefitsofthe
proposedtransaction,andwemaysufferotherconsequencesthatcouldadverselyaffectourbusiness,resultsofoperationsandstockprice,including,among
others:

wecouldberequiredtopayaterminationfeetoNXPof$2.0billion;

wewillhaveincurredandmaycontinuetoincurcostsrelatingtotheproposedtransaction,manyofwhicharepayablebyuswhetherornottheproposed
transactioniscompleted;

mattersrelatingtotheproposedtransaction(includingintegrationplanning)requiresubstantialcommitmentsoftimeandresourcesbyourmanagement
teamandnumerousothersthroughoutourorganization,whichcouldotherwisehavebeendevotedtootheropportunities;

wemaybesubjecttolegalproceedingsrelatedtotheproposedtransactionorthefailuretocompletetheproposedtransaction;

thefailuretoconsummatetheproposedtransactionmayresultinnegativepublicityandanegativeperceptionofusintheinvestmentcommunity;and

anydisruptionstoourbusinessresultingfromtheannouncementandpendencyoftheproposedtransaction,includinganyadversechangesinour
relationshipswithourcustomers,suppliers,partnersoremployees,maycontinueorintensifyintheeventtheproposedtransactionisnotconsummated.

Theproposedtransactionwillbeourlargestacquisitiontodate,byasignificantmargin.Thebenefitsweexpecttorealizefromtheproposedtransactionwill
depend,inpart,onourabilitytointegratethebusinessessuccessfullyandefficiently.SeetheRiskFactorentitledWe
may
engage
in
strategic
acquisitions,
transactions
or
make
investments
that
could
adversely
affect
our
financial
results
or
fail
to
enhance
stockholder
value
.

Furthermore,uncertaintiesabouttheproposedtransactionmaycauseourand/orNXPscurrentandprospectiveemployeestoexperienceuncertaintyabout
theirfutures.Theseuncertaintiesmayimpairourand/orNXPsabilitytoretain,recruitormotivatekeymanagement,engineering,technicalandotherpersonnel.
Similarly,ourand/orNXPsexistingorprospectivecustomers,licensees,suppliersand/orpartnersmaydelay,deferorceasepurchasingproductsorservicesfrom
orprovidingproductsorservicestousorNXP;delayordeferotherdecisionsconcerningusorNXP;orotherwiseseektochangethetermsonwhichtheydo
businesswithusorNXP.Anyoftheabovecouldharmusand/orNXP,andthusdecreasethebenefitsweexpecttoreceivefromtheproposedtransaction.

Theproposedtransactionmayalsoresultinsignificantchargesorotherliabilitiesthatcouldadverselyaffectourfinancialresults,suchascashexpensesand
non-cashaccountingchargesincurredinconnectionwithouracquisitionand/orintegrationofthebusinessandoperationsofNXP.Further,ourfailuretoidentify
oraccuratelyassessthemagnitudeofcertainliabilitiesweareassumingintheproposedtransactioncouldresultinunexpectedlitigationorregulatoryexposure,
unfavorableaccountingcharges,unexpectedincreasesintaxesdue,alossofanticipatedtaxbenefitsorotheradverseeffectsonourbusiness,operatingresultsor
financialcondition.Thepriceofourcommonstockfollowingtheproposedtransactioncoulddeclinetotheextentourfinancialresultsaremateriallyaffectedby
anyoftheseevents.

Our
revenues
depend
on
commercial
network
deployments,
expansions
and
upgrades
of
CDMA,
OFDMA
and
other
communications
technologies;
our
customers
and
licensees
sales
of
products
and
services
based
on
these
technologies;
and
customers
demand
for
our
products
and
services.
Wedevelop,patentandcommercializetechnologyandproductsbasedonCDMA,OFDMAandothercommunicationstechnologies,whichareprimarily
wireless.Wedependonoperatorsofwirelessnetworksandourcustomersandlicenseestoadoptthesetechnologiesforuseintheirnetworks,devicesandservices.
Wealsodependonourcustomersandlicenseestodevelopdevicesandservicesbasedonthesetechnologieswithvalue-addedfeaturestodriveconsumerdemand
fornew3G,3G/4Gmultimodeand4Gdevices,aswellasestablishingthesellingpricesforsuchdevices.Further,wedependonthetimingofourcustomersand
licenseesdeploymentsofnewdevicesandservicesbasedonthesetechnologies.Increasingly,wealsodependonoperatorsofwirelessnetworks,ourcustomers
andlicenseesandotherthirdpartiestoincorporatethesetechnologiesintonewdevicetypesandintoindustriesbeyondtraditionalcellularcommunications,suchas
automotive,theIoT,includingtheconnectedhome,smartcitiesandwearables,datacenter,networking,mobilecomputing,mobilehealthand

18

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machinelearning,includingrobotics,amongothers.Wearealsoimpactedbyconsumersratesofreplacementofsmartphonesandothercomputingdevices.
Ourrevenuesand/orgrowthinrevenuescouldbenegativelyimpacted,ourbusinessmaybeharmedandoursubstantialinvestmentsinthesetechnologiesmay
notprovideusanadequatereturn,if:
wirelessoperatorsandindustriesbeyondtraditionalcellularcommunicationsdeployalternativetechnologies;
wirelessoperatorsdelay3Gand3G/4Gmultimodenetworkdeployments,expansionsorupgradesand/ordelaymoving2Gcustomersto3G,3G/4G
multimodeor4Gwirelessdevices;
LTE,anOFDMA-based4Gwirelesstechnology,isnotmorewidelydeployedorfurthercommercialdeploymentisdelayed;
governmentregulatorsdelaymakingsufficientspectrumavailablefor3G,4G,newunlicensedtechnologiesthatwearedevelopinginconjunctionwith
3Gand4G,aswellasfor5G,therebyrestrictingtheabilityofwirelessoperatorstodeployorexpandtheuseofthesetechnologies;
wirelessoperatorsdelayordonotdriveimprovementsin3Gor3G/4Gmultimodenetworkperformanceand/orcapacity;
ourcustomersandlicenseesrevenuesandsalesofproducts,particularlypremium-tierproducts,andservicesusingthesetechnologiesdonotgrowordo
notgrowasquicklyasanticipateddueto,forexample,thematurityofsmartphonepenetrationindevelopedregions;
ourintellectualpropertyandtechnicalleadershipincludedinthe5Gstandardizationeffortisdifferentthanin3Gand4Gstandards;
thestandardizationand/ordeploymentof5Gtechnologyisdelayed;and/or

weareunabletodrivetheadoptionofourproductsandservicesintonetworksanddevices,includingdevicesbeyondtraditionalcellularapplications,
basedonCDMA,OFDMAandothercommunicationstechnologies.
Our
industry
is
subject
to
competition
in
an
environment
of
rapid
technological
change
that
could
result
in
decreased
demand
and/or
declining
average
selling
prices
for
our
products
and/or
those
of
our
customers
and/or
licensees.
Ourproducts,servicesandtechnologiesfacesignificantcompetition.Weexpectcompetitiontoincreaseasourcurrentcompetitorsexpandtheirproduct
offeringsorreducethepricesoftheirproductsaspartofastrategytoattractnewbusinessand/orcustomers,asnewopportunitiesdevelopandasnewcompetitors
entertheindustry.Competitioninwirelesscommunicationsisaffectedbyvariousfactorsthatinclude,amongothers:devicemanufacturerconcentrations;growth
indemand,consumptionandcompetitioninemerginggeographicregions;governmentinterventionand/orsupportofnationalindustriesand/orcompetitors;
evolvingindustrystandardsandbusinessmodels;evolvingmethodsoftransmissionofvoiceanddatacommunications;increasingdatatrafficanddensificationof
wirelessnetworks;convergenceandaggregationofconnectivitytechnologies(includingWi-FiandLTE)inbothdevicesandaccesspoints;consolidationof
wirelesstechnologiesandinfrastructureatthenetworkedge;networkingandconnectivitytrends(includingcloudservices);useofbothlicensedandunlicensed
spectrum;theevolvingnatureofcomputing(includingdemandforalwayson,alwaysconnectedcapabilities);thespeedoftechnologicalchange(includingthe
transitiontosmallergeometryprocesstechnologies);value-addedfeaturesthatdrivesellingpricesaswellasconsumerdemandfornew3G,3G/4Gmultimodeand
4Gdevices;turnkey,integratedproductsthatincorporatehardware,software,userinterface,applicationsandreferencedesigns;scalability;andtheabilityofthe
systemtechnologytomeetcustomersimmediateandfuturenetworkrequirements.Weanticipatethatadditionalcompetitorswillintroduceproductsasaresultof
growthopportunitiesinwirelesscommunications,thetrendtowardglobalexpansionbyforeignanddomesticcompetitors,technologicalandpublicpolicychanges
andrelativelylowbarrierstoentryincertainsegmentsoftheindustry.Additionally,thesemiconductorindustryhasexperiencedandmaycontinuetoexperience
consolidation,whichcouldresultinsignificantchangestothecompetitivelandscape.
Weexpectthatourfuturesuccesswilldependon,amongotherfactors,ourabilityto:
differentiateourintegratedcircuitproductswithinnovativetechnologiesacrossmultipleproductsandfeatures(e.g.,modem,RFFE,graphicsand/orother
processors,cameraandconnectivity)andwithsmallergeometryprocesstechnologiesthatdriveperformance;
developandofferintegratedcircuitproductsatcompetitivecostandpricepointstoeffectivelycoverbothemerginganddevelopedgeographicregions
andalldevicetiers;

19

Exhibit 21
Page 172
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2122 Page 108 of
232
continuetodrivetheadoptionofourintegratedcircuitproductsintothemostpopulardevicemodelsandacrossabroadspectrumofdevices,suchas
smartphones,tablets,othercomputingdevices,automobiles,wearableandotherconnecteddevicesandinfrastructureproducts;
maintainand/oracceleratedemandforourintegratedcircuitproductsatthepremiumdevicetier,whileincreasingtheadoptionofourproductsinmid-
andlow-tierdevices,inpartbystrengtheningourintegratedcircuitproductroadmapfor,anddevelopingchannelrelationshipsin,emerginggeographic
regions,suchasChinaandIndia,andbyprovidingturnkeyproducts,whichincorporateourintegratedcircuits,forlow-andmid-tiersmartphonesand
tablets;
continuetobealeaderin4Gtechnologyevolution,includingexpansionofourLTE-basedsinglemodelicensingprograminareaswheresingle-mode
productsarecommercialized,andcontinuetoinnovateandintroduce4Gturnkey,integratedproductsandservicesthatdifferentiateusfromour
competition;
bealeaderservingoriginalequipmentmanufacturers,highleveloperatingsystems(HLOS)providers,operatorsandotherindustryparticipantsas
competitors,newindustryentrantsandotherfactorscontinuetoaffecttheindustrylandscape;
beapreferredpartner(andsustainpreferredrelationships)providingintegratedcircuitproductsthatsupportmultipleoperatingsystemandinfrastructure
platformstoindustryparticipantsthateffectivelycommercializenewdevicesusingtheseplatforms;
increaseand/oracceleratedemandforoursemiconductorcomponentproducts,includingRFFE,andourwiredandwirelessconnectivityproducts,
includingnetworkingproductsforconsumers,carriersandenterpriseequipmentandconnecteddevices;
identifypotentialacquisitiontargetsthatwillgroworsustainourbusinessoraddressstrategicneeds,reachagreementontermsacceptabletousand
effectivelyintegratethesenewbusinessesand/ortechnologies;
createstandalonevalueand/orcontributetothesuccessofourexistingbusinessesthroughacquisitions,jointventuresandothertransactions(and/orby
developingcustomer,licenseeand/orvendorrelationships)innewindustrysegmentsand/ordisruptivetechnologies,productsand/orservices(suchas
productsforautomotive,theIoT,includingtheconnectedhome,smartcitiesandwearables,datacenter,networking,mobilecomputing,mobilehealth
andmachinelearning,includingrobotics,amongothers);
becomealeadingsupplierofradiofrequencyfront-endproducts,whicharedesignedtoaddresscellularradiofrequencybandfragmentationwhile
improvingradiofrequencyperformanceandassistoriginalequipmentmanufacturersindevelopingmultiband,multimodemobiledevices;
bealeaderin5Gtechnologydevelopment,standardization,intellectualpropertycreationandlicensinganddevelopandcommercialize5Gintegrated
circuitproductsandservices;and/or
continuetodevelopbrandrecognitiontoeffectivelycompeteagainstbetterknowncompaniesinmobilecomputingandotherconsumerdrivensegments
andtodeepenourpresenceinsignificantemerginggeographicregions.
Competitioninanyorallproducttiersmayresultinthelossofcertainbusinessorcustomers,whichwouldnegativelyimpactourrevenuesandoperating
results.Suchcompetitionmayalsoreduceaveragesellingpricesforourchipsetproductsand/ortheproductsofourcustomersandlicensees.Certainofthese
dynamicsareparticularlypronouncedinemerginggeographicregionswherecompetitorsmayhavelowercoststructuresand/ormayhaveawillingnessandability
toacceptlowerpricesand/orlowerornegativemarginsontheirproducts(particularlyinChina).Reductionsintheaveragesellingpricesofourchipsetproducts,
withoutacorrespondingincreaseinvolumes,wouldnegativelyimpactourrevenues,andwithoutcorrespondingdecreasesinaverageunitcosts,wouldnegatively
impactourmargins.Inaddition,reductionsintheaveragesellingpricesofourlicenseesproducts,unlessoffsetbyanincreaseinvolumes,wouldgenerally
decreasetotalroyaltiespayabletous,negativelyimpactingourlicensingrevenues.
CompaniesthatpromotestandardsthatareneitherCDMA-norOFDMA-based(e.g.,GSM)aswellascompaniesthatdesignintegratedcircuitsbasedon
CDMA,OFDMA,Wi-Fiortheirderivativesaregenerallycompetitorsorpotentialcompetitors.Examples(someofwhicharestrategicpartnersofoursinother
areas)includeBroadcomLimited,CirrusLogic,Ericsson,HiSiliconTechnologies,Intel,LeadcoreTechnologyCo.,Ltd.,MarvellTechnology,MaximIntegrated
Products,MediaTek,MicrochipTechnologyInc.,Nvidia,QorvoInc.,RealtekSemiconductor,SamsungElectronics,SkyworksSolutionsInc.andSpreadtrum
Communications(whichiscontrolledbyTsinghuaUnigroup).Someofthesecurrentandpotentialcompetitorsmayhaveadvantagesoverusthatinclude,among
others:motivationbyourcustomersincertaincircumstancestoutilizetheirowninternally-developedintegratedcircuitproducts,touseourcompetitorsintegrated
circuitproducts,ortochoosealternativetechnologies;lowercoststructuresand/orawillingnessandabilitytoacceptlowerprices

20

Exhibit 21
Page 173
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2123 Page 109 of
232
andlowerornegativemarginsfortheirproducts,particularlyinChina;foreigngovernmentsupportofothertechnologiesorcompetitors;betterknownbrand
names;ownershipandcontrolofmanufacturingfacilitiesandgreaterexpertiseinmanufacturingprocesses;moreextensiverelationshipswithlocaldistribution
companiesandoriginalequipmentmanufacturersinemerginggeographicregions(suchasChina);and/oramoreestablishedpresenceincertainregions.
We
derive
a
significant
portion
of
our
consolidated
revenues
from
a
small
number
of
customers
and
licensees.
If
revenues
derived
from
these
customers
or
licensees
decrease
or
the
timing
of
such
revenues
fluctuates,
our
operating
results
could
be
negatively
affected.
OurQCTsegmentderivesasignificantportionofitsrevenuesfromasmallnumberofcustomers,andweexpectthistrendtocontinueintheforeseeable
future.Ourindustryisexperiencingandmaycontinuetoexperienceconcentrationofdeviceshareamongafewcompanies,particularlyatthepremiumtier,
contributingtothistrend.Inaddition,certainofourlargestintegratedcircuitcustomersdeveloptheirownintegratedcircuitproducts,whichtheyhaveinthepast
chosen,andmayinthefuturechoose,toutilizeincertainoftheirdevicesratherthanourintegratedcircuitproducts(and/orselltheirintegratedcircuitproductsto
thirdpartiesincompetitionwithus).Also,oneofourlargestintegratedcircuitcustomershasbeguntoutilizeproductsofoneofourcompetitorsincertainoftheir
devicesratherthanourproducts.
Thelossofanyoneofoursignificantcustomers,areductioninthepurchasesofourproductsbysuchcustomersorthecancelationofsignificantpurchases
fromanyofthesecustomers,whetherduetotheuseoftheirownintegratedcircuitproducts,ourcompetitorsintegratedcircuitproductsorotherwise,would
reduceourrevenuesandcouldharmourabilitytoachieveorsustainexpectedoperatingresults,andadelayofsignificantpurchases,evenifonlytemporary,would
reduceourrevenuesintheperiodofthedelay.Further,theconcentrationofdeviceshareamongafewcompanies,andthecorrespondingpurchasingpowerof
thesecompanies,mayresultinlowerpricesforourproductswhich,ifnotaccompaniedbyasufficientincreaseinthevolumeofpurchasesofourproducts,could
haveanadverseeffectonourrevenuesandmargins.Inaddition,thetimingandsizeofpurchasesbyoursignificantcustomersmaybeimpactedbythetimingof
suchcustomersnewornextgenerationproductintroductions,overwhichwehavenocontrol,andthetimingofsuchintroductionsmaycauseouroperatingresults
tofluctuate.Accordingly,ifcurrentindustrydynamicsandconcentrationscontinue,ourQCTsegmentsrevenueswillcontinuetodependlargelyupon,andbe
impactedby,futurepurchases,andthetimingandsizeofanysuchfuturepurchases,bythesesignificantcustomers.
OneofourlargestcustomerspurchasesourMobileDataModem(MDM)products,whichdonotincludeourintegratedapplicationprocessortechnologyand
whichhavelowerrevenueandmargincontributionsthanourcombinedmodemandapplicationprocessorproducts.Totheextentsuchcustomertakesdeviceshare
fromourothercustomerswhopurchaseourintegratedmodemandapplicationprocessorproducts,ourrevenuesandmarginsmaybenegativelyimpacted.
Further,companiesthatdevelopHLOSfordevices,includingleadingtechnologycompanies,nowselltheirowndevices.Ifwefailtoeffectivelypartneror
continuepartneringwiththesecompanies,orwiththeirpartnersorcustomers,theymaydecidenottopurchase(eitherdirectlyorthroughtheircontract
manufacturers),ortoreduceordiscontinuetheirpurchasesof,ourintegratedcircuitproducts.
Inaddition,therehasbeenandcontinuestobelitigationamongcertainofourcustomersandotherindustryparticipants,andthepotentialoutcomesofsuch
litigation,includingbutnotlimitedtoinjunctionsagainstdevicesthatincorporateourproductsand/orintellectualpropertyorrulingsoncertainpatentlawor
patentlicensingissuesthatcreatenewlegalprecedent,couldimpactourbusiness,particularlyifsuchactionimpactsoneofourlargercustomers.
Althoughwehavemorethan330CDMA-basedlicensees,ourQTLsegmentderivesasignificantportionoflicensingrevenuesfromalimitednumberof
licensees.Intheeventthatoneormoreofoursignificantlicenseesfailtomeettheirreportingand/orpaymentrequirementsorweareunabletorenewormodify
oneormoreofsuchlicenseagreementsundersimilarterms,ourrevenues,operatingresultsandcashflowswouldbeadverselyimpacted.Moreover,thefuture
growthandsuccessofourcorelicensingbusinesswilldependinpartontheabilityofourlicenseestodevelop,introduceanddeliverhigh-volumeproductsthat
achieveandsustaincustomeracceptance.Wehavelittleornocontrolovertheproductdevelopment,saleseffortsorpricingofproductsbyourlicensees,andour
licenseesmightnotbesuccessful.Reductionsintheaveragesellingpricesofwirelessdevicessoldbyourmajorlicensees,withoutasufficientincreaseinthe
volumesofsuchdevicessold,wouldgenerallyhaveanadverseeffectonourlicensingrevenues.
We
derive
a
significant
portion
of
our
consolidated
revenues
from
the
premium-tier
device
segment.
If
sales
of
premium-tier
devices
decrease,
and/or
sales
of
our
premium-tier
integrated
circuit
products
decrease,
our
operating
results
could
be
negatively
affected.
Wederiveasignificantportionofourrevenuesfromthepremium-tierdevicesegment,andweexpectthistrendtocontinueintheforeseeablefuture.Wehave
experienced,andexpecttocontinuetoexperience,slowinggrowthinthe

21

Exhibit 21
Page 174
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2124 Page 110 of
232
premium-tierdevicesegmentdueto,amongotherfactors,lengtheningreplacementcyclesindevelopedregions,wherepremium-tiersmartphonesarecommon;
increasingconsumerdemandinemergingregions,particularlyChina,wherepremium-tiersmartphonesarelesscommonandreplacementcyclesareonaverage
longerthanindevelopedregions;and/oramaturingpremium-tiersmartphoneindustryinwhichdemandisincreasinglydrivenbynewproductlaunchesand/or
innovationcycles.
Inaddition,asdiscussedinthepriorriskfactor,ourindustryisexperiencingconcentrationofdeviceshareamongafewcompaniesatthepremiumtier,which
givesthemsignificantsupplychainleverage.Further,thosecompaniesmayutilizetheirowninternally-developedintegratedcircuitproducts,orourcompetitors
integratedcircuitproducts,ratherthanourproductsinaportionoftheirdevices.Thesedynamicsmayresultinlowerpricesforand/orreducedsalesofour
premium-tierintegratedcircuitproducts.
Areductioninsalesofpremium-tierdevices,orareductioninsalesofourpremium-tierintegratedcircuitproducts(whichhaveahigherrevenueandmargin
contributionthanourlower-tierintegratedcircuitproducts),mayreduceourrevenuesandmarginsandmayharmourabilitytoachieveorsustainexpected
operatingresults.
Efforts
by
some
communications
equipment
manufacturers
or
their
customers
to
avoid
paying
fair
and
reasonable
royalties
for
the
use
of
our
intellectual
property
may
require
the
investment
of
substantial
management
time
and
financial
resources
and
may
result
in
legal
decisions
and/or
actions
by
governments,
courts,
regulators
or
agencies,
Standards
Development
Organizations
(SDOs)
or
other
industry
organizations
that
harm
our
business.
Fromtimetotime,companiesinitiatevariousstrategiestoattempttorenegotiate,mitigateand/oreliminatetheirneedtopayroyaltiestousfortheuseofour
intellectualproperty.Thesestrategieshaveincluded:(i)litigation,oftenalleginginfringementofpatentsheldbysuchcompanies,patentmisuse,patentexhaustion,
patentinvalidityand/orunenforceabilityofourpatentsand/orlicenses,orsomeformofunfaircompetition;(ii)takingpositionscontrarytoourunderstandingof
theircontractswithus;(iii)appealstogovernmentalauthorities;(iv)collectiveaction,includingworkingwithwirelessoperators,standardsbodies,otherlike-
mindedcompaniesandotherorganizations,onbothformalandinformalbases,toadoptintellectualpropertypoliciesandpracticesthatcouldhavetheeffectof
limitingreturnsonintellectualpropertyinnovations;(v)lobbyinggovernmentalregulatorsandelectedofficialsforthepurposeofseekingtheimpositionofsome
formofcompulsorylicensingand/ortoweakenapatentholdersabilitytoenforceitsrightsorobtainafairreturnforsuchrights;and(vi)licenseesusingvarious
strategiestoattempttoshifttheirroyaltyobligationtotheirsuppliersthatresultsinloweringthewholesale(i.e.,licensees)sellingpriceonwhichtheroyaltyis
calculated.Inaddition,certainlicenseeshavedisputedorunderreportedroyaltiesowedtousundertheirlicenseagreementswithusorreportedtousinamanner
thatisnotincompliancewiththeircontractualobligations,andcertaincompanieshaveyettoenterintoordelayedenteringintolicenseagreementswithusfor
theiruseofourintellectualproperty,andlicenseesand/orcompaniesmaycontinuetodosointhefuture.Further,totheextentsuchlicenseesand/orcompanies
increasetheirdeviceshare,thenegativeimpactoftheirunderreportingand/ornon-reportingonourbusinessandoperatingresultswillbeexacerbated.
Wearecurrentlysubjecttovariouslitigationandgovernmentalinvestigationsand/orproceedings,someofwhichmayariseoutofthestrategiesdescribed
above.CertainlegalmattersaredescribedmorefullyinthisAnnualReportinNotestoConsolidatedFinancialStatements,Note7.Commitmentsand
Contingencies.Theunfavorableresolutionofoneormoreofthesematterscouldhaveamaterialadverseeffectonourbusiness,resultsofoperations,financial
conditionand/orcashflows.Dependingonthetypeofmatter,variousremediesthatcouldresultfromanunfavorableresolutioninclude,amongothers,injunctions,
monetarydamagesorfinesorotherorderstopaymoneyandtheissuanceoforderstoceasecertainconductand/ormodifyourbusinesspractices.Further,a
governmentalbodyinaparticularcountryorregionmayassert,andmaybesuccessfulinimposing,remedieswitheffectsthatextendbeyondthebordersofthat
countryorregion.
Inaddition,inconnectionwithourparticipationinSDOs,we,likeotherpatentowners,generallyhavemadecontractualcommitmentstosuchorganizationsto
licensethoseofourpatentsthatwouldnecessarilybeinfringedbystandard-compliantproducts(standard-essentialpatents)ontermsthatarefair,reasonableand
nondiscriminatory(FRAND).Somemanufacturersandusersofstandard-compliantproductsadvanceinterpretationsoftheseFRANDcommitmentsthatare
adversetoourlicensingbusiness,includinginterpretationsthatwouldlimittheamountofroyaltiesthatwecouldcollectonthelicensingofourpatentportfolio.
Further,somecompaniesorentitieshaveproposedsignificantchangestoexistingintellectualpropertypoliciesforimplementationbySDOsandother
industryorganizationswiththegoalofsignificantlydevaluingstandard-essentialpatents.Forexample,somehaveputforthproposalswhichwouldrequirea
maximumaggregateintellectualpropertyroyaltyratefortheuseofallstandard-essentialpatentsownedbyallofthemembercompaniestobeappliedtotheselling
priceofanyproductimplementingtherelevantstandard.Theyhavefurtherproposedthatsuchmaximumaggregateroyaltyratebeapportionedtoeachmember
companywithstandard-essentialpatentsbaseduponthenumberofstandard-essentialpatents

22

Exhibit 21
Page 175
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2125 Page 111 of
232
heldbysuchcompany.Othershaveproposedthatinjunctionsnotbeanavailableremedyforinfringementofstandard-essentialpatentsand/orhavemadeproposals
thatcouldseverelylimitdamageawardsandotherremediesbycourtsforpatentinfringement(e.g.,byseverelylimitingthebaseuponwhichtheroyalty
percentagemaybeapplied).AnumberofthesestrategiesarepurportedlybasedoninterpretationsofthepoliciesofcertainSDOsconcerningthelicensingof
patentsthatareormaybeessentialtoindustrystandardsandonour(and/orothercompanies)allegedfailuretoabidebythesepolicies.
SomeSDOs,courtsandgovernmentalagencieshaveadoptedandmayinthefutureadoptsomeoralloftheseinterpretationsorproposalsinamanneradverse
toourinterests,includinginlitigationtowhichwemaynotbeaparty.
Weexpectthatsuchproposals,interpretationsandstrategieswillcontinueinthefuture,andifsuccessful,ourbusinessmodelwouldbeharmed,eitherby
limitingoreliminatingourabilitytocollectroyalties(orbyreducingtheroyaltieswecancollect)onalloraportionofourpatentportfolio,limitingourreturnon
investmentwithrespecttonewtechnologies,limitingourabilitytoseekinjunctionsagainstinfringersofourstandard-essentialpatents,constrainingourabilityto
makelicensingcommitmentswhensubmittingourtechnologyforinclusioninfuturestandards(whichcouldmakeourtechnologylesslikelytobeincludedinsuch
standards)orforcingustoworkoutsideofSDOsorotherindustrygroupstopromoteournewtechnologies,andourresultsofoperationscouldbenegatively
impacted.Inaddition,thelegalandothercostsassociatedwithassertingordefendingourpositionshavebeenandcontinuetobesignificant.Weassumethatsuch
challenges,regardlessoftheirmerits,willcontinueintotheforeseeablefutureandmayrequiretheinvestmentofsubstantialmanagementtimeandfinancial
resources.
We
are
subject
to
government
regulations
and
policies.
Our
business
may
suffer
as
a
result
of
adverse
rulings
in
government
investigations
or
other
proceedings,
new
or
changed
laws,
regulations
or
policies
and/or
our
failure
or
inability
to
comply
with
laws,
regulations
or
policies.
Ourbusiness,productsandservices,andthoseofourcustomersandlicensees,aresubjecttovariouslawsandregulationsglobally,aswellasgovernment
policiesandthespecificationsofinternational,nationalandregionalcommunicationsstandardsbodies.Theadoptionofnewlaws,regulationsorpolicies,changes
intheinterpretationofexistinglaws,regulationsorpolicies,changesintheregulationofouractivitiesbyagovernmentorstandardsbodyand/oradverserulingsin
court,regulatory,administrativeorotherproceedingsrelatingtosuchlaws,regulationsorpolicies,including,amongothers,thoseaffectinglicensingpractices,
competitivebusinesspractices,theuseofourtechnologyorproducts,protectionofintellectualproperty,trade,foreigninvestmentsorloans,spectrumavailability
andlicenseissuance,adoptionofstandards,theprovisionofdevicesubsidiesbywirelessoperatorstotheircustomers,taxation,privacyanddataprotection,
environmentalprotectionoremployment,couldhaveanadverseeffectonourbusiness.
Wearecurrentlysubjecttovariousgovernmentalinvestigationsand/orproceedings,andcertainmattersaredescribedmorefullyinthisAnnualReportin
NotestoConsolidatedFinancialStatements,Note7.CommitmentsandContingencies.Theunfavorableresolutionofoneormoreofthesematterscouldhavea
materialadverseeffectonourbusiness,resultsofoperations,financialconditionand/orcashflows.Dependingonthetypeofmatter,variousremediesthatcould
resultfromanunfavorableresolutioninclude,amongothers,injunctions,monetarydamagesorfinesorotherorderstopaymoney,andtheissuanceofordersto
ceasecertainconductand/ormodifyourbusinesspractices.Further,agovernmentalbodyinaparticularcountryorregionmayassert,andmaybesuccessfulin
imposing,remedieswitheffectsthatextendbeyondthebordersofthatcountryorregion.
Delaysingovernmentapprovalsorothergovernmentalactivitiesthatcouldresultfrom,amongothers,adecreaseinoralackoffundingforcertainagencies
orbranchesofthegovernmentand/orpoliticalchanges,couldresultinourincurringhighercosts,couldnegativelyimpactourabilitytotimelyconsummate
strategictransactionsand/orcouldhaveothernegativeimpactsonourbusinessandthebusinessesofourcustomersandlicensees.
National,stateandlocalenvironmentallawsandregulationsaffectouroperationsaroundtheworld.Theselawsmaymakeitmoreexpensivetomanufacture,
havemanufacturedandsellproducts,andourcostscouldincreaseifourvendors(e.g.,third-partymanufacturersorutilitycompanies)passontheircoststous.
RegulationsintheUnitedStatesrequirethatwedeterminewhethercertainmaterialsusedinourproducts,referredtoasconflictminerals,originatedinthe
DemocraticRepublicoftheCongo(DRC)oranadjoiningcountry,orwerefromrecycledorscrapsources.Theverificationandreportingrequirements,inaddition
tocustomerdemandsforconflictfreesourcing,imposeadditionalcostsonusandonoursuppliersandmaylimitthesourcesorincreasethepricesofmaterials
usedinourproducts.Further,ifweareunabletodeterminethatourproductsareDRCconflictfree,wemayfacechallengeswithourcustomersthatplaceusata
competitivedisadvantage,andourreputationmaybeharmed.
Laws,regulationsandstandardsrelatingtocorporategovernance,businessconduct,publicdisclosureandhealthcarearecomplexandchangingandmay
createuncertaintyregardingcompliance.Laws,regulationsandstandardsaresubjectto

23

Exhibit 21
Page 176
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2126 Page 112 of
232
varyinginterpretationsinmanycases,andtheirapplicationinpracticemayevolveovertime.Asaresult,oureffortstocomplymayfail,particularlyifthereis
ambiguityastohowtheyshouldbeappliedinpractice.Newlaws,regulationsandstandardsorevolvinginterpretationsoflegalrequirementsmaycauseustoincur
highercostsaswerevisecurrentpractices,policiesand/orproceduresandmaydivertmanagementtimeandattentiontocomplianceactivities.
The
enforcement
and
protection
of
our
intellectual
property
rights
may
be
expensive,
could
fail
to
prevent
misappropriation
or
unauthorized
use
of
our
intellectual
property
rights,
could
result
in
the
loss
of
our
ability
to
enforce
one
or
more
patents,
or
could
be
adversely
affected
by
changes
in
patent
laws,
by
laws
in
certain
foreign
jurisdictions
that
may
not
effectively
protect
our
intellectual
property
rights
or
by
ineffective
enforcement
of
laws
in
such
jurisdictions.
Werelyprimarilyonpatent,copyright,trademarkandtradesecretlaws,aswellasnondisclosureandconfidentialityagreements,internationaltreatiesand
othermethods,toprotectourproprietaryinformation,technologiesandprocesses,includingourpatentportfolio.Policingunauthorizeduseofourproducts,
technologiesandproprietaryinformationisdifficultandtimeconsuming.Thestepswehavetakenhavenotalwaysprevented,andwecannotbecertainthesteps
wewilltakeinthefuturewillprevent,themisappropriationorunauthorizeduseofourproprietaryinformationandtechnologies,particularlyinforeigncountries
wherethelawsmaynotprotectourproprietaryintellectualpropertyrightsasfullyorasreadilyasUnitedStateslawsorwheretheenforcementofsuchlawsmay
belackingorineffective.Someindustryparticipantswhohaveavestedinterestindevaluingpatentsingeneral,orstandard-essentialpatentsinparticular,have
mountedattacksoncertainpatentsystems,increasingthelikelihoodofchangestoestablishedpatentlaws.IntheUnitedStates,thereiscontinueddiscussion
regardingpotentialpatentlawchangesandcurrentandpotentialfuturelitigationregardingpatents,theoutcomesofwhichcouldbedetrimentaltoourlicensing
business.Thelawsincertainforeigncountriesinwhichourproductsareormaybemanufacturedorsold,includingcertaincountriesinAsia,maynotprotectour
intellectualpropertyrightstothesameextentasthelawsintheUnitedStates.WeexpectthattheEuropeanUnionwilladoptaunitarypatentsysteminthenext
fewyearsthatmaybroadlyimpactthatregionspatentregime.Wecannotpredictwithcertaintythelong-termeffectsofanypotentialchanges.Inaddition,we
cannotbecertainthatthelawsandpoliciesofanycountryorthepracticesofanystandardsbodies,foreignordomestic,withrespecttointellectualproperty
enforcementorlicensingortheadoptionofstandards,willnotbechangedinthefutureinawaydetrimentaltoourlicensingprogramortothesaleoruseofour
productsortechnology.
Wehavehadandmayinthefuturehavedifficultyincertaincircumstancesinprotectingorenforcingourintellectualpropertyrightsand/orcontracts,
includingcollectingroyaltiesforuseofourpatentportfolioinparticularforeignjurisdictionsdueto,amongothers:policiesofforeigngovernments;challengesto
ourlicensingpracticesundersuchjurisdictionscompetitionlaws;adoptionofmandatorylicensingprovisionsbyforeignjurisdictions(eitherwith
controlled/regulatedroyaltiesorroyaltyfree);failureofforeigncourtstorecognizeandenforcejudgmentsofcontractbreachanddamagesissuedbycourtsinthe
UnitedStates;and/orchallengespendingbeforeforeigncompetitionagenciestothepricingandintegrationofadditionalfeaturesandfunctionalityintoourchipset
products.Certainlicenseeshavedisputedorunderreportedroyaltiesowedtousundertheirlicenseagreementswithusorreportedtousinamannerthatisnotin
compliancewiththeircontractualobligations,andcertaincompanieshaveyettoenterintoordelayedenteringintolicenseagreementsfortheiruseofour
intellectualproperty,andsuchlicenseesand/orcompaniesmaycontinuetodosointhefuture.Additionally,althoughourlicenseagreementsprovideuswiththe
righttoauditthebooksandrecordsoflicensees,auditscanbeexpensive,timeconsuming,incompleteandsubjecttodispute.Further,certainlicenseesmaynot
complywiththeobligationtoprovidefullaccesstotheirbooksandrecords.Totheextentwedonotaggressivelyenforceourrightsunderourlicenseagreements,
licenseesmaynotcomplywiththeirexistinglicenseagreements,andtotheextentwedonotaggressivelypursueunlicensedcompaniestoenterintolicense
agreementswithusfortheiruseofourintellectualproperty,otherunlicensedcompaniesmaynotenterintolicenseagreements.
Wehaveenteredintolitigationinthepastandmayneedtofurtherlitigateinthefuturetoenforceourcontractand/orintellectualpropertyrights,protectour
tradesecretsordeterminethevalidityandscopeofproprietaryrightsofothers.Asaresultofanysuchlitigation,wecouldloseourabilitytoenforceoneormore
patents,portionsofourlicenseagreementscouldbedeterminedtobeinvalidorunenforceable(whichmayinturnresultinotherlicenseeseithernotcomplying
withtheirexistinglicenseagreementsand/orinitiatinglitigation)and/orwecouldincursubstantialunexpectedoperatingcosts.Anyactionwetaketoenforceour
contractorintellectualpropertyrightscouldbecostlyandcouldabsorbsignificantmanagementtimeandattention,which,inturn,couldnegativelyimpactour
operatingresults.Further,evenapositiveresolutiontoourenforcementeffortsmaytaketimetoconclude,whichmayreduceourrevenuesintheperiodpriorto
conclusion.
Our
growth
increasingly
depends
on
our
ability
to
extend
our
products
and
services
into
new
and
expanded
product
areas,
such
as
RFFE,
and
adjacent
industry
segments
outside
of
traditional
cellular
industries,
such
as
the
IoT,
automotive
and
computing,
among
others.
Our
research,
development
and
other
investments
in
these
new
and
expanded
product
areas
and
industry
segments,
and
related
technologies,
products
and
services,
as
well
as
in
our
existing
technologies,
products

24

Exhibit 21
Page 177
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2127 Page 113 of
232
and
services
and
new
technologies,
such
as
5G,
may
not
generate
operating
income
or
contribute
to
future
operating
results
that
meet
our
expectations.
Ourindustryissubjecttorapidtechnologicalchange,evolvingindustrystandardsandfrequentnewproductintroductions,andwemustmakesubstantial
research,developmentandotherinvestments,suchasacquisitions,innewproducts,servicesandtechnologiestocompetesuccessfully.Technologicalinnovations
generallyrequiresignificantresearchanddevelopmenteffortsbeforetheyarecommerciallyviable.Whilewecontinuetoinvestsignificantresourcestoward
advancementsprimarilyinsupportof4GOFDMA-and5G-basedtechnologies,wealsoinnovateacrossabroadspectrumofopportunitiestodeploynewand
expandedproductsandenterintoadjacentindustrysegmentsbyleveragingourexistingtechnicalandbusinessexpertiseand/orthroughacquisitions.
Inparticular,ourfuturegrowthsignificantlydependsonnewandexpandedproductareas,suchasRFFE,andadjacentindustrysegments,suchasautomotive,
IoT,includingtheconnectedhome,smartcitiesandwearables,datacenter,networking,mobilecomputing,mobilehealthandmachinelearning,includingrobotics,
amongothers;ourabilitytodevelopleadingandcost-effectivetechnologies,productsandservicesfornewandexpandedproductareasandadjacentindustry
segments;andthirdpartiesincorporatingourtechnology,productsandservicesintodevicetypesusedintheseproductareasandindustrysegments.Accordingly,
weintendtocontinuetomakesubstantialinvestmentsinthesenewandexpandedproductareasandadjacentindustrysegments,andindevelopingnewproducts,
servicesandtechnologiesfortheseproductareasandindustrysegments.
However,ourresearch,developmentandotherinvestmentsinthesenewandexpandedproductareasandadjacentindustrysegments,andcorresponding
technologies,productsandservices,aswellasinourexisting,technologies,productsandservicesandnewtechnologies,suchasuseofbothlicensedand
unlicensedspectrum,convergenceofcellularandWi-Fiand5G,maynotsucceeddueto,amongothers:newindustrysegmentsand/orconsumerdemandmaynot
growasanticipated;ourstrategiesand/orthestrategiesofourcustomers,licenseesorpartnersmaynotbesuccessful;improvementsinalternatetechnologiesin
waysthatreducetheadvantagesweanticipatefromourinvestments;competitorsproductsorservicesbeingmorecosteffective,havingmorecapabilitiesorfewer
limitationsorbeingbroughttomarketfasterthanournewproductsandservices;andcompetitorshavinglongeroperatinghistoriesinindustrysegmentsthatare
newtous.Wemayalsounderestimatethecostsoforoverestimatethefutureoperatingincomeand/ormarginsthatcouldresultfromtheseinvestments,andthese
investmentsmaynot,ormaytakemanyyearsto,generatematerialreturns.
Ifournewtechnologies,productsand/orservicesarenotsuccessful,orarenotsuccessfulinthetimeframeweanticipate,wemayincursignificantcosts
and/orassetimpairments,ourbusinessmaynotgrowasanticipated,ourrevenuesand/ormarginsmaybenegativelyimpactedand/orourreputationmaybe
harmed.
The
continued
and
future
success
of
our
licensing
programs
can
be
impacted
by
the
deployment
of
other
technologies
in
place
of
technologies
based
on
CDMA,
OFDMA
and
their
derivatives;
the
success
of
our
licensing
programs
for
4G
single
mode
products
and
emerging
industry
segments;
and
the
need
to
extend
license
agreements
that
are
expiring
and/or
to
cover
additional
future
patents.
AlthoughweownaverystrongportfolioofissuedandpendingpatentsrelatedtoGSM,GPRS,EDGE,OFDM,OFDMA,WLANandothertechnologies,our
patentportfoliolicensingprogramintheseareasislessestablishedandmightnotbeassuccessfulingeneratinglicensingrevenuesasourCDMAlicensing
programhasbeen.Manywirelessoperatorsareinvestigating,haveselectedorhavedeployedOFDMA-basedLTEastheirnext-generation4Gtechnologyin
existing(orfutureifnotyetdeployed)wirelessspectrumbandsascomplementarytotheirexistingCDMA-basednetworks.While3G/4Gmultimodeproductsare
generallycoveredbyourexisting3Glicensingagreements,productsthatimplement4Gbutdonotalsoimplement3Garegenerallynotcoveredbythese
agreements.AlthoughwebelievethatourpatentedtechnologyisessentialandusefultoimplementationoftheLTEindustrystandardsandhavegrantedroyalty-
bearinglicensestomorethan210companies(includingHuawei,Lenovo,LG,Microsoft,Oppo,Samsung,SonyMobile,vivo,XiaomiandZTE)thathaverealized
thattheyneedalicensetoourpatentstomakeandsellproductsimplementing4Gstandardsbutnotimplementing3Gstandards,itmaybedifficulttoagreeon
materialtermsand/orconditionsofnewlicenseagreementsthatareacceptabletouswithcompaniesthatarecurrentlyunlicensed.Further,theroyaltyratesfor
singlemode4Gproductsarelowerthanourroyaltyratesfor3Gand3G/4Gmultimodeproducts,so,withoutacorrespondingincreaseinvolumesand/ordevice
ASP,wewillnotachievethesamelicensingrevenuesonsuchLTEproductsason3Gand3G/4Gmultimodeproducts.Inaddition,newconnectivityandother
servicesareemergingthatrelyondevicesthatmayormaynotbeusedontraditionalcellularnetworks,suchasdevicesusedintheconnectedhomeortheIoT.We
alsoseektodiversifyandbroadenourtechnologylicensingprogramstonewindustrysegmentsinwhichwecanutilizeourtechnologyleadership,suchaswireless
chargingandothertechnologies.Standards,evendefactostandards,thatdevelopasthesetechnologiesmature,inparticularthosethatdonotincludeabaselevel
ofinteroperability,mayimpactourabilitytoobtainroyaltiesthatareequivalenttothosethatwereceivefor3Gand3G/4Gmultimodeproductsusedincellular
communications.Althoughwebelievethatourpatented

25

Exhibit 21
Page 178
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2128 Page 114 of
232
technologyisessentialandusefultothecommercializationofsuchservices,theroyaltieswereceivemaybelowerthanthosewereceivefromourcurrentlicensing
program.
Overthelong-term,weneedtocontinuetoevolveourpatentportfolio.Ifwedonotmaintainastrongportfoliothatisapplicabletocurrentand/orfuture
standards(suchas5G),productsand/orservices,ourfuturelicensingrevenuescouldbenegativelyimpacted.
Thelicensesgrantedtoandfromusunderanumberofourlicenseagreementsincludeonlypatentsthatareeitherfiledorissuedpriortoacertaindateand,in
asmallnumberofagreements,royaltiesarepayableonthosepatentsforaspecifiedtimeperiod.Asaresult,thereareagreementswithsomelicenseeswherelater
patentsarenotlicensedbyortousand/orroyaltiesarenotowedtousundersuchlicenseagreementsafterthespecifiedtimeperiod.Additionally,certainofour
licenseagreements(includingessentiallyallofourrecentagreementsinChina)areeffectiveforaspecifiedterm.Inordertolicenseortoobtainalicensetosuch
laterpatentsoraftertheexpirationofaspecifiedterm,ortoreceiveroyaltiesafterthespecifiedtimeperiod,wewillneedtoextendormodifysuchlicense
agreementsorenterintonewlicenseagreementswithsuchlicensees.Accordingly,totheextentnotrenewedontheirtermsorbyelectionforanadditional
(generallymulti-year)period,ifapplicable,wewillneedtoextendormodifysuchlicenseagreementsorenterintonewlicenseagreementswithsuchlicensees
morefrequentlythanwehavedonehistorically.Wemightnotbeabletorenewthoselicenseagreements,orenterintonewlicenseagreements,inthefuture
withoutaffectingthematerialtermsandconditionsofourlicenseagreementswithsuchlicensees,andsuchmodificationsornewagreementsmaynegatively
impactourrevenues.Ifthereisadelayinrenewingalicenseagreementpriortoitsexpiration,therewouldbeadelayinourabilitytorecognizerevenuesrelatedto
thatlicenseesproductsales.Further,ifweareunabletoreachagreementonsuchmodificationsornewagreements,itcouldresultinpatentinfringementlitigation
withsuchcompanies.
We
depend
on
a
limited
number
of
third-party
suppliers
for
the
procurement,
manufacture
and
testing
of
our
products.
If
we
fail
to
execute
supply
strategies
that
provide
technology
leadership,
supply
assurance
and
low
cost,
our
operating
results
and
our
business
may
be
harmed.
We
are
also
subject
to
order
and
shipment
uncertainties
that
could
negatively
impact
our
operating
results.
OurQCTsegmentcurrentlyutilizesafablessproductionmodel,whichmeansthatwedonotownoroperatefoundriesfortheproductionofsiliconwafers
fromwhichourintegratedcircuitsaremade.Weemploybothturnkeyandtwo-stagemanufacturingmodelstopurchaseourintegratedcircuits.Undertheturnkey
model,ourfoundrysuppliersareresponsiblefordeliveringfullyassembledandtestedintegratedcircuits.Underthetwo-stagemanufacturingmodel,wepurchase
dieinsingularorwaferformfromsemiconductormanufacturingfoundriesandcontractwithseparatethird-partysuppliersformanufacturingservicessuchas
waferbump,probe,assemblyandfinaltest.ThesemiconductormanufacturingfoundriesthatsupplyproductstoourQCTsegmentareprimarilylocatedinAsia,as
areourprimarywarehouseswherewestorefinishedgoodsforfulfillmentofcustomerorders.Thefollowingcouldhaveanadverseeffectonourabilitytomeet
customerdemandsand/ornegativelyimpactourrevenues,businessoperations,profitabilityand/orcashflows:
areduction,interruption,delayorlimitationinourproductsupplysources;
afailurebyoursupplierstoprocurerawmaterialsortoprovideorallocateadequatemanufacturingortestcapacityforourproducts;
oursuppliersinabilitytoreacttoshiftsinproductdemandoranincreaseinrawmaterialorcomponentprices;
oursuppliersdelayindevelopingleadingprocesstechnologies,orinabilitytodevelopormaintainleadingprocesstechnologies,includingtransitionsto
smallergeometryprocesstechnologies;
thelossofasupplierortheinabilityofasuppliertomeetperformance,qualityoryieldspecificationsordeliveryschedules;and/or
additionalexpenseand/orproductiondelaysasaresultofqualifyinganewsupplierandcommencingvolumeproductionortestingintheeventofaloss
oforadecisiontoaddorchangeasupplier.
Whilewehaveestablishedalternatesuppliersforcertaintechnologies,werelyonsole-orlimited-sourcesuppliersforcertainproducts,subjectingusto
significantrisks,including:possibleshortagesofrawmaterialsormanufacturingcapacity;poorproductperformance;andreducedcontroloverdeliveryschedules,
manufacturingcapabilityandyields,qualityassurance,quantityandcosts.Totheextentwehaveestablishedalternatesuppliers,thesesuppliersmayrequire
significantlevelsofsupporttobringcomplextechnologiestoproduction.Asaresult,wemayinvestasignificantamountofeffortandresourcesandincurhigher
coststosupportandmaintainsuchalternatesuppliers.Further,anyfutureconsolidationoffoundrysupplierscouldincreaseourvulnerabilitytosole-orlimited-
sourcearrangementsandreduceoursupplierswillingnesstonegotiatepricing,whichcouldnegativelyimpactourabilitytoachievecostreductionsand/or
increaseourmanufacturing

26

Exhibit 21
Page 179
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2129 Page 115 of
232
costs.Ourarrangementswithoursuppliersmayobligateustoincurcoststomanufactureandtestourproductsthatdonotdecreaseatthesamerateasdecreasesin
pricingtoourcustomers.Ourability,andthatofoursuppliers,todevelopormaintainleadingprocesstechnologies,includingtransitionstosmallergeometry
processtechnologies,andtoeffectivelycompetewiththemanufacturingprocessesandperformanceofourcompetitors,couldimpactourabilitytointroducenew
productsandmeetcustomerdemand,couldincreaseourcosts(possiblydecreasingourmargins)andcouldsubjectustotheriskofexcessinventories.Ourinability
tomeetcustomerdemandduetosole-orlimited-sourcingand/ortheadditionalcoststhatweincurbecauseoftheseorothersupplyconstraintsorbecauseofthe
needtosupportalternatesupplierscouldnegativelyimpactourbusinessandourresultsofoperations.
Althoughwehavelong-termcontractswithoursuppliers,manyofthesecontractsdonotprovideforlong-termcapacitycommitments.Totheextentwedo
nothavefirmcommitmentsfromoursuppliersoveraspecifictimeperiodorforanyspecificquantity,oursuppliersmayallocate,andinthepasthaveallocated,
capacitytotheproductionandtestingofproductsfortheirothercustomerswhilereducingorlimitingcapacitytomanufactureortestourproducts.Accordingly,
capacityforourproductsmaynotbeavailablewhenweneeditoratreasonableprices.Totheextentwedoobtainlong-termcapacitycommitments,wemayincur
additionalcostsrelatedtothosecommitmentsand/ormakenon-refundablepaymentsforcapacitycommitmentsthatarenotused.
OneormoreofoursuppliersorpotentialalternatesuppliersmaymanufactureCDMA-orOFDMA-basedintegratedcircuitsthatcompetewithourproducts.
Inthisevent,thesuppliercouldelecttoallocaterawmaterialsandmanufacturingcapacitytotheirownproductsandreduceorlimitdeliveriestoustoour
detriment.Inaddition,wemaynotreceivereasonablepricing,manufacturingordeliveryterms.Wecannotguaranteethattheactionsofoursupplierswillnot
causedisruptionsinouroperationsthatcouldharmourabilitytomeetourdeliveryobligationstoourcustomersorincreaseourcostofsales.
Additionally,weplaceorderswithoursuppliersusingourforecastsofcustomerdemand,whicharebasedonanumberofassumptionsandestimates,andare
generallyonlypartiallycoveredbycommitmentsfromourcustomers.Ifweoverestimatecustomerdemand,wemayexperienceincreasedexcessand/orobsolete
inventory,whichwouldnegativelyimpactouroperatingresults.
Claims
by
other
companies
that
we
infringe
their
intellectual
property
could
adversely
affect
our
business.
Fromtimetotime,companieshaveasserted,andmayagainassert,patent,copyrightandotherintellectualpropertyrightsagainstourproductsorproducts
usingourtechnologiesorothertechnologiesusedinourindustry.Theseclaimshaveresultedandmayagainresultinourinvolvementinlitigation.Wemaynot
prevailinsuchlitigationgiven,amongotherfactors,thecomplextechnicalissuesandinherentuncertaintiesinintellectualpropertylitigation.Ifanyofour
productsorserviceswerefoundtoinfringeanothercompanysintellectualpropertyrights,wecouldbesubjecttoaninjunctionorberequiredtoredesignour
productsorservices,whichcouldbecostly,ortolicensesuchrightsand/orpaydamagesorothercompensationtosuchothercompany.Ifweareunableto
redesignourproductsorservices,licensesuchintellectualpropertyrightsusedinourproductsorservicesorotherwisedistributeourproducts(e.g.,througha
licensedsupplier),wecouldbeprohibitedfrommakingandsellingsuchproductsorprovidingsuchservices.Inanypotentialdisputeinvolvingothercompanies
patentsorotherintellectualproperty,ourchipsetfoundries,semiconductorassemblyandtestprovidersandcustomerscouldalsobecomethetargetsoflitigation.
Wearecontingentlyliableundercertainproductsales,services,licenseandotheragreementstoindemnifycertaincustomersagainstcertaintypesofliability
and/ordamagesarisingfromqualifyingclaimsofpatentinfringementbyproductsorservicessoldorprovidedbyus.Reimbursementsunderindemnification
arrangementscouldhaveanadverseeffectonourresultsofoperations.Furthermore,anysuchlitigationcouldseverelydisruptthesupplyofourproductsandthe
businessesofourchipsetcustomersandtheircustomers,whichinturncouldhurtourrelationshipswiththemandcouldresultinadeclineinourchipsetsales
and/orreductionsinourlicenseessales,causingacorrespondingdeclineinourchipsetand/orlicensingrevenues.Anyclaims,regardlessoftheirmerit,couldbe
timeconsumingtoaddress,resultincostlylitigation,diverttheeffortsofourtechnicalandmanagementpersonnelorcauseproductreleaseorshipmentdelays,any
ofwhichcouldhaveanadverseeffectonouroperatingresults.
Weexpectthatwemaycontinuetobeinvolvedinlitigationandmayhavetoappearinfrontofadministrativebodies(suchastheUnitedStatesInternational
TradeCommission)todefendagainstpatentassertionsagainstourproductsbycompanies,someofwhomareattemptingtogaincompetitiveadvantageorleverage
inlicensingnegotiations.Wemaynotbesuccessfulinsuchproceedings,andifwearenot,therangeofpossibleoutcomesisverybroadandmayinclude,for
example,monetarydamagesorfinesorotherorderstopaymoney,royaltypayments,injunctionsonthesaleofcertainofourintegratedcircuitproducts(and/oron
thesaleofourcustomersdevicesusingsuchproducts)and/ortheissuanceoforderstoceasecertainconductand/ormodifyourbusinesspractices.Further,a
governmentalbodyinaparticularcountryorregionmayassert,andmaybesuccessfulinimposing,remedieswitheffectsthatextendbeyondthebordersofthat
countryorregion.Inaddition,anegativeoutcomeinanysuchproceedingcouldseverelydisruptthebusinessofourchipsetcustomers

27

Exhibit 21
Page 180
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2130 Page 116 of
232
andtheirwirelessoperatorcustomers,whichinturncouldharmourrelationshipswiththemandcouldresultinadeclineinourworldwidechipsetsalesand/ora
reductioninourlicenseessalestowirelessoperators,causingcorrespondingdeclinesinourchipsetand/orlicensingrevenues.
Certainlegalmatters,includingcertainclaimsbyothercompaniesthatweinfringetheirintellectualproperty,aredescribedmorefullyinthisAnnualReportin
NotestoConsolidatedFinancialStatements,Note7.CommitmentsandContingencies.
We
may
engage
in
strategic
acquisitions,
transactions
or
make
investments
that
could
adversely
affect
our
financial
results
or
fail
to
enhance
stockholder
value.
Weengageinstrategicacquisitionsandothertransactions,includingjointventures,andmakeinvestments,whichwebelieveareimportanttothefutureofour
business,withthegoalofmaximizingstockholdervalue.Weacquirebusinessesandotherassets,includingpatents,technology,wirelessspectrumandother
intangibleassets,enterintojointventuresorotherstrategictransactionsandpurchaseminorityequityinterestsinormakeloanstocompaniesthatmaybeprivate
andearly-stage.Ourstrategicactivitiesaregenerallyfocusedonopeningneworexpandingopportunitiesforourtechnologiesandsupportingthedesignand
introductionofnewproductsandservices(orenhancingexistingproductsorservices)forvoiceanddatacommunicationsandnewindustrysegments.Recent
materialtransactionsincludeouracquisitionofCSRplc,ourpendingjointventurewithTDKCorporationandourproposedacquisitionofNXP.Manyofour
strategicactivitiesentailahighdegreeofriskandrequiretheuseofdomesticand/orforeigncapital,andinvestmentsmaynotbecomeliquidforseveralyearsafter
thedateoftheinvestment,ifatall.Ourstrategicactivitiesmaynotgeneratefinancialreturnsorresultinincreasedadoptionorcontinueduseofourtechnologies,
productsorservices.Insomecases,wemayberequiredtoconsolidateorrecordourshareoftheearningsorlossesofcompaniesinwhichwehaveacquired
ownershipinterests.Inaddition,wemayrecordimpairmentchargesrelatedtoourstrategicactivities.Anylossesorimpairmentchargesthatweincurrelatedto
strategicactivitieswillhaveanegativeimpactonourfinancialresults,andwemaycontinuetoincurneworadditionallossesrelatedtostrategicassetsor
investmentsthatwehavenotfullyimpairedorexited.Wemayunderestimatethecostsand/oroverestimatethebenefits,includingproductandothersynergiesand
growthopportunitiesthatweexpecttorealize,andwemaynotachievethem.Ifwedonotachievetheanticipatedbenefitsofbusinessacquisitionsorother
strategicactivities,ourresultsofoperationsmaybeadverselyaffected,andwemaynotenhancestockholdervaluebyengaginginthesetransactions.
Achievingtheanticipatedbenefitsofbusinessacquisitions,includingjointventuresandotherstrategicinvestmentsinwhichwehavemanagementand
operationalcontrol,dependsinpartuponourabilitytointegratethebusinessesinanefficientandeffectivemannerandachieveanticipatedsynergies.Such
integrationiscomplexandtimeconsumingandinvolvessignificantchallenges,including,amongothers:retainingkeyemployees;successfullyintegratingnew
employees,technology,products,processes,operations(includingmanufacturingoperations),salesanddistributionchannels,businessmodelsandbusiness
systems;retainingcustomersandsuppliersofthebusinesses;consolidatingresearchanddevelopmentand/orsupplyoperations;minimizingthediversionof
managementsattentionfromongoingbusinessmatters;andconsolidatingcorporateandadministrativeinfrastructures;andmanagingtheincreasedscale,
complexityandglobalizationofourbusiness,operationsandemployeebase.Wemaynotderiveanycommercialvaluefromassociatedtechnologiesorproductsor
fromfuturetechnologiesorproductsbasedonthesetechnologies,andwemaybesubjecttoliabilitiesthatarenotcoveredbyindemnificationprotectionthatwe
mayobtain,orwemaybecomesubjecttolitigation.Additionally,wemaynotbesuccessfulinenteringorexpandingintonewsalesordistributionchannels,
businessoroperationalmodels(includingmanufacturing),geographicregions,industrysegmentsand/orcategoriesofproductsservedbyoradjacenttothe
associatedbusinessesorinaddressingpotentialnewopportunitiesthatmayariseoutofthecombination.
Our
use
of
open
source
software
may
harm
our
business.
Certainofoursoftwareandoursupplierssoftwaremaycontainormaybederivedfromopensourcesoftware,andwehaveseen,andbelievewewill
continuetosee,anincreaseincustomersrequestingthatwedevelopproducts,includingsoftwareassociatedwithourintegratedcircuitproducts,thatincorporate
opensourcesoftwareelementsandoperateinanopensourceenvironment,which,undercertainopensourcelicenses,mayofferaccessibilitytoaportionofa
productssourcecodeandmayexposerelatedintellectualpropertytoadverselicensingconditions.Licensingofsuchsoftwaremayimposecertainobligationson
usifweweretodistributederivativeworksoftheopensourcesoftware.Forexample,theseobligationsmayrequireustomakesourcecodeforthederivative
worksavailabletoourcustomersinamannerthatallowsthemtomakesuchsourcecodeavailabletotheircustomersorlicensesuchderivativeworksundera
particulartypeoflicensethatisdifferentthanwhatwecustomarilyusetolicenseoursoftware.Developingopensourceproducts,whileadequatelyprotectingthe
intellectualpropertyrightsuponwhichourlicensingbusinessdepends,mayproveburdensomeandtime-consumingundercertaincircumstances,therebyplacing
usatacompetitivedisadvantage.Also,ouruseandourcustomersuseofopensourcesoftwaremaysubjectourproductsandourcustomersproductsto
governmentalscrutinyanddelaysinproductcertification,whichcouldcausecustomerstoviewourproductsaslessdesirablethanourcompetitorsproducts.

28

Exhibit 21
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Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2131 Page 117 of
232
Whilewebelievewehavetakenappropriatestepsandemployadequatecontrolstoprotectourintellectualpropertyrights,ouruseofopensourcesoftwarepresents
risksthatcouldhaveanadverseeffectontheserightsandonourbusiness.
Our
stock
price,
earnings
and
the
fair
value
of
our
investments
are
subject
to
substantial
quarterly
and
annual
fluctuations
and
to
market
downturns.
Ourstockpriceandearningshavefluctuatedinthepastandarelikelytofluctuateinthefuture.Factorsthatmayhaveasignificantimpactonthemarketprice
ofourstockand/orearningsincludethoseidentifiedthroughoutthisRiskFactorssection,volatilityofthestockmarketingeneralandtechnology-basedcompanies
inparticular,announcementsconcerningus,oursuppliers,ourcompetitorsorourcustomersorlicenseesandvariationsbetweenouractualresultsorguidanceand
expectationsofsecuritiesanalysts,amongothers.Further,increasedvolatilityinthefinancialmarketsand/oroveralleconomicconditionsmayreducetheamounts
thatwerealizeinthefutureonourcashequivalentsand/ormarketablesecuritiesandmayreduceourearningsasaresultofanyimpairmentchargesthatwerecord
toreducerecordedvaluesofmarketablesecuritiestotheirfairvalues.
Inthepast,securitiesclassactionlitigationhasbeenbroughtagainstacompanyfollowingperiodsofvolatilityinthemarketpriceofitssecurities.Dueto
changesinourstockprice,weareandmayinthefuturebethetargetofsecuritieslitigation.Securitieslitigationcouldresultinsubstantialuninsuredcostsand
divertmanagementsattentionandourresources.Certainlegalmatters,includingcertainsecuritieslitigationbroughtagainstus,aredescribedmorefullyinthis
AnnualReportinNotestoConsolidatedFinancialStatements,Note7.CommitmentsandContingencies.
Wemaintainanextensiveinvestmentportfolioofvariedholdings,whicharegenerallyclassifiedasavailable-for-saleandarethereforerecordedonour
consolidatedbalancesheetatfairvalue,withunrealizedgainsorlossesreportedasacomponentofaccumulatedothercomprehensiveincome.Thefairvalueofour
investmentsaresubjecttofluctuationbasedprimarilyonmarketpricevolatility,aswellastheunderlyingoperationsoftheassociatedinvestment,amongother
things.Ifthefairvalueofsuchinvestmentsdecreasesbelowtheircostbasis,assomeofourpreviousinvestmentshave,wemayberequiredincertain
circumstancestorecognizealossinourresultsofoperations.Thesensitivityofandrisksassociatedwiththemarketvalueofourinvestmentportfolioare
describedmorefullyinthisAnnualReportinPartII,Item7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk.
There
are
risks
associated
with
our
indebtedness.
Ouroutstandingindebtednessandanyadditionalindebtednessweincur,includinginconnectionwithourproposedacquisitionofNXP,mayhavenegative
consequencesonourbusiness,including,amongothers:
requiringustousecashtopaytheprincipalofandinterestonourindebtedness,therebyreducingtheamountofcashavailableforotherpurposes;
limitingourabilitytoobtainadditionalfinancingforworkingcapital,capitalexpenditures,acquisitions,stockrepurchases,dividendsorothergeneral
corporateandotherpurposes;
limitingourflexibilityinplanningfor,orreactingto,changesinourbusinessandourindustry;and/or
increasingourvulnerabilitytointerestratefluctuationstotheextentaportionofourdebthasvariableinterestrates.
Ourabilitytomakepaymentsofprincipalandinterestonourindebtednessdependsuponourfutureperformance,whichissubjecttogeneraleconomic
conditions,industrycyclesandfinancial,businessandotherfactors,manyofwhicharebeyondourcontrol.Ifweareunabletogeneratesufficientcashflowfrom
operationsinthefuturetoserviceourdebt,wemayberequiredto,amongotherthings:repatriatefundstotheUnitedStatesatsubstantialtaxcost;refinanceor
restructurealloraportionofourindebtedness;reduceordelayplannedcapitaloroperatingexpenditures;orsellselectedassets.Suchmeasuresmightnotbe
sufficienttoenableustoserviceourdebt.Inaddition,anysuchrefinancing,restructuringorsaleofassetsmightnotbeavailableoneconomicallyfavorableterms
oratall,andifprevailinginterestratesatthetimeofanysuchrefinancingand/orrestructuringarehigherthanourcurrentrates,interestexpenserelatedtosuch
refinancingand/orrestructuringwouldincrease.Ifthereareadversechangesintheratingsassignedtoourdebtsecuritiesbycreditratingagencies,ourborrowing
costs,ourabilitytoaccessdebtinthefutureand/orthetermsofsuchdebtcouldbeadverselyaffected.
Global,
regional
or
local
economic
conditions
that
impact
the
mobile
communications
industry
or
the
other
industries
in
which
we
operate
could
negatively
affect
the
demand
for
our
products
and
services
and
our
customers
or
licensees
products
and
services,
which
may
negatively
affect
our
revenues.
Adeclineinglobal,regionalorlocaleconomicconditionsoraslow-downineconomicgrowth,particularlyingeographicregionswithhighconcentrationsof
wirelessvoiceanddatausersorhighconcentrationsofourcustomersor

29

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232
licensees,couldhaveadverse,wide-rangingeffectsondemandforourproductsandfortheproductsandservicesofourcustomersorlicensees,particularly
equipmentmanufacturersorothersinthewirelesscommunicationsindustrywhobuytheirproducts,suchaswirelessoperators.Anyprolongedeconomicdownturn
mayresultinadecreaseindemandforourproductsortechnologies;theinsolvencyofkeysuppliers,customersorlicensees;delaysinreportingand/orpayments
fromourlicenseesand/orcustomers;failuresbycounterparties;andnegativeeffectsonwirelessdeviceinventories.Inaddition,ourcustomersabilitytopurchase
orpayforourproductsandservicesandnetworkoperatorsabilitytoupgradetheirwirelessnetworkscouldbeadverselyaffectedbyeconomicconditions,leading
toareduction,cancelationordelayofordersforourproductsorservices.
We
may
not
be
able
to
attract
and
retain
qualified
employees.
Ourfuturesuccessdependslargelyuponthecontinuedserviceofourexecutiveofficersandotherkeymanagementandtechnicalpersonnel,andonourability
tocontinuetoidentify,attract,retainandmotivatethem,particularlyinanenvironmentofcostreductions.Implementingourbusinessstrategyrequiresspecialized
engineeringandothertalent,asourrevenuesarehighlydependentontechnologicalandproductinnovations.Themarketforemployeesinourindustryis
extremelycompetitive.Further,existingimmigrationlawsmakeitmoredifficultforustorecruitandretainhighlyskilledforeignnationalgraduatesofuniversities
intheUnitedStates,makingthepoolofavailabletalentevensmaller.Ifweareunabletoattractandretainqualifiedemployees,ourbusinessmaybeharmed.
Currency
fluctuations
could
negatively
affect
future
product
sales
or
royalty
revenues,
harm
our
ability
to
collect
receivables
or
increase
the
U.S.
dollar
cost
of
our
products.
Ourcustomersselltheirproductsthroughouttheworldinvariouscurrencies.Ourconsolidatedrevenuesfrominternationalcustomersasapercentageofour
totalrevenuesweregreaterthan90%duringeachofthelastthreefiscalyears.Adversemovementsincurrencyexchangeratesmaynegativelyaffectourbusiness
andouroperatingresultsduetoanumberoffactors,including,amongothers:
OurproductsandthoseofourcustomersandlicenseesthataresoldoutsidetheUnitedStatesmaybecomelessprice-competitive,whichmayresultin
reduceddemandforthoseproductsand/ordownwardpressureonaveragesellingprices;
Certainofourrevenues,suchasroyalties,thatarederivedfromlicenseeorcustomersalesdenominatedinforeigncurrenciescoulddecrease;
Ourforeignsuppliersmayraisetheirpricesiftheyareimpactedbycurrencyfluctuations,resultinginhigherthanexpectedcostsandlowermargins;
and/or
Foreignexchangehedgingtransactionsthatweengageintoreducetheimpactofcurrencyfluctuationsmayrequirethepaymentofstructuringfees,limit
theU.S.dollarvalueofroyaltiesfromlicenseessalesthataredenominatedinforeigncurrencies,causeearningsvolatilityifthehedgesdonotqualifyfor
hedgeaccountingandexposeustocounterpartyriskifthecounterpartyfailstoperform.
Failures
in
our
products
or
services
or
in
the
products
or
services
of
our
customers
or
licensees,
including
those
resulting
from
security
vulnerabilities,
defects
or
errors,
could
harm
our
business.
Theuseofdevicescontainingourproductstoaccessuntrustedcontentcreatesariskofexposingthesystemsoftwareinthosedevicestoviralormalicious
attacks.Whilewecontinuetofocusonthisissueandaretakingmeasurestosafeguardourproductsfromcybersecuritythreats,devicecapabilitiescontinueto
evolve,enablingmoredataandprocesses,suchasmobilecomputing,andincreasingtheriskofsecurityfailures.Further,ourproductsareinherentlycomplexand
maycontaindefectsorerrorsthataredetectedonlywhentheproductsareinuse.Thedesignprocessinterfaceinnewdomainsoftechnologyandthemigrationto
integratedcircuittechnologieswithsmallergeometricfeaturesizesarecomplexandaddrisktomanufacturingyieldsandreliability.Further,manufacturing,
testing,marketinganduseofourproductsandthoseofourcustomersandlicenseesentailtheriskofproductliability.Becauseourproductsandservicesare
responsibleforcriticalfunctionsinourcustomersproductsand/ornetworks,securityfailures,defectsorerrorsinourproductsorservicescouldhaveanadverse
impactonus,onourcustomersand/orontheendusersofourcustomersproducts.Suchadverseimpactcouldincludeproductliabilityclaimsorrecalls,write-offs
ofourinventoriesand/orintangibleassets;unfavorablepurchasecommitments;ashiftofbusinesstoourcompetitors;adecreaseindemandforconnecteddevices
andwirelessservices;damagetoourreputationandtoourcustomerrelationships;andotherfinancialliabilityorharmtoourbusiness.Further,securityfailures,
defectsorerrorsintheproductsofourcustomersorlicensees,suchastherecentissueswiththeGalaxyNote7thatcausedSamsungtodiscontinuethatproduct,
couldhaveanadverseimpactonouroperatingresultsduetoadelayordecreaseindemandforourproductsorservicesgenerally,andourpremium-tierproducts
inparticular,amongotherfactors.

30

Exhibit 21
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232
Our
business
and
operations
could
suffer
in
the
event
of
security
breaches.
Attemptsbyotherstogainunauthorizedaccesstoourinformationtechnologysystemsareincreasinglymoresophisticated.Theseattempts,whichmightbe
relatedtoindustrialorotherespionage,includecovertlyintroducingmalwaretoourcomputersandnetworksandimpersonatingauthorizedusers,amongothers.
Weseektodetectandinvestigateallsecurityincidentsandtopreventtheirrecurrence,butinsomecases,wemightbeunawareofanincidentoritsmagnitudeand
effects.Whilewehaveidentifiedseveralincidentsofunauthorizedaccess,todatenonehavecausedmaterialdamagetoourbusiness.Thetheft,unauthorizeduse
orpublicationofourintellectualpropertyand/orconfidentialbusinessinformationcouldharmourcompetitiveposition,reducethevalueofourinvestmentin
researchanddevelopmentandotherstrategicinitiativesand/orotherwiseadverselyaffectourbusiness.Totheextentanysecuritybreachresultsininappropriate
disclosureofourcustomersorlicenseesconfidentialinformation,wemayincurliability.Weexpecttocontinuetodevoteresourcestothesecurityofour
informationtechnologysystems.
Potential
tax
liabilities
could
adversely
affect
our
results
of
operations.
WearesubjecttoincometaxesintheUnitedStatesandnumerousforeignjurisdictions,includingSingaporewhereourQCTsegmentsnon-UnitedStates
headquartersislocated.Significantjudgmentisrequiredindeterminingourprovisionforincometaxes.Althoughwebelievethatourtaxestimatesarereasonable,
thefinaldeterminationoftaxauditsandanyrelatedlegalproceedingscouldmateriallydifferfromamountsreflectedinourhistoricalincometaxprovisionsand
accruals.Insuchcase,ourincometaxprovisionandresultsofoperationsintheperiodorperiodsinwhichthatdeterminationismadecouldbenegativelyaffected.
WehavetaxincentivesinSingaporeprovidedthatwemeetspecifiedemploymentandothercriteria,andasaresultoftheexpirationoftheseincentives,our
Singaporetaxrateisexpectedtoincreaseinfiscal2017andagaininfiscal2027.Ifwedonotmeetthecriteriarequiredtoretainsuchincentives,ourSingaporetax
ratecouldincreasepriortofiscal2027,andourresultsofoperationscouldbeadverselyaffected.
Taxrulesmaychangeinamannerthatadverselyaffectsourfuturereportedfinancialresultsorthewayweconductourbusiness.Forexample,weconsider
theoperatingearningsofcertainnon-UnitedStatessubsidiariestobeindefinitelyreinvestedoutsidetheUnitedStatesbasedonourcurrentneedsforthoseearnings
tobereinvestedoffshoreaswellasestimatesthatfuturedomesticcashgeneratedfromoperationsand/orborrowingswillbesufficienttomeetfuturedomesticcash
needsfortheforeseeablefuture.NoprovisionhasbeenmadeforUnitedStatesfederal,stateorforeigntaxesthatmayresultfromfutureremittancesofthe
undistributedearningsoftheseforeignsubsidiaries.Ourfuturefinancialresultsandliquiditymaybeadverselyaffectediftaxrulesregardingunrepatriated
earningschange,ifdomesticcashneedsrequireustorepatriateforeignearnings,ifthesharesoftheseforeignsubsidiariesweresoldorotherwisetransferredorif
theUnitedStatesinternationaltaxruleschangeaspartofcomprehensivetaxreformorothertaxlegislation.

Furtherchangesinthetaxlawsofforeignjurisdictionscouldariseasaresultofthebaseerosionandprofitshifting(BEPS)projectthatwasundertakenbythe
OrganizationforEconomicCo-operationandDevelopment(OECD).TheOECD,whichrepresentsacoalitionofmembercountries,recommendedchangesto
numerouslong-standingtaxprinciplesrelatedtotransferpricing.Thesechanges,ifadoptedbycountries,couldincreasetaxuncertaintyandmayadverselyaffect
ourprovisionforincometaxes.Wehavenotyetdeterminedwhatchanges,ifany,maybeneededtoouroperationsorstructuretoaddressBEPS.Ifoureffective
taxratesweretoincrease,particularlyintheUnitedStatesorSingapore,ouroperatingresults,cashflowsand/orfinancialconditioncouldbeadverselyaffected.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

AtSeptember25,2016,weoccupiedthefollowingfacilities(squarefootageinmillions):

United States Other Countries Total


Ownedfacilities 4.6 0.1 4.7
Leasedfacilities 1.6 3.3 4.9
Total 6.2 3.4 9.6

31

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232
Ourheadquartersaswellascertainresearchanddevelopment,manufacturingandnetworkmanagementhuboperationsarelocatedinSanDiego,California.
Additionally,ourQCTsegmentsnon-UnitedStatesheadquartersislocatedinSingapore.Wealsoownandleasepropertiesaroundtheworldforuseassalesand
administrativeofficesandresearchanddevelopmentcenters,primarilyintheUnitedStates,India,ChinaandtheUnitedKingdom.Ourfacilityleasesexpireat
varyingdatesthrough2025,notincludingrenewalsthatwouldbeatouroption.Severalotherownedandleasedfacilitiesareunderconstructiontotaling
approximately493,000additionalsquarefeet.

Webelievethatourfacilitiesaresuitableandadequateforourpresentpurposesandthattheproductivecapacityinfacilitiesthatarenotunderconstructionis
substantiallyutilized.Wedonotidentifyorallocatefacilitiesbyoperatingsegment.Additionalinformationonnetproperty,plantandequipmentbygeographyis
providedinthisAnnualReportinNotestoConsolidatedFinancialStatements,Note8.SegmentInformation.Inthefuture,wemayneedtopurchase,buildor
leaseadditionalfacilitiestomeettherequirementsprojectedinourlong-termbusinessplan.

Item 3. Legal Proceedings

InformationregardinglegalproceedingsisprovidedinthisAnnualReportinNotestoConsolidatedFinancialStatements,Note7.Commitmentsand
Contingencies.Wearealsoengagedinnumerousotherlegalactionsarisingintheordinarycourseofourbusinessand,whiletherecanbenoassurance,we
believethattheultimateoutcomeoftheseotherlegalactionswillnothaveamaterialadverseeffectonourbusiness,resultsofoperations,financialconditionor
cashflows.

Item 4. Mine Safety Disclosures

Notapplicable.

32

Exhibit 21
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232
Part II

Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Dividends

OurcommonstockistradedontheNASDAQGlobalSelectMarketunderthesymbolQCOM.Thefollowingtablesetsforththerangeofhighandlowsales
pricesofourcommonstock,asreportedbyNASDAQ,andcashdividendsannouncedpershareofcommonstockforthefiscalperiodspresented.Quotationsof
ourstockpricerepresentinter-dealerpriceswithoutretailmarkup,markdownorcommissionandmaynotnecessarilyrepresentactualtransactions.

High ($) Low ($) Dividends ($)


2016
Firstquarter 61.19 45.93 0.48
Secondquarter 53.52 42.24 0.48
Thirdquarter 56.27 49.67 0.53
Fourthquarter 64.00 50.84 0.53
2015
Firstquarter 78.53 67.67 0.42
Secondquarter 75.60 62.26 0.42
Thirdquarter 71.90 64.60 0.48
Fourthquarter 66.05 52.39 0.48

AtOctober31,2016,therewere7,484holdersofrecordofourcommonstock.OnOctober31,2016,thelastsalepricereportedontheNASDAQGlobal
SelectMarketforourcommonstockwas$68.72pershare.OnOctober6,2016,weannouncedacashdividendof$0.53pershareonourcommonstock,payable
onDecember16,2016tostockholdersofrecordasofthecloseofbusinessonNovember30,2016.Weintendtocontinuetopayquarterlydividends,subjectto
capitalavailabilityandourviewthatcashdividendsareinthebestinterestsofourstockholders.Futuredividendsmaybeaffectedby,amongotheritems,our
viewsonpotentialfuturecapitalrequirements,includingthoserelatingtoresearchanddevelopment,creationandexpansionofsalesdistributionchannels,
investmentsandacquisitions,legalrisks,stockrepurchaseprograms,debtissuance,changesinfederalandstateincometaxlawandchangestoourbusinessmodel.

Share-Based Compensation

Weprimarilyissuerestrictedstockunitsunderourequitycompensationplans,whicharepartofabroad-based,long-termretentionprogramthatisintendedto
attractandretaintalentedemployeesanddirectorsandalignstockholderandemployeeinterests.

Our2016Long-TermIncentivePlan(2016Plan)providesforthegrantofbothincentiveandnonstatutorystockoptions,stockappreciationrights,restricted
stock,unrestrictedstock,restrictedstockunits,performanceunits,performanceshares,deferredcompensationawardsandotherstock-basedawards.Restricted
stockunitsgenerallyvestoverperiodsofthreeyearsfromthedateofgrant.Stockoptionsvestoverperiodsnotexceedingfiveyearsandareexercisableforupto
tenyearsfromthegrantdate.TheBoardofDirectorsmayamendorterminatethe2016Planatanytime.

Additionalinformationregardingourshare-basedcompensationplansandplanactivityforfiscal2016,2015and2014isprovidedinthisAnnualReportin
NotestoConsolidatedFinancialStatements,Note5.EmployeeBenefitPlansandadditionalinformationregardingourshare-basedcompensationplansforfiscal
2016isprovidedinour2017ProxyStatementundertheheadingEquityCompensationPlanInformation.

Issuer Purchases of Equity Securities

Issuerpurchasesofequitysecuritiesduringthefourthquarteroffiscal2016were:

33

Exhibit 21
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232
Total Number of Approximate Dollar Value
Shares Purchased as of Shares that May Yet Be
Average Price Part of Publicly Purchased Under the Plans
Total Number of Paid Per Share Announced Plans or or Programs
Shares Purchased (1) Programs (2)
(In thousands) (In thousands) (In millions)
June27,2016toJuly24,2016 $ $ 3,211
July25,2016toAugust21,2016 2,414 62.14 2,414 3,061
August22,2016toSeptember25,2016 1,201 62.43 1,201 2,986
Total 3,615 3,615

(1) AveragePricePaidPerShareexcludescashpaidforcommissions.

(2) OnMarch9,2015,weannouncedarepurchaseprogramauthorizingustorepurchaseupto$15billionofourcommonstock.AtSeptember25,2016,$3.0billionremained
authorizedforrepurchase.Thestockrepurchaseprogramhasnoexpirationdate.SinceSeptember25,2016,werepurchasedandretired1,865,000sharesofcommonstock
for$124million.

34

Exhibit 21
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232
Item 6. Selected Financial Data

Thefollowingdatashouldbereadinconjunctionwiththeannualconsolidatedfinancialstatements,relatednotesandotherfinancialinformationappearing
elsewhereherein.

Years Ended (1)


September 25, 2016 September 27, 2015 September 28, 2014 September 29, 2013 September 30, 2012
(In millions, except per share data)
Statement of Operations Data:
Revenues $ 23,554 $ 25,281 $ 26,487 $ 24,866 $ 19,121
Operatingincome 6,495 5,776 7,550 7,230 5,682
Incomefromcontinuingoperations 5,702 5,268 7,534 6,845 5,283
Discontinuedoperations,netofincometaxes 430 776
NetincomeattributabletoQualcomm 5,705 5,271 7,967 6,853 6,109

Per Share Data:


BasicearningspershareattributabletoQualcomm:
Continuingoperations $ 3.84 $ 3.26 $ 4.48 $ 3.99 $ 3.14
Discontinuedoperations 0.25 0.45
Netincome 3.84 3.26 4.73 3.99 3.59
DilutedearningspershareattributabletoQualcomm:
Continuingoperations 3.81 3.22 4.40 3.91 3.06
Discontinuedoperations 0.25 0.45
Netincome 3.81 3.22 4.65 3.91 3.51
Dividendspershareannounced 2.02 1.80 1.54 1.20 0.93

Balance Sheet Data:


Cash,cashequivalentsandmarketablesecurities $ 32,350 $ 30,947 $ 32,022 $ 29,406 $ 26,837
Totalassets 52,359 50,796 48,574 45,516 43,012
Loansanddebentures(2) 1,064
Short-termdebt(3) 1,749 1,000
Long-termdebt(4) 10,008 9,969
Otherlong-termliabilities(5) 895 817 428 550 426
Totalstockholdersequity 31,768 31,414 39,166 36,087 33,545

(1) OurfiscalyearendsonthelastSundayinSeptember.ThefiscalyearsendedSeptember25,2016,September27,2015,September28,2014andSeptember29,2013each
included52weeks.ThefiscalyearendedSeptember30,2012included53weeks.

(2) LoansanddebentureswereincludedinliabilitiesheldforsaleintheconsolidatedbalancesheetasofSeptember30,2012.

(3) Short-termdebtwascomprisedofoutstandingcommercialpaper.

(4) Long-termdebtwascomprisedoffloating-andfixed-ratenotes.

(5) Otherlong-termliabilitiesinthisbalancesheetdataexcludeunearnedrevenues.

35

Exhibit 21
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232
Item 7. Management s Discussion and Analysis of Financial Condition and Results of Operations

Inadditiontohistoricalinformation,thefollowingdiscussioncontainsforward-lookingstatementsthataresubjecttorisksanduncertainties.Actualresults
maydiffermateriallyfromthosereferredtohereinduetoanumberoffactors,includingbutnotlimitedtorisksdescribedinthesectionentitledRiskFactorsand
elsewhereinthisAnnualReport.

Overview

Fiscal 2016 Overview


Thetransitionofwirelessnetworksanddevicesto3G/4G(CDMA-based,OFDMA-basedandCDMA/OFDMAmultimode)continuedaroundtheworld.
3G/4Gconnectionsincreasedtoapproximately4.0billion,up18%year-over-year,andrepresentapproximately54%oftotalmobileconnections,upfrom47%at
theendoffiscal2015.(1)
Revenueswere$23.6billion,adecreaseof7%comparedtofiscal2015,withnetincomeattributabletoQualcommof$5.7billion,anincreaseof8%
comparedtofiscal2015.
QCT
Segment.
Weshippedapproximately842millionMobileStationModem(MSM)integratedcircuitsforCDMA-andOFDMA-basedwirelessdevices,a
decreaseof10%,comparedtoapproximately932millionMSMintegratedcircuitsinfiscal2015.QCTsrevenuesdecreasedby10%,anditsearningsbefore
taxesasapercentageofrevenuesdecreasedto12%from14%infiscal2015,primarilyduetotheeffectsofashiftinshareamongourcustomerswithinthe
premiumtier,whichreducedoursalesofintegratedSnapdragonprocessorsandskewedourproductmixtowardslower-marginmodemchipsetsinthistier,a
declineinshareatourlargecustomersandthecompetitiveenvironmentinChina,partiallyoffsetbylowerproductcosts,includinglowerexcessinventory
charges,andtheimpactoftheacquisitionofCSRinthefourthquarteroffiscal2015.
QTL
Segment.
Totalreporteddevicesales(2)bylicenseeswereapproximately$267.4billioninfiscal2016,anincreaseofapproximately7%,comparedto
approximately$250.9billioninfiscal2015.However,despitetheincreaseintotalreporteddevicesales,QTLsrevenuesdecreasedby4%comparedtofiscal
2015primarilyduetodecreasesinrevenuesperreportedunitandrecognitionofunearnedlicensefees,partiallyoffsetbyanincreaseinreportedsalesofCDMA-
basedproducts(includingmultimodeproductsthatalsoimplementOFDMA)and$266millioninlicensingrevenuesrecordedinthesecondquarteroffiscal2016
duetotheterminationofaninfrastructurelicenseagreementresultingfromthemergeroftwolicensees.QTLrevenuesandEBTinfiscal2016continuedtobe
impactednegativelybyunitsthatwebelievearenotbeingreportedbycertainlicenseesandsalesofcertainunlicensedproducts.
Strategic
Realignment
Plan.
Inthefourthquarteroffiscal2015,weannouncedaStrategicRealignmentPlandesignedtoimproveexecution,enhancefinancial
performanceanddriveprofitablegrowthasweworktocreatesustainablelong-termvalueforstockholders.AspartofthisStrategicRealignmentPlan,among
otheractions,weimplementedacostreductionplan,whichincludedaseriesoftargetedreductionsacrossourbusinesses,particularlyinQCT,andareductionto
annualshare-basedcompensationgrants.Thesecostreductioninitiativeswereachievedbytheendoffiscal2016.(3)Duringfiscal2016,werecordedrestructuring
andrestructuring-relatedchargesof$202millionrelatedtotheplan.

Capital
Return
Program.
Wepreviouslyannouncedourintentiontorepurchase$10billionofstockfromMarch2015throughMarch2016.Inthefirstquarter
offiscal2016,wecompletedtheremaining$1.9billionofrepurchasestowardsour$10billionstockrepurchasecommitment,whichincludesthecompletionofour
$5.0billionacceleratedsharerepurchaseagreements.Excludingthesestockrepurchases,wereturned$5.0billiontostockholders,including$2.0billionthrough
repurchasesofcommonstockand$3.0billionofcashdividends.Sharesoutstandingdecreasedby3%to1.48billionatSeptember25,2016from1.52billionat
September27,2015duetosharerepurchases,partiallyoffsetbynetsharesissuedunderouremployeebenefitplans.

(1) AccordingtoGSMAIntelligenceestimatesasofOctober31,2016forthequarterendedSeptember30,2016(estimatesexcludedWirelessLocalLoop).

(2) TotalreporteddevicesalesisthesumofallreportedsalesinU.S.dollars(asreportedtousbyourlicensees)ofalllicensedCDMA-based,OFDMA-basedand
CDMA/OFDMAmultimodesubscriberdevices(includinghandsets,modules,modemcardsandothersubscriberdevices)byourlicenseesduringaparticularperiod
(collectively,3G/4Gdevices).Notalllicenseesreportsalesthesameway(e.g.,somelicenseesreportsalesnetofpermitteddeductions,includingtransportation,insurance,
packingcostsandotheritems,whileotherlicenseesreportsalesandthenidentifytheamountofpermitteddeductionsintheirreports),andthewayinwhichlicenseesreport
suchinformationmaychangefromtimetotime.Inaddition,certainlicenseesmaynotreport(inthequarterinwhichtheyarecontractuallyobligatedtoreport)theirsalesof
certaintypesofsubscriberunits,which(asaresultofaudits,legalactionsorforother

36

Exhibit 21
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232
reasons)maybereportedinasubsequentquarter.Accordingly,totalreporteddevicesalesforaparticularperiodmayincludepriorperiodactivitythatwasnotreportedby
thelicenseeuntilsuchparticularperiod.

(3) Thecostreductioninitiativerelatedtocertainresearchanddevelopmentandselling,generalandmarketingexpensesandcertainnon-product-relatedcostofrevenues.It
excludestheimpactoftheCSRandCapsuleTechnologieacquisitionsaswellascostsofanonreportablesegmentuptotheamountofrelatedrevenuesrecognizedinfiscal
2016.

Our Business and Operating Segments


Wedesign,manufacture,havemanufacturedonourbehalfandmarketdigitalcommunicationsproductsandservicesbasedonCDMA,OFDMAandother
technologies.Wederiverevenuesprincipallyfromsalesofintegratedcircuitproductsandlicensingourintellectualproperty,includingpatents,softwareandother
rights.
Wehavethreereportablesegments.Weconductbusinessprimarilythroughtworeportablesegments,QCT(QualcommCDMATechnologies)andQTL
(QualcommTechnologyLicensing),andourQSI(QualcommStrategicInitiatives)reportablesegmentmakesstrategicinvestments.Ourreportablesegmentsare
operatedbyQUALCOMMIncorporatedanditsdirectandindirectsubsidiaries.Substantiallyallofourproductsandservicesbusinesses,includingQCT,and
substantiallyallofourengineering,researchanddevelopmentfunctions,areoperatedbyQualcommTechnologies,Inc.(QTI),awholly-ownedsubsidiaryof
QUALCOMMIncorporated,andQTIssubsidiaries.QTLisoperatedbyQUALCOMMIncorporated,whichownsthevastmajorityofourpatentportfolio.
NeitherQTInoranyofitssubsidiarieshasanyright,powerorauthoritytograntanylicensesorotherrightsunderortoanypatentsownedbyQUALCOMM
Incorporated.
QCTisaleadingdeveloperandsupplierofintegratedcircuitsandsystemsoftwarebasedonCDMA,OFDMAandothertechnologiesforuseinwirelessvoice
anddatacommunications,networking,applicationprocessing,multimediaandglobalpositioningsystemproducts.QCTsintegratedcircuitproductsaresoldand
itssystemsoftwareislicensedtomanufacturersthatuseourproductsinmobilephones,tablets,laptops,datamodules,handheldwirelesscomputersandgaming
devices,accesspointsandrouters,datacardsandinfrastructureequipment,broadbandgatewayequipmentandotherconsumerelectronicdevices.OurMSM
integratedcircuits,whichincludetheMobileDataModem,QualcommSingleChipandSnapdragonprocessorsandLTEmodems,performthecorebaseband
modemfunctionalityinwirelessdevicesprovidingvoiceanddatacommunications,aswellasmultimediaapplicationsandglobalpositioningfunctions.In
addition,ourSnapdragonprocessorsprovideadvancedapplicationandgraphicsprocessingcapabilities.QCTssystemsoftwarehelpsenabletheotherdevice
componentstointerfacewiththeintegratedcircuitproductsandisthefoundationsoftwareenablingmanufacturerstodevelopdevicesutilizingthefunctionality
withintheintegratedcircuits.QCTrevenuescomprised65%,68%and70%ofourtotalconsolidatedrevenuesinfiscal2016,2015and2014,respectively.
QCTcurrentlyutilizesafablessproductionmodel,whichmeansthatwedonotownoroperatefoundriesfortheproductionofsiliconwafersfromwhichour
integratedcircuitsaremade.Integratedcircuitsarediecutfromsiliconwafersthathavecompletedthepackageassemblyandtestmanufacturingprocesses.We
relyonindependentthird-partysupplierstoperformthemanufacturingandassembly,andmostofthetesting,ofourintegratedcircuitsbasedprimarilyonour
proprietarydesignsandtestprograms.Oursuppliersarealsoresponsiblefortheprocurementofmostoftherawmaterialsusedintheproductionofourintegrated
circuits.Weemploybothturnkeyandtwo-stagemanufacturingmodelstopurchaseourintegratedcircuits.Turnkeyiswhenourfoundrysuppliersareresponsible
fordeliveringfullyassembledandtestedintegratedcircuits.Underthetwo-stagemanufacturingmodel,wepurchasedieinsingularorwaferformfrom
semiconductormanufacturingfoundriesandcontractwithseparatethird-partysuppliersformanufacturingservices,suchaswaferbump,probe,assemblyandfinal
test.
QTLgrantslicensesorotherwiseprovidesrightstouseportionsofourintellectualpropertyportfolio,which,amongotherrights,includescertainpatentrights
essentialtoand/orusefulinthemanufactureandsaleofcertainwirelessproducts,including,withoutlimitation,productsimplementingCDMA2000,WCDMA,
CDMATDDand/orLTEstandardsandtheirderivatives.QTLlicensingrevenuesincludelicensefeesandroyaltiesbasedonsalesbylicenseesofproducts
incorporatingorusingourintellectualproperty.Licensefeesarefixedamountspaidinoneormoreinstallments.Royaltiesaregenerallybaseduponapercentage
ofthewholesale(i.e.,licensees)sellingpriceofcompletelicensedproducts,netofcertainpermissibledeductions(includingtransportation,insurance,packing
costsandotheritems).QTLrecognizesroyaltyrevenuesbasedonroyaltiesreportedbylicenseesandwhenotherrevenuerecognitioncriteriaaremet.Licensees,
however,donotreportandpayroyaltiesowedforsalesinanygivenquarteruntilaftertheconclusionofthatquarter.QTLrevenuescomprised33%,31%and
29%ofourtotalconsolidatedrevenuesinfiscal2016,2015and2014,respectively.Thevastmajorityofsuchrevenuesweregeneratedthroughourlicensees
salesofCDMA2000-andWCDMA-basedproducts,suchasfeaturephonesandsmartphones.
QSImakesstrategicinvestmentsthatarefocusedonopeningneworexpandingopportunitiesforourtechnologiesandsupportingthedesignandintroduction
ofnewproductsandservices(orenhancingexistingproductsorservices)forvoiceanddatacommunications.Manyofthesestrategicinvestmentsareinearly-
stagecompaniesinavarietyofindustries,including,butnotlimitedto,digitalmedia,e-commerce,healthcareandwearabledevices.Investmentsprimarilyinclude
non-

37

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232
marketableequityinstruments,whichgenerallyarerecordedusingthecostmethodortheequitymethod,andconvertibledebtinstruments,whicharerecordedat
fairvalue.QSIalsoheldwirelessspectrum,whichwassoldinthefirstquarteroffiscal2016foragainofapproximately$380million.Inaddition,QSIsegment
resultsincluderevenuesandrelatedcostsassociatedwithdevelopmentcontractswithoneofourequitymethodinvestees.Aspartofourstrategicinvestment
activities,weintendtopursuevariousexitstrategiesforeachofourQSIinvestmentsintheforeseeablefuture.
Nonreportablesegmentsincludeourmobileheath,datacenter,smallcellandotherwirelesstechnologyandserviceinitiatives.
Seasonality.
Manyofourproductsorintellectualpropertyareincorporatedintoconsumerwirelessdevices,whicharesubjecttoseasonalityandother
fluctuationsindemand.Asaresult,QCThastendedhistoricallytohavestrongersalestowardtheendofthecalendaryearasmanufacturersprepareformajor
holidaysellingseasons;andbecauseQTLrecognizesroyaltyrevenueswhenroyaltiesarereportedbylicensees,QTLhastendedtorecordhigherroyaltyrevenues
inthefirstcalendarquarterwhenlicenseesreporttheirsalesmadeduringthefourthcalendarquarter.Wehavealsoexperiencedfluctuationsinrevenuesduetothe
timingofconversionsandexpansionsof3Gand3G/4Gnetworksbywirelessoperatorsandthetimingoflaunchesofflagshipwirelessdevicesthatincorporateour
productsand/orintellectualproperty.Thesetrendsmayormaynotcontinueinthefuture.

Looking Forward
Weexpectcontinuedgrowthinthecomingyearsinconsumerdemandfor3G,3G/4Gmultimodeand4Gproductsandservicesaroundtheworld,driven
primarilybysmartphones.Wealsoexpectgrowthinnewdevicecategoriesandindustries,drivenbytheexpandingadoptionofcertaintechnologiesthatare
alreadycommonlyusedinsmartphones.Aswelookforwardtothenextseveralmonths,weexpectourbusinesstobeimpactedbythefollowingkeyitems:
OnOctober27,2016,weannouncedadefinitiveagreementunderwhichQualcommRiverHoldings,B.V.,anindirect,whollyownedsubsidiaryof
QualcommIncorporated,willacquireNXPSemiconductorsN.V.Pursuanttothedefinitiveagreement,QualcommRiverHoldingswillcommencea
tenderoffertoacquirealloftheissuedandoutstandingcommonsharesofNXPfor$110pershareincash,forestimatedtotalcashconsiderationof$38
billion.NXPisaleaderinhigh-performance,mixed-signalsemiconductorelectronicsinautomotive,broad-basedmicrocontrollers,secureidentification,
networkprocessingandRFpowerproducts.Thetransactionisexpectedtoclosebytheendofcalendar2017andissubjecttoreceiptofregulatory
approvalsinvariousjurisdictionsandotherclosingconditions,includingthetenderofspecifiedpercentages(whichvaryfrom70%to95%basedon
certaincircumstancesasprovidedinthedefinitiveagreement)oftheissuedandoutstandingcommonsharesofNXPintheoffer.Thetenderofferisnot
subjecttoanyfinancingcondition;however,weintendtofundthetransactionwithcashheldbyforeignentitiesandnewdebt.Weexpectthatthiswill
requireusto:devotesignificantresourcesandmanagementtimeandattentionpriortoclose;takeonsignificantdebt;andutilizeasubstantialportionof
ourcash,cashequivalentsandmarketablesecurities.
Consumerdemandfor3G/4Gsmartphoneproductsisincreasinginemergingregions,particularlyinChina,drivenbyavailabilityoflower-tier-3G/4G
devices.Weexpecttheongoingrolloutof4Gservicesinemergingregionswillencouragecompetitionandgrowth,bringingthebenefitsof3G/4GLTE
multimodetoconsumers.
Ourbusiness,particularlyQCT,expectstocontinuetobeimpactedbyindustrydynamics,including:
Concentrationofdeviceshareamongafewcompanieswithinthepremiumtier,resultinginsignificantsupplychainleverageforthose
companies;
Decisionsbycompaniestoutilizetheirowninternally-developedintegratedcircuitproductsorourcompetitorsintegratedcircuitproductsina
portionoftheirdevices;
Intensecompetition,particularlyinChina,asourcompetitorsexpandtheirproductofferingsand/orreducethepricesoftheirproductsaspartof
astrategytoattractnewand/orretaincustomers;and
Lengtheningreplacementcyclesindevelopedregions,wherethesmartphoneindustryismature,premium-tiersmartphonesarecommonand
consumerdemandisincreasinglydrivenbynewproductlaunchesand/orinnovationcycles,andfromincreasingconsumerdemandinemerging
regionswherepremium-tiersmartphonesarelesscommonandreplacementcyclesareonaveragelongerthanindevelopedregions.
Wecontinuetobelievethatcertainlicensees,particularlyinChina,arenotfullycomplyingwiththeircontractualobligationstoreporttheirsalesof
licensedproductstous,andcertaincompanies,includingunlicensedcompanies,aredelayingexecutionofnewlicenseagreements.Whilewehavemade
substantialprogressinreachingagreements

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232
withmanycompanies,negotiationswithcertainlicenseesandunlicensedcompaniesareongoing.Webelievethattheconclusionofnewagreementswith
thesecompanieswillresultinimprovedreportingbytheselicensees,includingwithrespecttosalesofthree-modedevices(i.e.,devicesthatimplement
GSM,TD-SCDMAandLTE-TDD)soldinChina.Additionally,webelieveourincreasedeffortsintheareasofcompliancewillalsoimprovereporting,
butwillalsoresultinincreasedcoststothebusiness.Litigationand/orotheractions(suchasthelitigationagainstMeizuTechnologyCo.,Ltd.described
inthisAnnualReportinNotestoConsolidatedFinancialStatements,Note7.CommitmentsandContingencies)maybenecessarytocompellicensees
toreportandpaytherequiredroyaltiesforsalestheyhavenotpreviouslyreportedand/ortocompelunlicensedcompaniestoexecutelicenses.
Regulatoryauthoritiesinotherjurisdictionscontinuetoinvestigateourbusinesspractices.Anunfavorableresolutionofoneormoreofthesematters
couldhaveamaterialadverseeffectonourbusinesswithremediesthatinclude,amongothers,injunctions,monetarydamagesorfinesorotherordersto
paymoney,andtheissuanceoforderstoceasecertainconductand/ormodifyourbusinesspractices.SeeNotestoConsolidatedFinancialStatements,
Note7.CommitmentsandContingencieselsewhereinthisAnnualReport.
Wecontinuetoinvestsignificantresourcestowardadvancementsin4GLTEand5Gtechnologies,OFDM-basedWLANtechnologies,wirelessbaseband
chips,ourconvergedcomputing/communications(Snapdragon)chips,radiofrequencyfront-end(RFFE),connectivity,graphics,audioandvideocodecs,
multimediaproducts,softwareandservices,whichcontributetotheexpansionofourintellectualpropertyportfolio.Wearealsoinvestingintargeted
opportunitiesthatleverageourexistingtechnicalandbusinessexpertisetodeploynewbusinessmodelsandenterintonewindustrysegments,suchas
productsforautomotive,theInternetofThings(IoT),includingtheconnectedhome,smartcitiesandwearables,datacenter,networking,mobile
computing,mobilehealthandmachinelearning,includingrobotics,amongothers.
InJanuary2016,weannouncedthatwehadreachedanagreementwithTDKCorporationtoformajointventure,underthenameRF360Holdings
SingaporePte.Ltd.,toenabledeliveryofRFFEmodulesandRFfiltersintofullyintegratedproductsformobiledevicesandIoTapplications,among
others.Thejointventurewillinitiallybeowned51%byusand49%byTDK.Certainintellectualproperty,patentsandfilterandmoduledesignand
manufacturingassetswillbecarvedoutofexistingTDKbusinessesandbeacquiredbythejointventure,withcertainassetsacquiredbyus.Thepurchase
priceofourinterestinthejointventureandtheassetstobetransferredtousis$1.2billion,tobeadjustedforworkingcapital,outstandingindebtedness
andcertaincapitalexpenditures,amongotherthings.Additionally,wehavetheoptiontoacquire(andTDKhasanoptiontosell)TDKsinterestinthe
jointventurefor$1.15billion30monthsaftertheclosingdate.TDKwillbeentitledtouptoatotalof$200millioninpaymentsbasedonsalesofRF
filterfunctionsoverthethree-yearperiodaftertheclosingdate,whichisasubstituteforandinlieuofanyrightofTDKtoreceiveanyprofitsharing,
distributions,dividendsorotherpaymentsofanykindornature.Thetransactionissubjecttoreceiptofregulatoryapprovalsandotherclosingconditions
andisexpectedtocloseinearlycalendar2017.
Inadditiontotheforegoingbusinessandmarket-basedmatters,wecontinuetodevoteresourcestoworkingwithandeducatingparticipantsinthewireless
valuechainandgovernmentsastothebenefitsofourbusinessmodelandourextensivetechnologyinvestmentsinpromotingahighlycompetitiveandinnovative
wirelessindustry.However,weexpectthatcertaincompaniesmaycontinuetobedissatisfiedwiththeneedtopayreasonableroyaltiesfortheuseofour
technologyandnotwelcomethesuccessofourbusinessmodelinenablingnew,highlycost-effectivecompetitorstotheirproducts.Weexpectthatsuch
companies,and/orgovernmentsorregulators,willcontinuetochallengeourbusinessmodelinvariousforumsthroughouttheworld.

FurtherdiscussionofrisksrelatedtoourbusinessispresentedintheRiskFactorsincludedinthisAnnualReport.

Critical Accounting Estimates

ThepreparationofourconsolidatedfinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesrequiresustomake
estimatesandjudgmentsthataffectthereportedamountsofassets,liabilities,revenuesandexpenses,anddisclosureofcontingentassetsandliabilities.Webase
ourestimatesonhistoricalandanticipatedresultsandtrendsandonvariousotherassumptionsthatwebelievearereasonableunderthecircumstances,including
assumptionsastofutureevents.Bytheirnature,estimatesaresubjecttoaninherentdegreeofuncertainty.Althoughwebelievethatourestimatesandthe
assumptionssupportingourassessmentsarereasonable,actualresultsthatdifferfromourestimatescouldbematerialtoourconsolidatedfinancialstatements.A
summaryofoursignificantaccountingpoliciesisincludedinthisAnnualReportinNotestoConsolidatedFinancialStatements,Note1.TheCompanyandIts
SignificantAccountingPolicies.Weconsiderthefollowingaccountingestimatestobecriticalinthepreparationofourconsolidatedfinancialstatements.

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Exhibit 21
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232
Impairment
of
Marketable
Securities
and
Other
Investments.
Weholdinvestmentsinmarketablesecurities,withincreasesanddecreasesinfairvalue
generallyrecordedthroughstockholdersequityasothercomprehensiveincomeorloss.Werecordimpairmentlossesinearningswhenwebelieveaninvestment
hasexperiencedadeclinethatisotherthantemporary.Thedeterminationthatadeclineisotherthantemporaryissubjectiveandinfluencedbymanyfactors.
Adversechangesinmarketconditionsorpooroperatingresultsofinvesteescouldresultinlossesoraninabilitytorecoverthecarryingvalueoftheinvestments,
therebyrequiringrecognitionofimpairmentlosses.Whenassessingtheseinvestmentsforanother-than-temporarydeclineinvalue,weconsidersuchfactorsas,
amongotherthings,thesignificanceofthedeclineinvalueascomparedtothecostbasis;underlyingfactorscontributingtoadeclineinthepricesofsecuritiesina
singleassetclass;howlongthemarketvalueofthesecurityhasbeenlessthanitscostbasis;thesecuritysrelativeperformanceversusitspeers,sectororasset
class;expectedmarketvolatility;themarketandeconomyingeneral;analystrecommendationsandpricetargets;viewsofexternalinvestmentmanagers;newsor
financialinformationthathasbeenreleasedspecifictotheinvestee;andtheoutlookfortheoverallindustryinwhichtheinvesteeoperates,asapplicable.During
fiscal2016,2015and2014,werecorded$112million,$163millionand$156million,respectively,inimpairmentlossesonourinvestmentsinmarketable
securities.AsofSeptember25,2016,wehadgrossunrealizedlossesof$105million.PriortoclosingtheNXPtransaction,weexpecttodivestasubstantial
portionofourmarketablesecuritiesportfolioinordertofinanceourproposedacquisition,whichmayresultinlossesinourresultsofoperations.

Wealsoholdinvestmentsinnon-marketableequityinstrumentsinprivatelyheldcompaniesthatareaccountedforusingeitherthecostortheequitymethod.
Manyoftheseinvestmentsareinearly-stagecompanies,whichareinherentlyriskybecausethemarketsforthetechnologiesorproductsofthesecompaniesare
uncertainandmayneverdevelop.Wemonitorourinvestmentsforeventsorcircumstancesthatcouldindicatetheinvestmentsareimpaired,suchasadeterioration
intheinvesteesfinancialconditionandbusinessforecastsandlowervaluationsinrecentlycompletedorproposedfinancings,andwerecordimpairmentlossesin
earningswhenwebelieveaninvestmenthasexperiencedadeclineinvaluethatisotherthantemporary.

Valuation
of
Inventories.
Inventoriesarevaluedatthelowerofcostormarket(replacementcost,nottoexceednetrealizablevalue)usingthefirst-in,first-out
method.Recoverabilityofinventoriesisassessedbasedonreviewoffuturecustomerdemandthatconsidersmultiplefactors,includingcommittedpurchaseorders
fromcustomersaswellaspurchasecommitmentprojectionsprovidedbycustomers,amongotherthings.Thisvaluationalsorequiresustomakejudgmentsand
assumptionsbasedoninformationcurrentlyavailableaboutmarketconditions,includingcompetition,productpricing,productlifecycleanddevelopmentplans.If
weoverestimatedemandforourproducts,theamountofourlosswillbeimpactedbyourcontractualabilitytoreduceinventorypurchasesfromoursuppliers.Our
assumptionsoffutureproductdemandareinherentlyuncertain,andchangesinourestimatesandassumptionsmaycauseustorealizematerialwrite-downsinthe
future.

Valuation
of
Goodwill
and
Other
Indefinite-Lived
and
Long-Lived
Assets
.Ourbusinessacquisitionstypicallyresultintherecordingofgoodwill,other
intangibleassetsandproperty,plantandequipment,andtherecordedvaluesofthoseassetsmaybecomeimpairedinthefuture.Wealsoacquireintangibleassets
andproperty,plantandequipmentinothertypesoftransactions.Thedeterminationoftherecordedvalueofintangibleassetsacquiredinabusinesscombination
requiresmanagementtomakeestimatesandassumptionsthataffectourconsolidatedfinancialstatements.Forintangibleassetsacquiredinanon-monetary
exchange,theestimatedfairvaluesoftheassetstransferred(ortheestimatedfairvaluesoftheassetsreceived,ifmoreclearlyevident)areusedtoestablishtheir
recordedvalues,unlessthevaluesofneithertheassetsreceivednortheassetstransferredaredeterminablewithinreasonablelimits,inwhichcasetheassets
receivedaremeasuredbasedonthecarryingvaluesoftheassetstransferred.Valuationtechniquesconsistentwiththemarketapproach,incomeapproachand/or
costapproachareusedtomeasurefairvalue.Anestimateoffairvaluecanbeaffectedbymanyassumptionsthatrequiresignificantjudgment.Forexample,the
incomeapproachgenerallyrequiresustouseassumptionstoestimatefuturecashflowsincludingthoserelatedtototaladdressablemarket,pricingandshare
forecasts,competition,technologyobsolescence,futuretaxratesanddiscountrates.Ourestimateofthefairvalueofcertainassetsmaydiffermateriallyfromthat
determinedbyotherswhousedifferentassumptionsorutilizedifferentbusinessmodels.

Goodwillandotherindefinite-livedintangibleassetsaretestedannuallyforimpairmentandininterimperiodsifcertaineventsoccurindicatingthatthe
carryingamountsmaybeimpaired.Long-livedassets,suchasproperty,plantandequipmentandintangibleassetssubjecttoamortization,arereviewedfor
impairmentwhenthereisevidencethateventsorchangesincircumstancesindicatethatthecarryingamountofanassetorassetgroupmaynotberecoverable.Our
judgmentsregardingtheexistenceofimpairmentindicatorsandfuturecashflowsrelatedtogoodwillandotherindefinite-livedintangibleassetsandlong-lived
assetsmaybebasedonoperationalperformanceofourbusinesses,marketconditions,expectedsellingpriceand/orotherfactors.Althoughthereareinherent
uncertaintiesinthisassessmentprocess,theestimatesandassumptionsweuse,includingestimatesoffuturecashflowsanddiscountrates,areconsistentwithour
internalplanning,whenappropriate.Iftheseestimatesortheirrelatedassumptionschangeinthefuture,wemayberequiredtorecordanimpairmentchargeona

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232
portionorallofourgoodwill,otherindefinite-livedintangibleassetsand/orlong-livedassets.Furthermore,wecannotpredicttheoccurrenceoffutureimpairment-
triggeringeventsnortheimpactsucheventsmighthaveonourreportedassetvalues.Futureeventscouldcauseustoconcludethatimpairmentindicatorsexistand
thatgoodwillorotherintangibleassetsassociatedwithouracquiredbusinessesareimpaired.Anyresultingimpairmentlosscouldhaveanadverseimpactonour
financialpositionandresultsofoperations.Duringfiscal2016,2015and2014,werecorded$107million,$317millionand$642million,respectively,in
impairmentchargesforgoodwill,otherindefinite-livedintangibleassetsandlong-livedassets.TheestimatedfairvaluesofourQCTandQTLreportingunitswere
substantiallyinexcessoftheirrespectivecarryingvaluesatSeptember25,2016.

Legal
Proceedings.
Wearecurrentlyinvolvedincertainlegalproceedings,andweintendtocontinuetovigorouslydefendourselves.However,the
unfavorableresolutionofoneormoreoftheseproceedingscouldhaveamaterialadverseeffectonourbusiness,resultsofoperations,financialconditionand/or
cashflows.Abroadrangeofremedieswithrespecttoourbusinesspracticesthataredeemedtoviolateapplicablelawsarepotentiallyavailable.Theseremedies
mayinclude,amongothers,injunctions,monetarydamagesorfinesorotherorderstopaymoneyandtheissuanceoforderstoceasecertainconductand/orto
modifyourbusinesspractices.Wedisclosealosscontingencyifthereisatleastareasonablepossibilitythatamateriallosshasbeenincurred.Werecordourbest
estimateofalossrelatedtopendinglegalproceedingswhenthelossisconsideredprobableandtheamountcanbereasonablyestimated.Wherearangeoflosscan
bereasonablyestimatedwithnobestestimateintherange,werecordtheminimumestimatedliability.Asadditionalinformationbecomesavailable,weassessthe
potentialliability,includingtheprobabilityoflossrelatedtopendinglegalproceedings,andreviseourestimatesandupdateourdisclosuresaccordingly.
Significantjudgmentisrequiredinboththedeterminationofprobabilityandthedeterminationastowhetheralossisreasonablyestimable.Revisionsinour
estimatesofthepotentialliabilitycouldmateriallyimpactourresultsofoperations.

Income
Taxes.
WearesubjecttoincometaxesintheUnitedStatesandnumerousforeignjurisdictions,andtheassessmentofourincometaxpositions
involvesdealingwithuncertaintiesintheapplicationofcomplextaxlawsandregulationsinvarioustaxingjurisdictions.Inaddition,theapplicationoftaxlaws
andregulationsissubjecttolegalandfactualinterpretation,judgmentanduncertainty.Taxlawsandregulationsthemselvesaresubjecttochangeasaresultof
changesinfiscalpolicy,changesinlegislation,theevolutionofregulationsandcourtrulings.Significantjudgmentsandestimatesarerequiredindeterminingour
provisionforincometaxes,includingthoserelatedtotaxincentives,intercompanyresearchanddevelopmentcost-sharingarrangements,transferpricingandtax
credits.Whilewebelievewehaveappropriatesupportforthepositionstakenonourtaxreturns,weregularlyassessthepotentialoutcomesofexaminationsby
taxingauthoritiesindeterminingtheadequacyofourprovisionforincometaxes.Therefore,theactualliabilityforUnitedStatesorforeigntaxesmaybematerially
differentfromourestimates,whichcouldresultintheneedtorecordadditionaltaxliabilitiesorpotentiallyreversepreviouslyrecordedtaxliabilities.Weare
participatingintheInternalRevenueService(IRS)ComplianceAssuranceProcessprogramwherebyweendeavortoagreewiththeIRSonthetreatmentofall
issuespriortofilingourfederalreturn.Abenefitofparticipationinthisprogramisthatpost-filingadjustmentsbytheIRSarelesslikelytooccur.

OurQCTsegmentsnon-UnitedStatesheadquartersislocatedinSingapore.WeobtainedtaxincentivesinSingaporethatcommencedinMarch2012,
includingataxexemptionforthefirstfiveyears,providedthatwemeetspecifiedemploymentandincentivecriteria,andasaresultoftheexpirationofthese
incentives,ourSingaporetaxrateisexpectedtoincreaseinfiscal2017andagaininfiscal2027.Ourfailuretomeetthesecriteriacouldadverselyimpactour
provisionforincometaxes.

Weconsidertheoperatingearningsofcertainnon-UnitedStatessubsidiariestobeindefinitelyreinvestedoutsidetheUnitedStatesbasedonourplansforuse
and/orinvestmentoutsideoftheUnitedStatesandourbeliefthatoursourcesofcashandliquidityintheUnitedStateswillbesufficienttomeetfuturedomestic
cashneeds.Onaregularbasis,weconsiderprojectedcashneedsfor,amongotherthings,potentialacquisitions,suchasourproposedacquisitionofNXP,
investmentsinourexistingbusinesses,futureresearchanddevelopmentandcapitaltransactions,includingrepurchasesofourcommonstock,dividendsanddebt
repayments.Weestimatetheamountofcashorotherliquiditythatisavailableorneededinthejurisdictionswheretheseinvestmentsareexpectedaswellasour
abilitytogeneratecashinthosejurisdictionsandouraccesstocapitalmarkets.Thisanalysisenablesustoconcludewhetherornotwewillindefinitelyreinvestthe
currentperiodsforeignearnings.Wehavenotrecordedadeferredtaxliabilityofapproximately$11.5billionrelatedtotheUnitedStatesfederalandstateincome
taxesandforeignwithholdingtaxesonapproximately$32.5billionofundistributedearningsofcertainnon-UnitedStatessubsidiariesindefinitelyreinvested
outsidetheUnitedStates.ShouldwedecidetonolongerindefinitelyreinvestsuchearningsoutsidetheUnitedStates,forexample,ifwedeterminethatsuch
earningsareneededtofundfuturedomesticoperationsorthereisnotasufficientneedforsuchearningsoutsideoftheUnitedStates,wewouldhavetoadjustthe
incometaxprovisionintheperiodwemakesuchdetermination.

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Exhibit 21
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232
Results of Operations

Revenues
(in
millions)
2016 vs. 2015 2015 vs. 2014
2016 2015 2014 Change Change
Equipmentandservices $ 15,467 $ 17,079 $ 18,625 $ (1,612) $ (1,546)
Licensing 8,087 8,202 7,862 (115) 340
$ 23,554 $ 25,281 $ 26,487 $ (1,727) $ (1,206)

Thedecreasesinequipmentandservicesrevenuesinfiscal2016and2015wereprimarilyduetodecreasesinQCTrevenuesof$1.76billionand$1.49billion,
respectively.Thedecreaseinequipmentandservicesrevenuesinfiscal2016waspartiallyoffsetbyincreasesinanonreportablesegmentsrevenuesandQSI
revenuesof$56millionand$43million,respectively.Thedecreaseinlicensingrevenuesinfiscal2016wasprimarilyduetothedecreaseinQTLrevenues,
partiallyoffsetbyanincreaseinanonreportablesegmentsrevenuesof$143million.Theincreaseinourlicensingrevenuesinfiscal2015wasprimarilyduetoan
increaseinQTLrevenuesof$378million.

QCTandQTLsegmentrevenuesrelatedtotheproductsofSamsungElectronicsandHonHaiPrecisionIndustryCo.,Ltd/Foxconn,itsaffiliatesandother
supplierstoAppleInc.comprised40%,45%and49%oftotalconsolidatedrevenuesinfiscal2016,2015and2014,respectively.

RevenuesfromcustomersinChina,SouthKoreaandTaiwancomprised57%,17%and12%,respectively,oftotalconsolidatedrevenuesforfiscal2016,
comparedto53%,16%and13%,respectively,forfiscal2015,and50%,23%and11%,respectively,forfiscal2014.Wereportrevenuesfromexternal
customersbycountrybasedonthelocationtowhichourproductsorservicesaredelivered,whichforQCTisgenerallythecountryinwhichourcustomers
manufacturetheirproducts,orforlicensingrevenues,theinvoicedaddressesofourlicensees.Asaresult,therevenuesbycountrypresentedhereinarenot
necessarilyindicativeofeitherthecountryinwhichthedevicescontainingourproductsand/orintellectualpropertyareultimatelysoldtoconsumersorthecountry
inwhichthecompaniesthatsellthedevicesareheadquartered.Forexample,Chinarevenueswouldincluderevenuesrelatedtoshipmentsofintegratedcircuitstoa
companythatisheadquarteredinSouthKoreabutthatmanufacturesdevicesinChina,whichdevicesarethensoldtoconsumersinEuropeand/ortheUnited
States.

Costs
and
Expenses
(in
millions)
2016 vs. 2015 2015 vs. 2014
2016 2015 2014 Change Change
Costofrevenues $ 9,749 $ 10,378 $ 10,686 $ (629) $ (308)
Grossmargin 59% 59% 60%

Themarginpercentageinfiscal2016remainedflatprimarilyduetotheeffectof$163millioninadditionalchargesrelatedtotheamortizationofintangible
assetsandtherecognitionofthestep-upofinventoriestofairvalueprimarilyrelatedtotheacquisitionofCSRplcinthefourthquarteroffiscal2015,offsetbythe
impactofhigher-marginsegmentmixprimarilyrelatedtoQTL.Thedecreaseinmarginpercentageinfiscal2015wasprimarilyattributabletoadecreaseinQCT
grossmarginpercentage.Ourmarginpercentagemaycontinuetofluctuateinfutureperiodsdependingonthemixofproductssoldandservicesprovided,
competitivepricing,newproductintroductioncostsandotherfactors.

2016 vs. 2015 2015 vs. 2014


2016 2015 2014 Change Change
Researchanddevelopment $ 5,151 $ 5,490 $ 5,477 $ (339) $ 13
%ofrevenues 22% 22% 21%
Selling,general,andadministrative $ 2,385 $ 2,344 $ 2,290 $ 41 $ 54
%ofrevenues 10% 9% 9%
Other $ (226) $ 1,293 $ 484 $ (1,519) $ 809

Thedollardecreaseinresearchanddevelopmentexpensesinfiscal2016wasprimarilyattributabletoadecreaseof$228millionincostsrelatedtothe
developmentofintegratedcircuittechnologiesandrelatedsoftwareproducts.SuchdecreasewasprimarilydrivenbyactionsinitiatedundertheStrategic
RealignmentPlan,partiallyoffsetbyincreasedresearchanddevelopmentcostsresultingfromacquisitions.Thedecreaseinresearchanddevelopmentexpensesin
fiscal2016also

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232
includeddecreasesof$67millionindevelopmentcostsofdisplaytechnologiesand$45millioninshare-basedcompensationexpense.Thedollarincreasein
researchanddevelopmentexpensesinfiscal2015wasprimarilyattributabletoanincreaseof$117millionincostsrelatedtothedevelopmentofintegratedcircuit
technologiesandrelatedsoftwareproducts,partiallyoffsetbyadecreaseof$72millionrelatedtothedevelopmentcostsofdisplaytechnologiesandadditional
decreasesrelatedtothedevelopmentcostsofothernewproductandlicensinginitiatives.
Thedollarincreaseinselling,generalandadministrativeexpensesinfiscal2016wasprimarilyattributabletoincreasesof$65millionincostsrelatedto
litigationandotherlegalmatters,$39millioninemployee-relatedexpensesand$27millionindepreciationandamortizationexpense,partiallyoffsetbydecreases
of$36millioninshare-basedcompensationexpense,$21millioninsellingandmarketingexpenses,$19millioninprofessionalservicesand$17millioninpatent-
relatedcosts.Thedollarincreaseinselling,generalandadministrativeexpensesinfiscal2015wasprimarilyattributabletoincreasesof$73millioninsellingand
marketingexpensesand$46millionincostsrelatedtolitigationandotherlegalmatters,partiallyoffsetbydecreasesof$49millioninemployee-relatedexpenses
and$13millioninshare-basedcompensation.

Otherincomeinfiscal2016wasprimarilyattributabletoa$380milliongainonthesaleofwirelessspectrum,partiallyoffsetbybenetchargesrelatedtoour
StrategicRealignmentPlan,whichincluded$202millioninrestructuringandrestructuring-relatedcharges,partiallyoffsetbya$48milliongainonthesaleofour
businessthatprovidedaugmentedrealityapplications.Otherexpensesinfiscal2015wereattributabletoa$975millionchargeresultingfromtheresolution
reachedwiththeNDRC,chargesof$255millionand$11millionforimpairmentofgoodwillandintangibleassets,respectively,relatedtoourcontentandpush-
to-talkservicesanddisplaybusinessesand$190millioninrestructuringandrestructuring-relatedchargesrelatedtoourStrategicRealignmentPlan,partiallyoffset
by$138millioningainsonsalesofcertainpropertyplantandequipment.Otherexpensesinfiscal2014werecomprisedof$607millionincertainproperty,plant
andequipmentandgoodwillimpairmentchargesand$19millioninrestructuring-relatedcostsincurredbyoneofourdisplaybusinesses,a$16milliongoodwill
impairmentchargerelatedtoourformerQRS(QualcommRetailSolutions)divisionanda$15millionlegalsettlement,partiallyoffsetbythereversalofa$173
millionexpenseaccrualrecordedinfiscal2013relatedtotheParkerVisionverdictagainstus,whichwasoverturned.

Interest
Expense
and
Net
Investment
Income
(in
millions)
2016 vs. 2015 2015 vs. 2014
2016 2015 2014 Change Change
Interestexpense $ 297 $ 104 $ 5 $ 193 $ 99

Investmentincome,net
Interestanddividendincome $ 611 $ 527 $ 586 $ 84 $ (59)
Netrealizedgainsonmarketablesecurities 239 451 770 (212) (319)
Netrealizedgainsonotherinvestments 49 49 56 (7)
Impairmentlossesonmarketablesecuritiesandother
investments (172) (200) (180) 28 (20)
Equityinnetlossesofinvestees (84) (32) (10) (52) (22)
Other (8) 20 11 (28) 9
$ 635 $ 815 $ 1,233 $ (180) $ (418)

Theincreaseininterestexpenseinfiscal2016and2015wasprimarilyduetotheissuanceofanaggregateprincipalamountof$10.0billioninfloating-and
fixed-ratenotesinMay2015.

Income
Tax
Expense
(in
millions)
2016 vs. 2015 2015 vs. 2014
2016 2015 2014 Change Change
Incometaxexpense $ 1,131 $ 1,219 $ 1,244 $ (88) $ (25)
Effectivetaxrate 17% 19% 14% (2)% 5%

43

Exhibit 21
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232
ThefollowingtablesummarizestheprimaryfactorsthatcausedourannualeffectivetaxratestobelessthantheUnitedStatesfederalstatutoryrate:

2016 2015 2014


Expectedincometaxprovisionatfederalstatutorytaxrate 35% 35% 35%
BenefitsfromforeignincometaxedatotherthanU.S.rates (16%) (14%) (20%)
Benefitsrelatedtotheresearchanddevelopmenttaxcredits (2%) (2%) (1%)
Worthlessstockdeductionofdomesticsubsidiary (1%)
Other 1%
Effectivetaxrate 17% 19% 14%

Theannualeffectivetaxrateof17%forfiscal2016reflecteda$101milliontaxbenefitrecordeddiscretelyinthethirdquarterresultingfromaworthless
stockdeductiononadomesticsubsidiaryofoneofourformerdisplaybusinessesanda$79millionbenefitoftheretroactivereinstatementoftheUnitedStates
federalresearchanddevelopmentcreditrecordeddiscretelyduringthefirstquarteroffiscal2016relatedtofiscal2015.Theeffectivetaxrateforourstateincome
taxprovision,netoffederalbenefit,wasnegligibleforallyearspresented.

Duringfiscal2015,theNDRCimposedafineof$975million,whichwasnotdeductiblefortaxpurposesandwassubstantiallyattributabletoaforeign
jurisdiction.Additionally,duringfiscal2015,werecordedataxbenefitof$101millionrelatedtofiscal2014resultingfromtheUnitedStatesgovernment
reinstatingthefederalresearchanddevelopmenttaxcreditretroactivelytoJanuary1,2014throughDecember31,2014.Theeffectivetaxrateforfiscal2015also
reflectedtheUnitedStatesfederalresearchanddevelopmenttaxcreditgeneratedthroughDecember31,2014,thedateonwhichthecreditexpiredanda$61
milliontaxbenefitasaresultofafavorabletaxauditsettlementwiththeInternalRevenueService(IRS)relatedtoQualcommAtheros,Inc.spre-acquisition2010
and2011taxreturns.Theannualeffectivetaxrateforfiscal2014reflectedthetaxbenefitfromtheUnitedStatesfederalresearchanddevelopmenttaxcredit
generatedthroughDecember31,2013,thedateonwhichthecreditpreviouslyexpired.Theeffectivetaxrateforfiscal2014alsoreflectedataxbenefitof$66
millionrelatedtofiscal2013resultingfromanagreementreachedwiththeIRSoncomponentsofourfiscal2013taxreturn.

Theannualeffectivetaxrateforfiscal2016,2015and2014alsoreflectedtaxbenefitsforcertaintaxincentivesobtainedinSingaporethatcommencedin
March2012,includingataxexemptionforthefirstfiveyears,providedthatwemeetspecifiedemploymentandothercriteria.OurSingaporetaxrateisexpected
toincreaseinfiscal2017andagaininfiscal2027asaresultoftheexpirationoftheseincentives.

Unrecognizedtaxbenefitswere$271millionand$40millionatSeptember25,2016andSeptember27,2015,respectively.Theincreaseinunrecognizedtax
benefitsinfiscal2016wasprimarilyduetotaxpositionsrelatedtoclassificationofincome.Webelievethatitisreasonablypossiblethatthetotalamountsof
unrecognizedtaxbenefitsatSeptember25,2016mayincreaseordecreaseinthenext12months.

Our Segment Results


Thefollowingshouldbereadinconjunctionwiththefiscal2016,2015and2014financialresultsforeachreportablesegmentincludedinthisAnnualReport
inNotestoConsolidatedFinancialStatements,Note8.SegmentInformation.

44

Exhibit 21
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232
(in
millions) QCT QTL QSI
2016
Revenues $ 15,409 $ 7,664 $ 47
EBT(1) 1,812 6,528 386
EBTasa%ofrevenues 12% 85%
2015
Revenues $ 17,154 $ 7,947 $ 4
EBT (1)
2,465 6,882 (74)
EBTasa%ofrevenues 14% 87%
2014
Revenues $ 18,665 $ 7,569 $
EBT(1) 3,807 6,590 (7)
EBTasa%ofrevenues 20% 87%

(1) Earnings(loss)beforetaxes.

QCT
Segment.
QCTresultsofoperationsinfiscal2016werenegativelyimpactedbytheeffectsofashiftinshareamongourcustomerswithinthepremium
tier,whichreducedoursalesofintegratedSnapdragonprocessorsandskewedourproductmixtowardslower-marginmodemchipsetsinthistier,adeclineinshare
atourlargecustomersandthecompetitiveenvironmentinChina.ThedecreasesinQCTrevenuesinfiscal2016and2015of$1.75billionand$1.51billion,
respectively,wereprimarilyduetodecreasesinequipmentandservicesrevenues.Equipmentandservicesrevenues,mostlyrelatedtosalesofMSMand
accompanyingRadioFrequency(RF)andPowerManagement(PM)integratedcircuits,were$15.18billion,$16.95billionand$18.43billioninfiscal2016,2015
and2014,respectively.Thedecreaseinequipmentandservicesrevenuesinfiscal2016resultedprimarilyfromdecreasesof$1.35billionrelatedtolowerMSM
andaccompanyingRFandPMunitshipmentsand$1.14billionfromloweraveragesellingpricesandlower-pricedproductmix,partiallyoffsetbyanetincrease
of$753millioninrevenuesrelatedtootherproducts,primarilyrelatedtohigherconnectivityshipmentsresultingfromtheacquisitionofCSRinthefourthquarter
offiscal2015.Thedecreaseinequipmentandservicesrevenuesinfiscal2015resultedprimarilyfromadecreaseof$2.89billionfromlower-pricedproductmix
andloweraveragesellingprices,partiallyoffsetbyanincreaseof$1.26billionrelatedtohigherMSMandaccompanyingRFandPMunitshipments.
Approximately842million,932millionand861millionMSMintegratedcircuitsweresoldduringfiscal2016,2015and2014,respectively.
QCTEBTasapercentageofrevenuesdecreasedinfiscal2016ascomparedtofiscal2015primarilyduetotheimpactoflowerrevenuesrelativetooperating
expenses.QCTgrossmarginpercentageremainedflatinfiscal2016primarilyasaresultofloweraveragesellingpricesandlower-marginproductmix,offsetby
loweraverageunitcostsandlowerexcessinventorycharges.QCTEBTasapercentageofrevenuesdecreasedinfiscal2015ascomparedtofiscal2014primarily
duetoadecreaseingrossmarginpercentageandtherelatedimpactoflowerrevenuesrelativetooperatingexpenses.ThedecreaseinQCTgrossmargin
percentageinfiscal2015primarilyresultedfromloweraveragesellingpricesandlower-marginproductmix,partiallyoffsetbyloweraverageunitcosts.QCT
grossmarginpercentageinfiscal2015wasalsoimpactedbyanincreaseof$179millioninexcessinventorycharges.
QTL
Segment.
ThedecreaseinQTLrevenuesinfiscal2016of$283millionwasprimarilyattributabletodecreasesinrevenuesperreportedunitand
recognitionofunearnedlicensefees,partiallyoffsetbyanincreaseinreportedsalesofCDMA-basedproducts(includingmultimodeproductsthatalsoimplement
OFDMA)and$266millioninlicensingrevenuesrecordedinthesecondquarteroffiscal2016duetotheterminationofaninfrastructurelicenseagreement
resultingfromthemergeroftwolicensees.QTLrevenuesandEBTinfiscal2016continuedtobeimpactednegativelybyunitsthatwebelievearenotbeing
reportedbycertainlicenseesandsalesofcertainunlicensedproducts.Whilewehavereachedagreementswithmanylicensees,negotiationswithcertainother
licenseesandunlicensedcompaniesareongoing,andadditionallitigationmaybecomenecessaryifnegotiationsfailtoresolvetherelevantissues.
TheincreaseinQTLrevenuesinfiscal2015of$378millionwasprimarilyduetoanincreaseinsalesofCDMA-basedproducts,includingmultimode
productsthatalsoimplementOFDMA,reportedbylicensees,partiallyoffsetbyadecreaseinrevenuesperreportedunit.QTLrevenuesandEBTinfiscal2015
wereimpactednegativelybyunitsthatwebelievewerenotbeingreportedbycertainlicenseesandsalesofcertainunlicensedproductsinChina.Alsoinfiscal
2015,QTLexperiencednegativefluctuationsinforeigncurrencyexchangerates.

45

Exhibit 21
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Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2148 Page 134 of
232
QSI
Segment
.TheincreaseinQSIEBTinfiscal2016wasprimarilyduetoa$380milliongainonthesaleofwirelessspectrum,anincreaseof$47millionin
netrealizedgainsoninvestmentsandadecreaseof$21millioninimpairmentlossesoninvestments.ThedecreaseinQSIEBTinfiscal2015of$67millionwas
primarilyduetoincreasesof$32millioninimpairmentlossesoninvestmentsand$29millioninequitylossesandothercostsrelatedtoourequitymethod
investments.
Liquidity and Capital Resources
OnOctober27,2016,weannouncedadefinitiveagreementunderwhichQualcommRiverHoldingswillacquireNXP.Pursuanttothedefinitiveagreement,
QualcommRiverHoldingswillcommenceatenderoffertoacquirealloftheissuedandoutstandingcommonsharesofNXPfor$110pershareincash,for
estimatedtotalcashconsiderationof$38billion.Thetransactionisexpectedtoclosebytheendofcalendar2017andissubjecttoreceiptofregulatoryapprovals
invariousjurisdictionsandotherclosingconditions.Weintendtofundthetransactionwithcashheldbyforeignentities,whichwillresultintheuseofa
substantialportionofourcash,cashequivalentsandmarketablesecurities,aswellasnewdebt,andwesecured$13.6billionincommittedfinancinginconnection
withsigningthedefinitiveagreement.

QualcommRiverHoldingsandNXPmayterminatethedefinitiveagreementundercertaincircumstances.IfthedefinitiveagreementisterminatedbyNXPin
certaincircumstances,NXPwillberequiredtopayQualcommRiverHoldingsaterminationfeeof$1.25billion.Ifthedefinitiveagreementisterminatedby
QualcommRiverHoldingsundercertaincircumstancesinvolvingthefailuretoobtaintherequiredregulatoryapprovalsorthefailureofNXPtocompletecertain
pre-closingreorganizationstepsinallmaterialrespects,QualcommRiverHoldingswillberequiredtopayNXPaterminationfeeof$2.0billion.

Ourprincipalsourcesofliquidityareourexistingcash,cashequivalentsandmarketablesecurities,cashgeneratedfromoperations,cashprovidedbyourdebt
programsandproceedsfromtheissuanceofcommonstockunderourstockoptionandemployeestockpurchaseplans.Thefollowingtablepresentsselected
financialinformationrelatedtoourliquidityasofandfortheyearsendedSeptember25,2016andSeptember27,2015(inmillions):

2016 2015 $ Change % Change


Cash,cashequivalentsandmarketablesecurities $ 32,350 $ 30,947 $ 1,403 5%
Accountsreceivable,net 2,219 1,964 255 13%
Inventories 1,556 1,492 64 4%
Short-termdebt 1,749 1,000 749 75%
Long-termdebt 10,008 9,969 39 %
Netcashprovidedbyoperatingactivities 7,400 5,506 1,894 34%
Netcashusedbyinvestingactivities (3,488) (3,572) 84 2%
Netcashusedbyfinancingactivities (5,522) (2,261) (3,261)

Thenetincreaseincash,cashequivalentsandmarketablesecuritieswasprimarilytheresultofnetcashprovidedbyoperatingactivitiesandnetproceedsfrom
short-termdebt,partiallyoffsetby$3.9billioninpaymentstorepurchasesharesofourcommonstockand$3.0billionincashdividendspaid.Totalcashprovided
byoperatingactivitiesincreasedprimarilyduetochangesinworkingcapital,whichwasimpactedbyaprepaymentof$950millioninfiscal2015tosecurelong-
termcapacitycommitmentsatasupplierofourintegratedcircuitproducts,andanincreaseinnetincomeof$434million.Ourdayssalesoutstanding,ona
consolidatedbasis,were33daysatSeptember25,2016andSeptember27,2015.Theincreaseinaccountsreceivablewasprimarilyduetothetimingofthe
collectionofpaymentsfromcertainofourlicensees.Theincreaseininventorieswasprimarilyduetoanincreaseintheoverallquantityofunitsonhandtoalign
withnear-termdemand,partiallyoffsetbyloweraverageunitcosts.
Ourcash,cashequivalentsandmarketablesecuritiesatSeptember25,2016consistedof$2.8billionheldbyUnitedStates-basedentitiesand$29.6billion
heldbyforeignentities.Mostofourcash,cashequivalentsandmarketablesecuritiesheldbyforeignentitiesareindefinitelyreinvestedandwouldbesubjectto
materialtaxeffectsifrepatriated.However,webelievethatourUnitedStatessourcesofcashandliquidityaresufficienttomeetourbusinessneedsintheUnited
Statesanddonotexpectthatwewillneedtorepatriatethefunds.
Webelieveourcurrentcash,cashequivalentsandmarketablesecurities,ourexpectedcashflowgeneratedfromoperationsandourexpectedfinancing
activitieswillsatisfyourworkingandothercapitalrequirementsforatleastthenext12monthsbasedonourcurrentbusinessplans.Recentandexpectedworking
andothercapitalrequirements,inadditiontoourproposedacquisitionofNXP,alsoincludetheitemsdescribedbelow.

46

Exhibit 21
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232
OurpurchaseobligationsatSeptember25,2016,someofwhichrelatetoresearchanddevelopmentactivitiesandcapitalexpenditures,totaled$4.2
billionand$886millionforfiscal2017and2018,respectively,and$1.0billionthereafter.
Ourresearchanddevelopmentexpenditureswere$5.2billionand$5.5billionduringfiscal2016and2015,respectively,andweexpecttocontinueto
investheavilyinresearchanddevelopmentfornewtechnologies,applicationsandservicesforvoiceanddatacommunications.
Cashoutflowsforcapitalexpenditureswere$539millionand$994millionduringfiscal2016and2015,respectively.Weexpecttocontinuetoincur
capitalexpendituresinthefuturetosupportourbusiness,includingresearchanddevelopmentactivities.Futurecapitalexpendituresmaybeimpactedby
transactionsthatarecurrentlynotforecasted.
InJanuary2016,weannouncedthatwehadreachedagreementwithTDKCorporationtoformajointventure,underthenameRF360HoldingsSingapore
Pte.Ltd.Thejointventurewillinitiallybeowned51%byusand49%byTDK.Thepurchasepricedueuponcloseofthetransactionis$1.2billion,tobe
adjustedforworkingcapital,outstandingindebtednessandcertaincapitalexpenditures,amongotherthings.Additionally,wehavetheoptiontoacquire
(andTDKhasanoptiontosell)TDKsinterestinthejointventurefor$1.15billion30monthsaftertheclosingdate.Weexpecttouseexistingcash
resourcestofundtheacquisition.TDKwillbeentitledtouptoatotalof$200millioninpaymentsbasedonsalesofRFfilterfunctionsoverthethree-
yearperiodaftertheclosingdate.Thetransactionissubjecttoregulatoryapprovalsandotherclosingconditionsandisexpectedtocloseinearlycalendar
2017.
Weexpecttocontinuemakingstrategicinvestmentsandacquisitions,theamountsofwhichcouldvarysignificantly,toopennewopportunitiesforour
technologies,obtaindevelopmentresources,growourpatentportfolioorpursuenewbusinesses.
Debt.
WehaveaRevolvingCreditFacilitythatprovidesforunsecuredrevolvingfacilityloans,swinglineloansandlettersofcreditinanaggregateamountof
upto$4.0billion,expiringinFebruary2020.AtSeptember25,2016,noamountswereoutstandingundertheRevolvingCreditFacility.
Wehaveanunsecuredcommercialpaperprogram,whichprovidesfortheissuanceofupto$4.0billionofcommercialpaper.Netproceedsfromthisprogram
areusedforgeneralcorporatepurposes.AtSeptember25,2016,wehad$1.7billionofcommercialpaperoutstandingwithweighted-averagenetinterestratesof
0.52%andweighted-averageremainingdaystomaturityof36days.
InMay2015,weissuedanaggregateprincipalamountof$10.0billionineighttranchesofunsecuredfloating-andfixed-ratenotes,withmaturitydatesin
2018through2045andeffectiveinterestratesbetween0.93%and4.74%.Interestispayableinarrearsquarterlyforthefloating-ratenotesandsemi-annuallyfor
thefixed-ratenotes.InadditiontothenewdebtweexpecttoissueinconnectionwithourproposedacquisitionofNXP,wemayalsoissuedebtinthefuture.The
amountandtimingofsuchadditionalborrowingswillbesubjecttoanumberoffactors,includingthecashflowgeneratedbyUnitedStates-basedentities,
acquisitionsandstrategicinvestments,acceptableinterestratesandchangesincorporateincometaxlaw,amongotherfactors.
AdditionalinformationregardingouroutstandingdebtatSeptember25,2016isprovidedinthisAnnualReportinNotestoConsolidatedFinancial
Statements,Note6.Debt.
Capital
Return
Program.
Thefollowingtablesummarizesstockrepurchasesanddividendspaidduringfiscal2016,2015and2014(inmillions,exceptper-
shareamounts):

Stock Repurchase Program Dividends Total


Average Price Paid Per
Shares Share Amount Per Share Amount Amount
2016 73.8 $ 53.16 $ 3,922 $ 2.02 $ 2,990 $ 6,912
2015 172.4 65.21 11,245 1.80 2,880 14,125
2014 60.3 75.48 4,548 1.54 2,586 7,134

OnMarch9,2015,weannouncedthatwehadbeenauthorizedtorepurchaseupto$15billionofourcommonstock.Additionally,weannouncedour
intentiontorepurchase$10billionofstockfromMarch2015throughMarch2016,whichwecompletedduringthefirstquarteroffiscal2016.AtSeptember25,
2016,$3.0billionremainedauthorizedforrepurchaseunderourstockrepurchaseprogram.SinceSeptember25,2016,werepurchasedandretired1,865,000
sharesofcommon

47

Exhibit 21
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232
stockfor$124million.AsaresultofourproposedacquisitionofNXPandthependinguseofourcashandmarketablesecurities,wecurrentlyexpectto
repurchasesharesduringthenextfewyearstooffsetdilution.Weperiodicallyevaluaterepurchasesasameansofreturningcapitaltostockholderstodetermine
whenandifrepurchasesareinthebestinterestsofourstockholders.
OnOctober6,2016,weannouncedacashdividendof$0.53pershareonourcommonstock,payableonDecember16,2016tostockholdersofrecordasof
thecloseofbusinessonNovember30,2016.Weintendtocontinuetousecashdividendsasameansofreturningcapitaltostockholders,subjecttocapital
availabilityandourviewthatcashdividendsareinthebestinterestsofourstockholders.

Contractual Obligations/Off-Balance Sheet Arrangements

Wehavenosignificantcontractualobligationsnotfullyrecordedonourconsolidatedbalancesheetsorfullydisclosedinthenotestoourconsolidated
financialstatements.Wehavenomaterialoff-balancesheetarrangementsasdefinedinRegulationS-K303(a)(4)(ii).

ThefollowingtablesummarizesthepaymentsduebyfiscalperiodforouroutstandingcontractualobligationsatSeptember25,2016(inmillions):

No
Beyond Expiration
Total 2017 2018-2019 2020-2021 2021 Date
Purchaseobligations(1) $ 6,104 $ 4,204 $ 1,635 $ 260 $ 5 $
Operatingleaseobligations 338 94 132 76 36
Equityfundingandfinancingcommitments(2) 251 16 87 12 134 2
Long-termdebt(3) 10,000 1,500 2,000 6,500
Otherlong-termliabilities(4)(5) 240 4 191 31 3 11
Totalcontractualobligations $ 16,933 $ 4,318 $ 3,545 $ 2,379 $ 6,678 $ 13

(1) Totalpurchaseobligationsincludecommitmentstopurchaseintegratedcircuitproductinventoriesof$3.4billion,$766million,$673millionand$158millionforeachof
thesubsequentfouryearsfromfiscal2017through2020,respectively;therewerenosuchpurchasecommitmentsthereafter.Integratedcircuitproductinventoryobligations
representpurchasecommitmentsforsemiconductordie,finishedgoodsandmanufacturingservices,suchaswaferbump,probe,assemblyandfinaltest.Underour
manufacturingrelationshipswithourfoundrysuppliersandassemblyandtestserviceproviders,cancelationofoutstandingpurchaseordersisgenerallyallowedbutrequires
paymentofallcostsincurredthroughthedateofcancelation,andinsomecases,incrementalfeesrelatedtocapacityunderutilization.
(2) Certainofthesecommitmentsdonothavefixedfundingdatesandaresubjecttocertainconditions.Commitmentsrepresentthemaximumamountstobefundedunder
thesearrangements;actualfundingmaybeinlesseramountsornotatall.
(3) Theamountsnotedhereinrepresentcontractualpaymentsofprincipalonly.
(4) Certainlong-termliabilitiesreflectedonourbalancesheet,suchasunearnedrevenues,arenotpresentedinthistablebecausetheydonotrequirecashsettlementinthe
future.Otherlong-termliabilitiesaspresentedinthistableincludetherelatedcurrentportions,asapplicable.
(5) OurconsolidatedbalancesheetatSeptember25,2016included$140millioninnoncurrentliabilitiesforuncertaintaxpositions,someofwhichmayresultincashpayment.
Thefuturepaymentsrelatedtouncertaintaxpositionshavenotbeenpresentedinthetableaboveduetotheuncertaintyoftheamountsandtimingofcashsettlementwith
thetaxingauthorities.
AdditionalinformationregardingourfinancialcommitmentsatSeptember25,2016isprovidedinthisAnnualReportinNotestoConsolidatedFinancial
Statements,Note3.IncomeTaxes,Note6.DebtandNote7.CommitmentsandContingencies.
Recent Accounting Pronouncements
Informationregardingrecentaccountingpronouncementsandtheimpactofthosepronouncements,ifany,onourconsolidatedfinancialstatementsisprovided
inthisAnnualReportinNotestoConsolidatedFinancialStatements,Note1.TheCompanyandItsSignificantAccountingPolicies.

48

Exhibit 21
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232
Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest
Rate
Risk
-
Debt
and
Interest
Rate
Swap
Agreements.
Weissuedanaggregateprincipalamountof$10.0billionofunsecuredfloating-andfixed-rate
noteswithvaryingmaturitydates.Wealsoenteredintointerestrateswapswithanaggregatenotionalamountof$3.0billiontoeffectivelyconvertcertainfixed-
rateinterestpaymentsintofloating-ratepayments.Theinterestratesonourfloating-ratenotesandinterestrateswapsarebasedonLIBOR.Byissuingthefloating-
ratenotesandenteringintotheinterestrateswapagreements,wehaveassumedrisksassociatedwithvariableinterestratesbaseduponLIBOR.AtSeptember25,
2016,ahypotheticalincreaseinLIBOR-basedinterestratesof100basispointswouldcauseourinterestexpensetoincreaseby$30milliononanannualizedbasis
asitrelatestoourfloating-ratenotesandtheinterestrateswapagreements.

Additionally,wehaveacommercialpaperprogramthatprovidesfortheissuanceofupto$4.0billionofcommercialpaper.AtSeptember25,2016,wehad
$1.7billionofcommercialpaperoutstanding,withoriginalmaturitiesoflessthan4months.Changesininterestratescouldaffecttheamountsofinterestthatwe
payifwerefinancethecurrentoutstandingcommercialpaperwithnewdebt.

AdditionalinformationregardingournotesandrelatedinterestrateswapagreementsandcommercialpaperprogramisprovidedinthisAnnualReportin
NotestoConsolidatedFinancialStatements,Note1.TheCompanyandItsSignificantAccountingPoliciesandNotestoConsolidatedFinancialStatements,
Note6.Debt.

Interest
Rate
Risk
-
Investment
Portfolio.
Weinvestaportionofourcashinanumberofdiversifiedfixed-andfloating-ratesecurities,consistingofcash
equivalents,marketabledebtsecurities,debtfundsandderivativeinstrumentsrelatedtoourinvestmentportfolio(includinginterestrateswaps)thataresubjectto
interestraterisk.Changesinthegenerallevelofinterestratescanaffectthefairvalueofourinvestmentportfolio.Ifinterestratesinthegeneraleconomywereto
rise,ourholdingscouldlosevalue.AtSeptember25,2016,ahypotheticalincreaseininterestratesof100basispointsacrosstheentireyieldcurveonourholdings
wouldhaveresultedinadecreaseof$501millioninthefairvalueofourholdings.

Equity
Price
Risk.
Weholdadiversifiedmarketablesecuritiesportfoliothatincludesequitysecuritiesandfundsharesthataresubjecttoequitypricerisk.We
havemadeinvestmentsinmarketableequitysecuritiesofcompaniesofvaryingsize,style,industryandgeography,andchangesininvestmentallocationsmay
affectthepricevolatilityofourinvestments.A10%decreaseinthemarketpriceofourmarketableequitysecuritiesandfundsharesatSeptember25,2016would
havecausedadecreaseinthecarryingamountsofthesesecuritiesof$175million.AtSeptember25,2016,grossunrealizedlossesofourmarketableequity
securitiesandfundshareswere$12million.Althoughweconsidertheunrealizedlossestobetemporary,thereisariskthatwemayincurother-than-temporary
impairmentchargesorrealizedlossesonthevaluesofthesesecuritiesiftheydonotrecoverinvaluewithinareasonableperiod.

Wealsoholdinvestmentsinnon-marketableequityinstrumentsinprivatelyheldcompaniesthatmaybeimpactedbyequitypricerisks.Volatilityintheequity
marketscouldnegativelyaffectourinvesteesabilitytoraiseadditionalcapitalaswellasourabilitytorealizevaluefromourinvestmentsthroughinitialpublic
offerings,mergersandprivatesales.Consequently,wecouldincurother-than-temporaryimpairmentlossesorrealizedlossesonallorapartofthevaluesofour
non-marketableequityinvestments.AtSeptember25,2016,thecarryingvalueofournon-marketableequityinvestmentswas$855millionandwasincludedin
othernoncurrentassets.

Foreign
Exchange
Risk.
Wemanageourexposuretoforeignexchangemarketrisks,whendeemedappropriate,throughtheuseofderivativefinancial
instruments,includingforeigncurrencyforwardandoptioncontractswithfinancialcounterparties.Weutilizesuchderivativefinancialinstrumentsforhedgingor
riskmanagementpurposesratherthanforspeculationpurposes.Counterpartiestoourderivativecontractsareallmajorbankinginstitutions.Intheeventofthe
financialinsolvencyordistressofacounterpartytoourderivativefinancialinstruments,wemaybeunabletosettletransactionsifthecounterpartydoesnot
provideuswithsufficientcollateraltosecureitsnetsettlementobligationstous,whichcouldhaveanegativeimpactonourresults.Adescriptionofourforeign
currencyaccountingpoliciesisprovidedinthisAnnualReportinNotestoConsolidatedFinancialStatements,Note1.TheCompanyandItsSignificant
AccountingPolicies.

AtSeptember25,2016,ournetliabilityrelatedtoforeigncurrencyoptionandforwardcontractsdesignatedashedgesofforeigncurrencyrisk(onroyalties
earnedfromcertainlicenseesontheirsalesofCDMA-baseddevices)wasnegligible.Ifourforecastedroyaltyrevenuesforcurrenciesinwhichwehedgewereto
declineby20%andforeignexchangeratesweretochangeunfavorablyby20%inourhedgedforeigncurrency,wewouldnotincuralossasourhedgepositions
wouldcontinuetobefullyeffective.

AtSeptember25,2016,ournetassetrelatedtoforeigncurrencyoptionandforwardcontractsdesignatedashedgesofforeigncurrencyrisk(oncertain
operatingexpendituretransactions)wasnegligible.Ifourforecastedoperatingexpenditures

49

Exhibit 21
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232
forcurrenciesinwhichwehedgeweretodeclineby20%andforeignexchangeratesweretochangeunfavorablyby20%inourhedgedforeigncurrency,we
wouldincuranegligibleloss.

Financialassetsandliabilitiesheldbyconsolidatedsubsidiariesthatarenotdenominatedinthefunctionalcurrencyofthoseentitiesaresubjecttotheeffects
ofcurrencyfluctuationsandmayaffectreportedearnings.Asaglobalcompany,wefaceexposuretoadversemovementsinforeigncurrencyexchangerates.We
mayhedgecurrencyexposuresassociatedwithcertainassetsandliabilitiesdenominatedinnonfunctionalcurrenciesandcertainanticipatednonfunctionalcurrency
transactions.Asaresult,wecouldexperienceunanticipatedgainsorlossesonanticipatedforeigncurrencycashflows,aswellaseconomiclosswithrespecttothe
recoverabilityofinvestments.Whilewemayhedgecertaintransactionswithnon-UnitedStatescustomers,declinesincurrencyvaluesincertainregionsmay,if
notreversed,adverselyaffectfutureproductsalesbecauseourproductsmaybecomemoreexpensivetopurchaseinthecountriesoftheaffectedcurrencies.

Ouranalysismethodsusedtoassessandmitigatetherisksdiscussedaboveshouldnotbeconsideredprojectionsoffuturerisks.

Item 8. Financial Statements and Supplementary Data

OurconsolidatedfinancialstatementsatSeptember25,2016andSeptember27,2015andforeachofthethreeyearsintheperiodendedSeptember25,2016
andtheReportofPricewaterhouseCoopersLLP,IndependentRegisteredPublicAccountingFirm,areincludedinthisAnnualReportonpagesF-1throughF-37.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Underthesupervisionandwiththeparticipationofourmanagement,includingourprincipalexecutiveofficerandprincipalfinancialofficer,weconductedan
evaluationofourdisclosurecontrolsandprocedures,assuchtermsaredefinedunderRule13a-15(e)promulgatedundertheSecuritiesExchangeActof1934,as
amended(theExchangeAct).Basedonthisevaluation,ourprincipalexecutiveofficerandourprincipalfinancialofficerconcludedthatourdisclosurecontrolsand
procedureswereeffectiveasoftheendoftheperiodcoveredbythisAnnualReport.

Managements Report on Internal Control over Financial Reporting

Ourmanagementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting,assuchtermisdefinedinExchangeAct
Rule13a-15(f).Underthesupervisionandwiththeparticipationofourmanagement,includingourprincipalexecutiveofficerandprincipalfinancialofficer,we
conductedanevaluationoftheeffectivenessofourinternalcontroloverfinancialreportingbasedontheframeworkinInternal
Control

Integrated
Framework
(2013)
issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission.Basedonourevaluationunderthisframework,ourmanagement
concludedthatourinternalcontroloverfinancialreportingwaseffectiveasofSeptember25,2016.

PricewaterhouseCoopersLLP,theindependentregisteredpublicaccountingfirmthatauditedtheconsolidatedfinancialstatementsincludedinthisAnnual
Report,hasalsoauditedtheeffectivenessofourinternalcontroloverfinancialreportingasofSeptember25,2016,asstatedinitsreportwhichappearsonpageF-
1.

Inherent Limitations over Internal Controls

Ourinternalcontroloverfinancialreportingisdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationof
consolidatedfinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Ourinternalcontroloverfinancialreporting
includesthosepoliciesandproceduresthat:

i. pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsofourassets;

ii. providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationofconsolidatedfinancialstatementsinaccordancewith
generallyacceptedaccountingprinciples,andthatourreceiptsandexpendituresarebeingmadeonlyinaccordancewithauthorizationsofour
managementanddirectors;and

50

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232
iii. providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,useordispositionofourassetsthatcouldhavea
materialeffectontheconsolidatedfinancialstatements.

Internalcontroloverfinancialreportingcannotprovideabsoluteassuranceofachievingfinancialreportingobjectivesbecauseofitsinherentlimitations,
includingthepossibilityofhumanerrorandcircumventionbycollusionoroverridingofcontrols.Accordingly,evenaneffectiveinternalcontrolsystemmaynot
preventordetectmaterialmisstatementsonatimelybasis.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrols
maybecomeinadequatebecauseofchangesinconditionsorthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.

Changes in Internal Control over Financial Reporting

Therewerenochangesinourinternalcontroloverfinancialreportingduringthefourthquarteroffiscal2016thathavemateriallyaffected,orarereasonably
likelytomateriallyaffect,ourinternalcontroloverfinancialreporting.

Item 9B. Other Information

None.

Part III

Item 10. Directors, Executive Officers and Corporate Governance

TheinformationrequiredbythisitemregardingdirectorsisincorporatedbyreferencetoourDefinitiveProxyStatementtobefiledwiththeSecuritiesand
ExchangeCommissioninconnectionwithour2017AnnualMeetingofStockholders(the2017ProxyStatement)undertheheadingsNomineesforElectionand
Section16(a)BeneficialOwnershipReportingCompliance.CertaininformationrequiredbythisitemregardingexecutiveofficersissetforthinItem1ofPartI
ofthisReportunderthecaptionExecutiveOfficers,andcertaininformationisincorporatedbyreferencetothe2017ProxyStatementundertheheadingSection
16(a)BeneficialOwnershipReportingCompliance.Theinformationrequiredbythisitemregardingcorporategovernanceisincorporatedbyreferencetothe
2017ProxyStatementundertheheadingsCodeofEthicsandCorporateGovernancePrinciplesandPractices,DirectorNominationsandBoardMeetings,
CommitteesandAttendance.

Item 11. Executive Compensation

Theinformationrequiredbythisitemisincorporatedbyreferencetothe2017ProxyStatementundertheheadingsExecutiveCompensationandRelated
Information,CompensationTablesandNarrativeDisclosures,DirectorCompensation,CompensationCommitteeInterlocksandInsiderParticipationin
CompensationDecisionsandCompensationCommitteeReport.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Theinformationrequiredbythisitemisincorporatedbyreferencetothe2017ProxyStatementundertheheadingsEquityCompensationPlanInformation
andStockOwnershipofCertainBeneficialOwnersandManagement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Theinformationrequiredbythisitemisincorporatedbyreferencetothe2017ProxyStatementundertheheadingsCertainRelationshipsandRelated-Person
TransactionsandDirectorIndependence.

Item 14. Principal Accounting Fees and Services

Theinformationrequiredbythisitemisincorporatedbyreferencetothe2017ProxyStatementundertheheadingFeesforProfessionalServicesand
PolicyonAuditCommitteePre-ApprovalofAuditandNon-AuditServicesofIndependentPublicAccountants.

PART IV

Item 15. Exhibits and Financial Statement Schedules

51

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232
Thefollowingdocumentsarefiledaspartofthisreport:

(a)FinancialStatements:

Page
Number
(1)ReportofIndependentRegisteredPublicAccountingFirm F-1
ConsolidatedBalanceSheetsatSeptember25,2016andSeptember27,2015 F-2
ConsolidatedStatementsofOperationsforFiscal2016,2015and2014 F-3
ConsolidatedStatementsofComprehensiveIncomeforFiscal2016,2015and2014 F-4
ConsolidatedStatementsofCashFlowsforFiscal2016,2015and2014 F-5
ConsolidatedStatementsofStockholdersEquityforFiscal2016,2015and2014 F-6
NotestoConsolidatedFinancialStatements F-7
(2)ScheduleII-ValuationandQualifyingAccounts S-1

Financialstatementschedulesotherthanthoselistedabovehavebeenomittedbecausetheyareeithernotrequired,notapplicableortheinformationis
otherwiseincludedinthenotestotheconsolidatedfinancialstatements.

(b)Exhibits

Exhibit Exhibit Description Form File No./ Film Date of First Exhibit Filed
Number No. Filing Number Herewith
2.1 Rule2.7Announcement,RecommendedCashAcquisitionofCSRplcby 8-K 000-19528/ 10/15/2014 2.1
QualcommGlobalTradingPte.Ltd. 141156425
2.2 MasterTransactionAgreement,datedJanuary13,2016,byandamong 8-K 000-19528/ 1/13/2016 2.1
QualcommGlobalTradingPte.Ltd.,eachotherPurchaserGroupmember, 161339867
TDKJapan,eachotherSellerGroupmember,and,solelyforpurposesof
Section10.9thereof,QUALCOMMIncorporated.
2.3 PurchaseAgreementdatedasofOctober27,2016byandbetween 8-K 000-19528/ 10/27/2016 2.1
QualcommRiverHoldings,B.V.andNXPSemiconductorsN.V. 161956228
3.1 RestatedCertificateofIncorporation,asamended. 10-Q 000-19528/ 7/20/2016 3.1
161775595
3.2 AmendedandRestatedBylaws. 8-K 000-19528/ 7/15/2016 3.2
161769723
4.1 Indenture,datedMay20,2015,betweentheCompanyandU.S.Bank 8-K 000-19528/ 5/21/2015 4.1
NationalAssociation,astrustee. 15880967
4.2 OfficersCertificate,datedMay20,2015,fortheFloatingRateNotesdue 8-K 000-19528/ 5/21/2015 4.2
2018,theFloatingRateNotesdue2020,the1.400%Notesdue2018,the 15880967
2.250%Notesdue2020,the3.000%Notesdue2022,the3.450%Notesdue
2025,the4.650%Notesdue2035andthe4.800%Notesdue2045.
4.3 FormofFloatingRateNotesdue2018. 8-K 000-19528/ 5/21/2015 4.3
15880967
4.4 FormofFloatingRateNotesdue2020. 8-K 000-19528/ 5/21/2015 4.4
15880967
4.5 Formof1.400%Notesdue2018. 8-K 000-19528/ 5/21/2015 4.5
15880967
4.6 Formof2.250%Notesdue2020. 8-K 000-19528/ 5/21/2015 4.6
15880967
4.7 Formof3.000%Notesdue2022. 8-K 000-19528/ 5/21/2015 4.7
15880967
4.8 Formof3.450%Notesdue2025. 8-K 000-19528/ 5/21/2015 4.8
15880967
4.9 Formof4.650%Notesdue2035. 8-K 000-19528/ 5/21/2015 4.9
15880967

52

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232
Exhibit Exhibit Description Form File No./ Film Date of First Exhibit Filed
Number No. Filing Number Herewith
4.10 Formof4.800%Notesdue2045. 8-K 000-19528/ 5/21/2015 4.10
15880967
10.1 FormofIndemnityAgreementbetweentheCompanyanditsdirectorsand 10-K 000-19528/ 11/4/2015 10.1
officers.(1) 151197257
10.2 FormofStockOptionGrantNoticeandAgreementunderthe2001Stock 10-Q 000-19528/ 7/21/2004 10.40
OptionPlan.(1) 04924948
10.3 2001StockOptionPlan,asamended.(1) 10-Q 000-19528/ 4/21/2004 10.55
04746204
10.4 FormofGrantNoticeandStockOptionAgreementunderthe2006Long- 10-K 000-19528/ 11/5/2009 10.84
TermIncentivePlan.(1) 091159213
10.5 AtherosCommunications,Inc.2004StockIncentivePlan,asamended.(1) S-8 333-174649/ 6/1/2011 99.1
11886141
10.6 ResolutionsAmendingAtherosCommunications,Inc.EquityPlans.(1) S-8 333-174649/ 6/1/2011 99.6
11886141
10.7 FormofGrantNoticesandGlobalEmployeeStockOptionAgreementunder 10-K 000-19528/ 11/7/2012 10.104
the2006Long-TermIncentivePlan.(1) 121186937
10.8 FormofGrantNoticesandGlobalEmployeeRestrictedStockUnit 10-K 000-19528/ 11/7/2012 10.105
Agreementunderthe2006Long-TermIncentivePlan.(1) 121186937
10.9 2006Long-TermIncentivePlan,asamendedandrestated.(1) 10-Q 000-19528/ 4/24/2013 10.112
13779468
10.10 FormofAircraftTimeSharingAgreement.(1) 10-Q 000-19528/ 7/24/2013 10.114
13983769
10.11 FormofExecutiveGrantNoticesandExecutivePerformanceStockUnit 10-K 000-19528/ 11/6/2013 10.115
Agreementsunderthe2006Long-TermIncentivePlanfortheSeptember30, 131196747
2013toSeptember27,2015performanceperiods.(1)
10.12 FormofGrantNoticesandNon-EmployeeDirectorRestrictedStockUnit 10-K 000-19528/ 11/6/2013 10.117
Agreementsunderthe2006Long-TermIncentivePlanfornon-employee 131196747
directorsresidingintheUnitedKingdomandHongKong.(1)
10.13 FormofExecutiveGrantNoticeandExecutivePerformanceStockUnit 10-K 000-19528/ 11/6/2013 10.118
Agreementunderthe2006Long-TermIncentivePlan,whichincludesa 131196747
September30,2013toJune29,2014performanceperiod.(1)
10.14 FormofGrantNoticesandNon-EmployeeDirectorDeferredStockUnit 10-K 000-19528/ 11/6/2013 10.119
Agreementsunderthe2006Long-TermIncentivePlanfornon-employee 131196747
directorsresidingintheUnitedStatesandSpain.(1)
10.15 FormofAnnualCashIncentivePlanPerformanceUnitAgreements.(1) 10-Q 000-19528/ 1/29/2014 10.120
14557092
10.16 FormofNon-EmployeeDirectorDeferredStockUnitGrantNoticesand 10-Q 000-19528/ 7/23/2014 10.122
DeferredStockUnitAgreementunderthe2006Long-TermIncentivePlan 14988939
fornon-employeedirectorsresidinginSingapore.(1)
10.17 FormofExecutiveRestrictedStockUnitGrantNoticeandExecutive 10-Q 000-19528/ 7/23/2014 10.123
RestrictedStockUnitAgreementsunderthe2006Long-TermIncentive 14988939
Plan,whichincludesaSeptember29,2014toMarch29,2015performance
period.(1)
10.18 Non-QualifiedDeferredCompensationPlanamendedandrestatedeffective 10-Q 000-19528/ 1/28/2015 10.125
September29,2014.(1) 15555092
10.19 Non-QualifiedDeferredCompensationPlan,asamended,effectiveJanuary 8-K 000-19528/ 9/30/2015 10.1
1,2016.(1) 151134109
10.20 Amendmentto2006Long-TermIncentivePlan,asamendedandrestated.(1) 10-Q 000-19528/ 1/28/2015 10.126
15555092
10.21 FormofAnnualCashIncentivePlanPerformanceUnitAgreements.(1) 10-Q 000-19528/ 1/28/2015 10.127
15555092
10.22 AmendedandRestatedQUALCOMMIncorporated2001EmployeeStock 10-Q 000-19528/ 7/22/2015 10.128
PurchasePlan,asamended.(1) 151000141

53

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232
Exhibit Exhibit Description Form File No./ Film Date of First Exhibit Filed
Number No. Filing Number Herewith
10.23 RevolvingCreditAgreementamongQualcommIncorporated,thelenders 8-K 000-19528/ 2/18/2015 10.1
partytheretoandBankofAmerica,N.A.,asAdministrativeAgent,Swing 15628813
LineLenderandLetterofCreditIssuer,datedasofFebruary18,2015.
10.24 MasterConfirmation-AcceleratedStockBuyback,datedasofMay20, 8-K 000-19528/ 5/21/2015 10.1
2015,betweentheCompanyandGoldman,Sachs&Co. 15881368
10.25 MasterConfirmation-AcceleratedStockBuyback,datedasofMay20, 8-K 000-19528/ 5/21/2015 10.2
2015,betweentheCompanyandMorganStanley&Co.LLC. 15881368
10.26 CooperationAgreement,datedasofJuly21,2015,betweentheCompany 8-K 000-19528/ 7/22/2015 99.1
andJANAPartnersLLC. 151000188
10.27 FormofExecutivePerformanceStockUnitGrantNoticeandExecutive 10-K 000-19528/ 11/4/2015 10.27
PerformanceStockUnitagreementunderthe2006Long-TermIncentive 151197257
Plan,whichincludesaSeptember29,2014toSeptember24,2017
performanceperiod.(1)
10.28 FormofExecutivePerformanceStockUnitAwardGrantNoticeand 10-K 000-19528/ 11/4/2015 10.28
ExecutivePerformanceStockUnitAwardGrantAgreementunderthe2006 151197257
Long-TermIncentivePlan,whichincludesaSeptember28,2015to
September28,2018performanceperiod.(1)
10.29 Formof2016AnnualCashIncentivePlanPerformanceUnitAgreement.(1) 10-Q 000-19528/ 1/27/2016 10.29
161365251
10.30 2016Long-TermIncentivePlan.(1) DEF14A 000-19528/ 1/21/2016 Appendix5
161353677
10.31 FormofExecutivePerformanceStockUnitAwardGrantNoticeunderthe 10-Q 000-19528/ 4/20/2016 10.31
2006Long-TermIncentivePlan,whichincludesaMarch28,2016toMarch 161581558
28,2019performanceperiod.(1)
10.32 FormofNon-EmployeeDirectorDeferredStockUnitGrantNoticesand 10-Q 000-19528/ 4/20/2016 10.32
Non-EmployeeDirectorDeferredStockUnitAgreementsunderthe2016 161581558
Long-TermIncentivePlanfornon-employeedirectorsresidingintheUnited
States.(1)
10.33 FormofNon-EmployeeDirectorDeferredStockUnitGrantNoticesand 10-Q 000-19528/ 4/20/2016 10.33
Non-EmployeeDirectorDeferredStockUnitAgreementsunderthe2016 161581558
Long-TermIncentivePlanfornon-employeedirectorsresidinginSpain.(1)
10.34 FormofNon-EmployeeDirectorDeferredStockUnitGrantNoticesand 10-Q 000-19528/ 4/20/2016 10.34
Non-EmployeeDirectorDeferredStockUnitAgreementsunderthe2016 161581558
Long-TermIncentivePlanfornon-employeedirectorsresidinginSingapore.
(1)
10.35 QualcommIncorporated2017DirectorCompensationPlan.(1) 8-K 000-19528/ 10/11/2016 99.1
161931217
10.36 FormofExecutiveRestrictedStockUnitGrantNoticeandExecutive X
RestrictedStockUnitAgreementunderthe2016Long-TermIncentivePlan.
(1)
10.37 FormofExecutivePerformanceStockUnitAwardGrantNoticeand X
ExecutivePerformanceStockUnitAwardAgreementunderthe2016Long-
TermIncentivePlan.(1)
10.38 ExecutivePerformanceUnitAward X
GrantNoticeandExecutivePerformanceUnitAward
Agreementunderthe2016Long-TermIncentivePlanforDerekK.Aberle.
(1)(2)
12.1 ComputationofRatioofEarningstoFixedCharges. X
21 SubsidiariesoftheRegistrant. X
23.1 ConsentofIndependentRegisteredPublicAccountingFirm. X
31.1 CertificationpursuanttoSection302oftheSarbanes-OxleyActof2002for X
SteveMollenkopf.

54

Exhibit 21
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232
Exhibit Exhibit Description Form File No./ Film Date of First Exhibit Filed
Number No. Filing Number Herewith
31.2 CertificationpursuanttoSection302oftheSarbanes-OxleyActof2002for X
GeorgeS.Davis.
32.1 Certificationpursuantto18U.S.C.Section1350,asadoptedpursuantto X
Section906oftheSarbanes-OxleyActof2002,forSteveMollenkopf.
32.2 Certificationpursuantto18U.S.C.Section1350,asadoptedpursuantto X
Section906oftheSarbanes-OxleyActof2002,forGeorgeS.Davis.
101.INS XBRLInstanceDocument. X
101.SCH XBRLTaxonomyExtensionSchema. X
101.CAL XBRLTaxonomyExtensionCalculationLinkbase. X
101.LAB XBRLTaxonomyExtensionLabelsLinkbase. X
101.PRE XBRLTaxonomyExtensionPresentationLinkbase. X
101.DEF XBRLTaxonomyExtensionDefinitionLinkbase. X

(1) IndicatesmanagementcontractorcompensatoryplanorarrangementrequiredtobeidentifiedpursuanttoItem15(a).

(2) Confidentialtreatmenthasbeenrequestedwithrespecttocertainportionsofthisexhibit.

Item 16. Form 10-K Summary

None.

55

Exhibit 21
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232
SIGNATURES

PursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonitsbehalf
bytheundersigned,thereuntodulyauthorized.

November2,2016


QUALCOMMIncorporated

By /s/SteveMollenkopf
SteveMollenkopf
ChiefExecutiveOfficer

56

Exhibit 21
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232
PursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisReporthasbeensignedbelowbythefollowingpersonsonbehalfoftheregistrantandin
thecapacitiesandonthedatesindicated:

Signature Title Date



/s/SteveMollenkopf ChiefExecutiveOfficerandDirector November2,2016
SteveMollenkopf (PrincipalExecutiveOfficer)

/s/GeorgeS.Davis ExecutiveVicePresidentandChiefFinancialOfficer November2,2016
GeorgeS.Davis (PrincipalFinancialOfficer)

/s/JohnF.Murphy SeniorVicePresidentandChiefAccountingOfficer November2,2016
JohnF.Murphy (PrincipalAccountingOfficer)

/s/BarbaraT.Alexander Director November2,2016
BarbaraT.Alexander

/s/RaymondV.Dittamore Director November2,2016
RaymondV.Dittamore

/s/JeffreyW.Henderson Director November2,2016
JeffreyW.Henderson

/s/ThomasW.Horton Director November2,2016
ThomasW.Horton

/s/PaulE.Jacobs Chairman November2,2016
PaulE.Jacobs

/s/AnnM.Livermore Director November2,2016
AnnM.Livermore

/s/HarishManwani Director November2,2016
HarishManwani

/s/MarkD.McLaughlin Director November2,2016
MarkD.McLaughlin

/s/ClarkT.Randt,Jr. Director November2,2016
ClarkT.Randt,Jr.

/s/FranciscoRos Director November2,2016
FranciscoRos

/s/AnthonyJ.Vinciquerra Director November2,2016
AnthonyJ.Vinciquerra

57

Exhibit 21
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232
Report of Independent Registered Public Accounting Firm
TotheBoardofDirectorsandStockholdersofQUALCOMMIncorporated:
Inouropinion,theaccompanyingconsolidatedfinancialstatementslistedintheindexappearingunderItem15(a)(1)presentfairly,inallmaterialrespects,the
financialpositionofQUALCOMMIncorporatedanditssubsidiariesatSeptember25,2016andSeptember27,2015andtheresultsoftheiroperationsandtheir
cashflowsforeachofthethreeyearsintheperiodendedSeptember25,2016inconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesof
America.Inaddition,inouropinion,thefinancialstatementschedulelistedintheindexappearingunderItem15(a)(2)presentsfairly,inallmaterialrespects,the
informationsetforththereinwhenreadinconjunctionwiththerelatedconsolidatedfinancialstatements.Alsoinouropinion,theCompanymaintained,inall
materialrespects,effectiveinternalcontroloverfinancialreportingasofSeptember25,2016,basedoncriteriaestablishedinInternal
Control
-
Integrated
Framework
(2013)
issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO).TheCompanysmanagementisresponsiblefor
thesefinancialstatementsandfinancialstatementschedule,formaintainingeffectiveinternalcontroloverfinancialreportingandforitsassessmentofthe
effectivenessofinternalcontroloverfinancialreporting,includedintheaccompanyingManagementsReportonInternalControloverFinancialReporting
appearingunderItem9A.Ourresponsibilityistoexpressopinionsonthesefinancialstatements,onthefinancialstatementscheduleandontheCompanys
internalcontroloverfinancialreportingbasedonourintegratedaudits.WeconductedourauditsinaccordancewiththestandardsofthePublicCompany
AccountingOversightBoard(UnitedStates).Thosestandardsrequirethatweplanandperformtheauditstoobtainreasonableassuranceaboutwhetherthe
financialstatementsarefreeofmaterialmisstatementandwhethereffectiveinternalcontroloverfinancialreportingwasmaintainedinallmaterialrespects.Our
auditsofthefinancialstatementsincludedexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements,assessingthe
accountingprinciplesusedandsignificantestimatesmadebymanagement,andevaluatingtheoverallfinancialstatementpresentation.Ourauditofinternalcontrol
overfinancialreportingincludedobtaininganunderstandingofinternalcontroloverfinancialreporting,assessingtheriskthatamaterialweaknessexists,and
testingandevaluatingthedesignandoperatingeffectivenessofinternalcontrolbasedontheassessedrisk.Ourauditsalsoincludedperformingsuchother
proceduresasweconsiderednecessaryinthecircumstances.Webelievethatourauditsprovideareasonablebasisforouropinions.
Acompanysinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingand
thepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Acompanysinternalcontrolover
financialreportingincludesthosepoliciesandproceduresthat(i)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthe
transactionsanddispositionsoftheassetsofthecompany;(ii)providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationof
financialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatreceiptsandexpendituresofthecompanyarebeingmadeonlyin
accordancewithauthorizationsofmanagementanddirectorsofthecompany;and(iii)providereasonableassuranceregardingpreventionortimelydetectionof
unauthorizedacquisition,use,ordispositionofthecompanysassetsthatcouldhaveamaterialeffectonthefinancialstatements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationof
effectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewith
thepoliciesorproceduresmaydeteriorate.
/s/PricewaterhouseCoopersLLP
SanDiego,California

November2,2016

F-1

Exhibit 21
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232
QUALCOMM Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)

September 25, September 27,


2016 2015
ASSETS
Currentassets:
Cashandcashequivalents $ 5,946 $ 7,560
Marketablesecurities 12,702 9,761
Accountsreceivable,net 2,219 1,964
Inventories 1,556 1,492
Deferredtaxassets 635
Othercurrentassets 558 687
Totalcurrentassets 22,981 22,099
Marketablesecurities 13,702 13,626
Deferredtaxassets 2,030 1,453
Property,plantandequipment,net 2,306 2,534
Goodwill 5,679 5,479
Otherintangibleassets,net 3,500 3,742
Otherassets 2,161 1,863
Totalassets $ 52,359 $ 50,796

LIABILITIES AND STOCKHOLDERS EQUITY
Currentliabilities:
Tradeaccountspayable $ 1,858 $ 1,300
Payrollandotherbenefitsrelatedliabilities 934 861
Unearnedrevenues 509 583
Short-termdebt 1,749 1,000
Othercurrentliabilities 2,261 2,356
Totalcurrentliabilities 7,311 6,100
Unearnedrevenues 2,377 2,496
Long-termdebt 10,008 9,969
Otherliabilities 895 817
Totalliabilities 20,591 19,382

Commitmentsandcontingencies(Note7)

Stockholdersequity:
Qualcommstockholdersequity:
Preferredstock,$0.0001parvalue;8sharesauthorized;noneoutstanding
Commonstockandpaid-incapital,$0.0001parvalue;6,000sharesauthorized;1,476and1,524sharesissuedand
outstanding,respectively 414
Retainedearnings 30,936 31,226
Accumulatedothercomprehensiveincome 428 195
TotalQualcommstockholdersequity 31,778 31,421
Noncontrollinginterests (10) (7)
Totalstockholdersequity 31,768 31,414
Totalliabilitiesandstockholdersequity $ 52,359 $ 50,796

Seeaccompanyingnotes.

F-2

Exhibit 21
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232
QUALCOMM Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

Year Ended
September 25, 2016 September 27, 2015 September 28, 2014
Revenues:
Equipmentandservices $ 15,467 $ 17,079 $ 18,625
Licensing 8,087 8,202 7,862
Totalrevenues 23,554 25,281 26,487
Costsandexpenses:
Costofrevenues 9,749 10,378 10,686
Researchanddevelopment 5,151 5,490 5,477
Selling,generalandadministrative 2,385 2,344 2,290
Other(Note2) (226) 1,293 484
Totalcostsandexpenses 17,059 19,505 18,937
Operatingincome 6,495 5,776 7,550
Interestexpense (297) (104) (5)
Investmentincome,net(Note2) 635 815 1,233
Incomefromcontinuingoperationsbeforeincometaxes 6,833 6,487 8,778
Incometaxexpense (1,131) (1,219) (1,244)
Incomefromcontinuingoperations 5,702 5,268 7,534
Discontinuedoperations,netofincometaxes(Note11) 430
Netincome 5,702 5,268 7,964
Netlossattributabletononcontrollinginterests 3 3 3
NetincomeattributabletoQualcomm $ 5,705 $ 5,271 $ 7,967

BasicearningspershareattributabletoQualcomm:
Continuingoperations $ 3.84 $ 3.26 $ 4.48
Discontinuedoperations 0.25
Netincome $ 3.84 $ 3.26 $ 4.73
DilutedearningspershareattributabletoQualcomm:
Continuingoperations $ 3.81 $ 3.22 $ 4.40
Discontinuedoperations 0.25
Netincome $ 3.81 $ 3.22 $ 4.65
Sharesusedinpersharecalculations:
Basic 1,484 1,618 1,683
Diluted 1,498 1,639 1,714

Dividendspershareannounced $ 2.02 $ 1.80 $ 1.54

Seeaccompanyingnotes.

F-3

Exhibit 21
Page 213
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232
QUALCOMM Incorporated
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)

Year Ended
September 25, September 27, September 28,
2016 2015 2014
Netincome $ 5,702 $ 5,268 $ 7,964
Othercomprehensiveincome(loss),netofincometaxes:
Foreigncurrencytranslation(losses)gains (22) (47) 1
Reclassificationofforeigncurrencytranslationlossesincludedinnetincome 21 1
Noncreditother-than-temporaryimpairmentlossesandsubsequentchangesinfairvaluerelatedtocertain
available-for-saledebtsecurities,netoftaxbenefitof$23,$19and$1,respectively (43) (35) (1)
Reclassificationofnetother-than-temporarylossesonavailable-for-salesecuritiesincludedinnet
income,netoftaxbenefitof$71,$66and$55,respectively 130 121 101
Netunrealizedgains(losses)onotheravailable-for-salesecurities,netoftax(expense)benefitof($166),
$114and($140),respectively 306 (215) 259
Reclassificationofnetrealizedgainsonavailable-for-salesecuritiesincludedinnetincome,netoftax
expenseof$85,$173and$252,respectively (156) (317) (462)
Netunrealized(losses)gainsonderivativeinstruments,netoftaxbenefit(expense)of$2,$0and($4),
respectively (4) 54 8
Reclassificationofnetrealizedlosses(gains)onderivativeinstruments,netoftax(benefit)expenseof
($2),$0and$14,respectively 1 (26)
Totalothercomprehensiveincome(loss) 233 (439) (119)
Totalcomprehensiveincome 5,935 4,829 7,845
Comprehensivelossattributabletononcontrollinginterests 3 3 3
ComprehensiveincomeattributabletoQualcomm $ 5,938 $ 4,832 $ 7,848

Seeaccompanyingnotes.

F-4

Exhibit 21
Page 214
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2164 Page 150 of
232
QUALCOMM Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

Year Ended
September 25, September 27, September 28,
2016 2015 2014
Operating Activities:
Netincome $ 5,702 $ 5,268 $ 7,964
Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities:
Depreciationandamortizationexpense 1,428 1,214 1,150
Indefiniteandlong-livedassetimpairmentcharges 107 317 642
Incometaxprovision(lessthan)inexcessofincometaxpayments (200) 47 298
Gainonsaleofwirelessspectrum (380)
Gainonsaleofdiscontinuedoperations (665)
Non-cashportionofshare-basedcompensationexpense 943 1,026 1,059
Incrementaltaxbenefitsfromshare-basedcompensation (8) (103) (280)
Netrealizedgainsonmarketablesecuritiesandotherinvestments (288) (500) (826)
Impairmentlossesonmarketablesecuritiesandotherinvestments 172 200 180
Otheritems,net 77 (16) (17)
Changesinassetsandliabilities:
Accountsreceivable,net (232) 550 (281)
Inventories (49) 93 (155)
Otherassets 246 (793) 108
Tradeaccountspayable 541 (908) 619
Payroll,benefitsandotherliabilities (352) (328) (617)
Unearnedrevenues (307) (561) (292)
Netcashprovidedbyoperatingactivities 7,400 5,506 8,887
Investing Activities:
Capitalexpenditures (539) (994) (1,185)
Purchasesofavailable-for-salesecurities (18,015) (15,400) (13,581)
Proceedsfromsalesandmaturitiesofavailable-for-salesecurities 14,386 15,080 13,587
Purchasesoftradingsecurities (177) (1,160) (3,075)
Proceedsfromsalesandmaturitiesoftradingsecurities 779 1,658 2,824
Purchasesofothermarketablesecurities (220)
Proceedsfromsalesofothermarketablesecurities 450
Acquisitionsandotherinvestments,netofcashacquired (812) (3,019) (895)
Proceedsfromsaleofwirelessspectrum 232
Proceedsfromsalesofproperty,plantandequipment 16 266 37
Proceedsfromsaleofdiscontinuedoperations,netofcashsold 788
Otheritems,net 192 (3) 81
Netcashusedbyinvestingactivities (3,488) (3,572) (1,639)
Financing Activities:
Proceedsfromshort-termdebt 8,949 4,083
Repaymentofshort-termdebt (8,200) (3,083)
Proceedsfromlong-termdebt 9,937
Proceedsfromissuanceofcommonstock 668 787 1,439
Repurchasesandretirementsofcommonstock (3,923) (11,246) (4,549)
Dividendspaid (2,990) (2,880) (2,586)
Incrementaltaxbenefitsfromshare-basedcompensation 8 103 280
Otheritems,net (34) 38 (64)
Netcashusedbyfinancingactivities (5,522) (2,261) (5,480)
Effectofexchangeratechangesoncashandcashequivalents (4) (20) (3)
Net (decrease) increase in cash and cash equivalents (1,614) (347) 1,765
Cash and cash equivalents at beginning of period 7,560 7,907 6,142
Cash and cash equivalents at end of period Exhibit 21 $ 5,946 $ 7,560 $ 7,907
Page 215
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2165 Page 151 of
Seeaccompanyingnotes.
232
F-5

Exhibit 21
Page 216
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2166 Page 152 of
232
QUALCOMM Incorporated
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In millions)

Common Accumulated
Common Stock and Other Total Qualcomm Total
Stock Paid-In Retained Comprehensive Stockholders Noncontrolling Stockholders
Shares Capital Earnings Income Equity Interests Equity
Balance at September 29, 2013 1,685 $ 9,874 $ 25,461 $ 753 $ 36,088 $ (1) $ 36,087
Totalcomprehensiveincome(1) 7,967 (119) 7,848 (3) 7,845
Commonstockissuedunderemployee
benefitplansandtherelatedtaxbenefits 50 1,726 1,726 1,726
Repurchasesandretirementsofcommon
stock (60) (4,549) (4,549) (4,549)
Share-basedcompensation 1,101 1,101 1,101
Taxwithholdingsrelatedtovestingof
share-basedpayments (6) (417) (417) (417)
Dividends (2,629) (2,629) (2,629)
Other 1 1 1 2
Balance at September 28, 2014 1,669 7,736 30,799 634 39,169 (3) 39,166
Totalcomprehensiveincome 5,271 (439) 4,832 (3) 4,829
Commonstockissuedunderemployee
benefitplansandtherelatedtaxbenefits 32 871 871 871
Repurchasesandretirementsofcommon
stock (172) (9,334) (1,912) (11,246) (11,246)
Share-basedcompensation 1,078 1,078 1,078
Taxwithholdingsrelatedtovestingof
share-basedpayments (5) (351) (351) (351)
Dividends (2,932) (2,932) (2,932)
Other (1) (1)
Balance at September 27, 2015 1,524 31,226 195 31,421 (7) 31,414
Totalcomprehensiveincome 5,705 233 5,938 (3) 5,935
Commonstockissuedunderemployee
benefitplansandtherelatedtaxbenefits 30 615 615 615
Repurchasesandretirementsofcommon
stock (73) (974) (2,949) (3,923) (3,923)
Share-basedcompensation 997 997 997
Taxwithholdingsrelatedtovestingof
share-basedpayments (5) (224) (224) (224)
Dividends (3,046) (3,046) (3,046)
Balance at September 25, 2016 1,476 $ 414 $ 30,936 $ 428 $ 31,778 $ (10) $ 31,768

(1) Income(loss)fromdiscontinuedoperations,netofincometaxes,(Note11)wasattributabletoQualcomm.
Seeaccompanyingnotes.

F-6

Exhibit 21
Page 217
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2167 Page 153 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The Company and Its Significant Accounting Policies

The
Company.
QUALCOMMIncorporated,aDelawarecorporation,anditssubsidiaries(collectivelytheCompanyorQualcomm)develop,design,
manufacture,havemanufacturedonitsbehalfandmarketdigitalcommunicationsproducts,whichprincipallyconsistofintegratedcircuitsandsystemsoftware,
foruseinmobiledevices,wirelessnetworks,broadbandgatewayequipmentandconsumerelectronicdevices.TheCompanyalsograntslicensestouseportionsof
itsintellectualpropertyportfolio,whichincludescertainpatentrightsessentialtoand/orusefulinthemanufactureandsaleofcertainwirelessproductsand
receivesfixedlicensefees(payableinoneormoreinstallments)aswellasongoingroyaltiesbasedonsalesbylicenseesofwirelessproductsincorporatingits
patentedtechnologies.

Principles
of
Consolidation.
TheCompanysconsolidatedfinancialstatementsincludetheassets,liabilitiesandoperatingresultsofmajority-owned
subsidiaries.Inaddition,theCompanyconsolidatesitsinvestmentinanimmateriallessthanmajority-ownedvariableinterestentityastheCompanyistheprimary
beneficiary.Theownershipoftheotherinterestholdersofconsolidatedsubsidiariesandthevariableinterestentityispresentedseparatelyintheconsolidated
balancesheetsandstatementsofoperations.Allsignificantintercompanyaccountsandtransactionshavebeeneliminated.

Financial
Statement
Preparation.
ThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStates
requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsandthedisclosureofcontingentamountsintheCompanysconsolidated
financialstatementsandtheaccompanyingnotes.ExamplesoftheCompanyssignificantaccountingestimatesthatmayinvolveahigherdegreeofjudgmentand
complexitythanothersinclude:thedeterminationofother-than-temporaryimpairmentsofmarketablesecuritiesandotherinvestments;thevaluationof
inventories;thevaluationandassessmentoftherecoverabilityofgoodwillandotherindefinite-livedandlong-livedassets;therecognition,measurementand
disclosureoflosscontingenciesrelatedtolegalproceedings;andthecalculationoftaxliabilities,includingtherecognitionandmeasurementofuncertaintax
positions.Actualresultscoulddifferfromthoseestimates.Certainprioryearamountshavebeenreclassifiedtoconformtothecurrentyearpresentation.

Fiscal
Year.
TheCompanyoperatesandreportsusinga52-53weekfiscalyearendingonthelastSundayinSeptember.ThefiscalyearsendedSeptember25,
2016,September27,2015andSeptember28,2014included52weeks.

Cash
Equivalents.
TheCompanyconsidersallhighlyliquidinvestmentswithoriginalmaturitiesof90daysorlesstobecashequivalents.Cashequivalents
arecomprisedofmoneymarketfunds,certificatesofdeposit,commercialpaper,governmentagenciessecurities,corporatebondsandnotes,certainbanktime
depositsandrepurchaseagreementsfullycollateralizedbygovernmentagenciessecurities.Thecarryingamountsapproximatefairvalueduetotheshort
maturitiesoftheseinstruments.

Marketable
Securities.
Marketablesecuritiesincludetradingsecurities,available-for-salesecuritiesandsecuritiesforwhichtheCompanyhaselectedthefair
valueoption.Theclassificationofmarketablesecuritieswithinthesecategoriesisdeterminedatthetimeofpurchaseandreevaluatedateachbalancesheetdate.
TheCompanyclassifiescertainportfoliosofdebtsecuritiesthatutilizederivativeinstrumentstoacquireorreduceforeignexchangeand/orequity,prepaymentand
creditriskastrading.TheCompanyclassifiesmarketablesecuritiesascurrentornoncurrentbasedonthenatureofthesecuritiesandtheiravailabilityforusein
currentoperations.Marketablesecuritiesarestatedatfairvalue.Thenetunrealizedgainsorlossesonavailable-for-salesecuritiesarerecordedasacomponentof
accumulatedothercomprehensiveincome,netofincometaxes.TheunrealizedgainsorlossesontradingsecuritiesandsecuritiesforwhichtheCompanyhas
electedthefairvalueoptionarerecognizedinnetinvestmentincome.Therealizedgainsandlossesonmarketablesecuritiesaredeterminedusingthespecific
identificationmethod.

Ateachbalancesheetdate,theCompanyassessesavailable-for-salesecuritiesinanunrealizedlosspositiontodeterminewhethertheunrealizedlossisother
thantemporary.TheCompanyconsidersfactorsincluding:thesignificanceofthedeclineinvalueascomparedtothecostbasis;underlyingfactorscontributingto
adeclineinthepricesofsecuritiesinasingleassetclass;howlongthemarketvalueofthesecurityhasbeenlessthanitscostbasis;thesecuritysrelative
performanceversusitspeers,sectororassetclass;expectedmarketvolatility;themarketandeconomyingeneral;analystrecommendationsandpricetargets;
viewsofexternalinvestmentmanagers;newsorfinancialinformationthathasbeenreleasedspecifictotheinvestee;andtheoutlookfortheoverallindustryin
whichtheinvesteeoperates.

IfadebtsecuritysmarketvalueisbelowamortizedcostandtheCompanyeitherintendstosellthesecurityoritismorelikelythannotthattheCompanywill
berequiredtosellthesecuritybeforeitsanticipatedrecovery,theCompanyrecordsanother-than-temporaryimpairmentchargetonetinvestmentincomeforthe
entireamountoftheimpairment.Fortheremainingdebtsecurities,ifanother-than-temporaryimpairmentexists,theCompanyseparatestheother-than-temporary
impairmentintotheportionofthelossrelatedtocreditfactors,orthecreditlossportion,whichisrecordedasachargetonetinvestment

F-7

Exhibit 21
Page 218
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2168 Page 154 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

income,andtheportionofthelossthatisnotrelatedtocreditfactors,orthenoncreditlossportion,whichisrecordedasacomponentofotheraccumulated
comprehensiveincome,netofincometaxes.

Forequitysecurities,theCompanyconsidersthelossrelativetotheexpectedvolatilityandthelikelihoodofrecoveryoverareasonableperiodoftime.If
eventsandcircumstancesindicatethatadeclineinthevalueofanequitysecurityhasoccurredandisotherthantemporary,theCompanyrecordsachargetonet
investmentincomeforthedifferencebetweenfairvalueandcostatthebalancesheetdate.Additionally,iftheCompanyhaseithertheintenttoselltheequity
securityordoesnothaveboththeintentandtheabilitytoholdtheequitysecurityuntilitsanticipatedrecovery,theCompanyrecordsachargetonetinvestment
incomeforthedifferencebetweenfairvalueandcostatthebalancesheetdate.

Equity
and
Cost
Method
Investments.
TheCompanygenerallyaccountsfornon-marketableequityinvestmentseitherundertheequityorthecostmethod.
EquityinvestmentsoverwhichtheCompanyhassignificantinfluence,butnotcontrolovertheinvesteeandisnottheprimarybeneficiaryoftheinvestees
activitiesareaccountedforundertheequitymethod.Othernon-marketableequityinvestmentsareaccountedforunderthecostmethod.TheCompanysshareof
gainsandlossesinequitymethodinvestmentsarerecordedinnetinvestmentincome.TheCompanymonitorsnon-marketableequityinvestmentsforeventsor
circumstancesthatcouldindicatetheinvestmentsareimpaired,suchasadeteriorationintheinvesteesfinancialconditionandbusinessforecastsandlower
valuationsinrecentlycompletedorproposedfinancings,andrecordsachargetonetinvestmentincomeforthedifferencebetweentheestimatedfairvalueandthe
carryingvalue.

ThecarryingvaluesoftheCompanysnon-marketableequityinvestmentsarerecordedinothernoncurrentassetsandwereasfollows(inmillions):

September 25, 2016 September 27, 2015


Equitymethodinvestments $ 324 $ 163
Costmethodinvestments 531 457
$ 855 $ 620

Transactionswithequitymethodinvesteesareconsideredrelatedpartytransactions.Revenuesfromcertainlicensingandservicescontractswithtwoofthe
Companysequitymethodinvesteeswere$196millionandnegligibleinfiscal2016and2015,respectively.Therewerenosuchrevenuesinfiscal2014.The
Companyeliminatesunrealizedprofitorlossrelatedtosuchtransactionsinrelationtoitsownershipinterestintheinvestee,whichisrecordedasacomponentof
equityinnetlossesininvesteesinnetinvestmentincome.Aggregateaccountsreceivablefromtheseequitymethodinvesteeswere$73millionatSeptember25,
2016.NoaccountsreceivablewereduefromtheseequitymethodinvesteesatSeptember27,2015.

Derivatives.
TheCompanysprimaryobjectivesforholdingderivativeinstrumentsaretomanageinterestrateriskonitslong-termdebtandtomanageforeign
exchangeriskforcertainforeigncurrencyrevenueandoperatingexpendituretransactions.Toalesserextent,theCompanyalsoholdsderivativeinstrumentsinits
investmentportfoliostomanageriskbyacquiringorreducingforeignexchangerisk,interestrateriskand/orequity,prepaymentandcreditrisk.Derivative
instrumentsarerecordedatfairvalueandincludedinothercurrentassets,noncurrentassets,otheraccruedliabilitiesorothernoncurrentliabilitiesbasedontheir
maturitydates.CounterpartiestotheCompanysderivativeinstrumentsareallmajorbankinginstitutions.

Interest
Rate
Swaps:
TheCompanymanagesitsexposuretocertaininterestraterisksrelatedtoitslong-termdebtthroughtheuseofinterestrateswaps.Such
swapsallowtheCompanytoeffectivelyconvertfixed-ratepaymentsintofloating-ratepaymentsbasedonLIBOR.Thesetransactionsaredesignatedasfairvalue
hedges,andthegainsandlossesrelatedtochangesinthefairvalueoftheinterestrateswapssubstantiallyoffsetchangesinthefairvalueofthehedgedportionof
theunderlyingdebtthatareattributabletochangesinthemarketinterestrates.Thenetgainsandlossesontheinterestrateswaps,aswellastheoffsettinggainsor
lossesontherelatedfixed-ratedebtattributabletothehedgedrisks,arerecognizedinearningsasinterestexpenseinthecurrentperiod.Theinterestsettlement
paymentsassociatedwiththeinterestrateswapagreementsareclassifiedascashflowsfromoperatingactivitiesintheconsolidatedstatementsofcashflows.

AtSeptember25,2016andSeptember27,2015,theaggregatefairvaluesoftheCompanysinterestrateswapsrelatedtoitslong-termdebtwere$65million
and$32million,respectively,andwererecordedinnoncurrentassets.Theswapshadanaggregatenotionalamountof$3.0billion,whicheffectivelyconverted
allofthefixed-ratedebtduein2018andapproximately43%and50%ofthefixed-ratedebtduein2020and2022,respectively,intofloating-ratedebt.The
maturitiesoftheswapsmatchtheCompanysfixed-ratedebtduein2018,2020and2022.

F-8

Exhibit 21
Page 219
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2169 Page 155 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign
Currency
Hedges:
TheCompanymanagesitsexposuretoforeignexchangemarketrisks,whendeemedappropriate,throughtheuseofderivative
instruments,includingforeigncurrencyforwardandoptioncontractswithfinancialcounterparties.Thesederivativeinstrumentsmaturebetweenoneandnine
months.Gainsandlossesarisingfromtheeffectiveportionofsuchcontractsthataredesignatedascashflowhedginginstrumentsarerecordedasacomponentof
accumulatedothercomprehensiveincomeasgainsandlossesonderivativeinstruments,netofincometaxes.Thehedginggainsandlossesinaccumulatedother
comprehensiveincomearesubsequentlyreclassifiedtorevenuesorcostsandexpenses,asapplicable,intheconsolidatedstatementsofoperationsinthesame
periodinwhichtheunderlyingtransactionsaffecttheCompanysearnings.Gainsandlossesarisingfromtheineffectiveportionofsuchcontractsarerecordedin
netinvestmentincomeasgainsandlossesonderivativeinstruments.Thecashflowsassociatedwithderivativeinstrumentsdesignatedascashflowornet
investmenthedginginstrumentsareclassifiedascashflowsfromoperatingactivitiesintheconsolidatedstatementsofcashflows,whichisthesamecategoryas
thehedgedtransaction.Thecashflowsassociatedwiththeineffectiveportionofsuchderivativeinstrumentsareclassifiedascashflowsfrominvestingactivitiesin
theconsolidatedstatementsofcashflows.AtSeptember25,2016andSeptember27,2015,thefairvaluesoftheCompanysforeigncurrencyoptionandforward
contractsusedtohedgeforeigncurrencyriskrecordedintotalassetsandintotalliabilitieswerenegligible.Allsuchinstrumentsweredesignatedascashflow
hedges.

Investment
Portfolio
Derivatives:
TheCompanyalsoutilizescurrencyforwards,futures,optionsandswapsthatarenotdesignatedashedginginstrumentsto
acquireorreduceforeignexchange,interestrateand/orequity,prepaymentandcreditrisksinitsmarketablesecuritiesinvestmentportfolios.TheCompany
primarilyusessuchderivativeinstrumentsforriskmanagementandnotspeculativepurposes.Thesederivativeinstrumentsmatureovervariousperiodsuptofive
years.Gainsandlossesarisingfromchangesinthefairvaluesofsuchderivativeinstrumentsarerecordedinnetinvestmentincomeasgainsandlosseson
derivativeinstruments.Thecashflowsassociatedwithsuchderivativeinstrumentsareclassifiedascashflowsfrominvestingactivitiesintheconsolidated
statementsofcashflows.AtSeptember25,2016andSeptember27,2015,thefairvaluesofthesederivativeinstrumentsrecordedintotalassetsandintotal
liabilitieswerenegligible.

Gross
Notional
Amounts:
ThegrossnotionalamountsoftheCompanysinterestrate,foreigncurrencyandinvestmentportfolioderivativesbyinstrumenttype
wereasfollows(inmillions):

September 25, 2016 September 27, 2015


Forwards $ 108 $ 269
Futures 133
Options 929 620
Swaps 3,061 3,004
$ 4,098 $ 4,026

Thegrossnotionalamountsbycurrencywereasfollows(inmillions):

September 25, 2016 September 27, 2015


Britishpoundsterling $ $ 83
Chineserenminbi 325 111
Euro 31 36
Indianrupee 433 409
Japaneseyen 97 174
Koreanwon 85 81
UnitedStatesdollar 3,045 3,089
Other 82 43
$ 4,098 $ 4,026

Fair
Value
Measurements.
Fairvalueisdefinedastheexchangepricethatwouldbereceivedforanassetorpaidtotransferaliability(anexitprice)inthe
principalormostadvantageousmarketfortheassetorliabilityinanorderlytransactionbetweenmarketparticipantsasofthemeasurementdate.Applicable
accountingguidanceprovidesanestablishedhierarchyforinputsusedinmeasuringfairvaluethatmaximizestheuseofobservableinputsandminimizestheuseof
unobservableinputsbyrequiringthatthemostobservableinputsbeusedwhenavailable.Observableinputsareinputsthat

F-9

Exhibit 21
Page 220
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2170 Page 156 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

marketparticipantswoulduseinvaluingtheassetorliabilityandaredevelopedbasedonmarketdataobtainedfromsourcesindependentoftheCompany.
UnobservableinputsareinputsthatreflecttheCompanysassumptionsaboutthefactorsthatmarketparticipantswoulduseinvaluingtheassetorliability.There
arethreelevelsofinputsthatmaybeusedtomeasurefairvalue:

Level1includesfinancialinstrumentsforwhichquotedmarketpricesforidenticalinstrumentsareavailableinactivemarkets.

Level2includesfinancialinstrumentsforwhichthereareinputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheinstrument.

Level3includesfinancialinstrumentsforwhichfairvalueisderivedfromvaluationtechniquesinwhichoneormoresignificantinputsareunobservable,
includingtheCompanysownassumptions.

Assetsandliabilitiesareclassifiedbasedonthelowestlevelofinputthatissignificanttothefairvaluemeasurements.TheCompanyreviewsthefairvalue
hierarchyclassificationonaquarterlybasis.Changesintheobservabilityofvaluationinputsmayresultinareclassificationoflevelsforcertainsecuritieswithin
thefairvaluehierarchy.

Cash
Equivalents
and
Marketable
Securities:
Withtheexceptionofauctionratesecurities,theCompanyobtainspricinginformationfromquotedmarket
prices,pricingvendorsorquotesfrombrokers/dealers.TheCompanyconductsreviewsofitsprimarypricingvendorstodeterminewhethertheinputsusedinthe
vendorspricingprocessesaredeemedtobeobservable.Thefairvalueforinterest-bearingsecuritiesincludesaccruedinterest.

ThefairvalueofU.S.Treasurysecuritiesandgovernment-relatedsecurities,corporatebondsandnotesandcommonandpreferredstockisgenerally
determinedusingstandardobservableinputs,includingreportedtrades,quotedmarketprices,matrixpricing,benchmarkyields,broker/dealerquotes,issuer
spreads,two-sidedmarketsand/orbenchmarksecurities.

Thefairvalueofdebtandequityfundsisreportedatpublishednetassetvalues.TheCompanyassessesthedailyfrequencyandsizeoftransactionsat
publishednetassetvaluesand/orthefundsunderlyingholdingstodeterminewhetherfairvalueisbasedonobservableorunobservableinputs.

Thefairvalueofmortgage-andasset-backedsecuritiesisderivedfromtheuseofmatrixpricing(pricesforsimilarsecurities)or,insomecases,cashflow
pricingmodelswithobservableinputs,suchascontractualterms,maturity,creditratingand/orsecuritizationstructuretodeterminethetimingandamountof
futurecashflows.Certainmortgage-andasset-backedsecuritiesmayrequiretheuseofsignificantunobservableinputstoestimatefairvalue,suchasdefault
likelihood,recoveryratesandprepaymentspeed.

ThefairvalueofauctionratesecuritiesisestimatedbytheCompanyusingadiscountedcashflowmodelthatincorporatestransactiondetails,suchas
contractualterms,maturityandtimingandamountoffuturecashflows,aswellasassumptionsrelatedtoliquidity,defaultlikelihoodandrecovery,thefuturestate
oftheauctionratemarketandcreditvaluationadjustmentsofmarketparticipants.ThoughmostofthesecuritiesheldbytheCompanyarepoolsofstudentloans
guaranteedbytheU.S.government,prepaymentspeedsandilliquiditydiscountsareconsideredsignificantunobservableinputs.Theseadditionalinputsare
generallyunobservable,andtherefore,auctionratesecuritiesareincludedinLevel3.

Derivative
Instruments:
DerivativeinstrumentsthataretradedonanexchangearevaluedusingquotedmarketpricesandareincludedinLevel1.Derivative
instrumentsthatarenottradedonanexchangearevaluedusingconventionalcalculations/modelsthatareprimarilybasedonobservableinputs,suchasforeign
currencyexchangerates,volatilitiesandinterestrates,andtherefore,suchderivativeinstrumentsareincludedinLevel2.

Other
Investments
and
Other
Liabilities:
OtherinvestmentsandotherliabilitiesincludedinLevel1arecomprisedoftheCompanysdeferredcompensation
planliabilityandrelatedassets,whichconsistofmutualfundsclassifiedastradingsecurities,andareincludedinotherassets.

Allowances
for
Doubtful
Accounts.
TheCompanymaintainsallowancesfordoubtfulaccountsforestimatedlossesresultingfromtheinabilityofthe
Companyscustomerstomakerequiredpayments.TheCompanyconsidersthefollowingfactorswhendeterminingifcollectionofrequiredpaymentsis
reasonablyassured:customercredit-worthiness;pasttransactionhistorywiththecustomer;currenteconomicindustrytrends;changesincustomerpaymentterms;
andbankcredit-worthinessforlettersofcredit.IftheCompanyhasnopreviousexperiencewiththecustomer,theCompanymayrequestfinancialinformation,
includingfinancialstatementsorotherdocuments,todeterminethatthecustomerhasthemeansofmakingpayment.TheCompanymayalsoobtainreportsfrom
variouscreditorganizationstodeterminethatthecustomerhasahistoryofpayingitscreditors.Ifthesefactorsdonotindicatecollectionisreasonablyassured,
revenueis

F-10

Exhibit 21
Page 221
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2171 Page 157 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

deferredasareductiontoaccountsreceivableuntilcollectionbecomesreasonablyassured,whichisgenerallyuponreceiptofcash.Ifthefinancialconditionofthe
Companyscustomerswastodeteriorate,adverselyaffectingtheirabilitytomakepayments,additionalallowanceswouldberequired.

Inventories.
Inventoriesarevaluedatthelowerofcostormarket(replacementcost,nottoexceednetrealizablevalue)usingthefirst-in,first-outmethod.
Recoverabilityofinventoriesisassessedbasedonreviewoffuturecustomerdemandthatconsidersmultiplefactors,includingcommittedpurchaseordersfrom
customersaswellaspurchasecommitmentprojectionsprovidedbycustomers,amongotherthings.

Property,
Plant
and
Equipment.
Property,plantandequipmentarerecordedatcostanddepreciatedoramortizedusingthestraight-linemethodovertheir
estimatedusefullives.Upontheretirementordispositionofproperty,plantandequipment,therelatedcostandaccumulateddepreciationoramortizationare
removed,andagainorlossisrecorded.Buildingsonownedlandaredepreciatedover30years,andbuildingimprovementsaredepreciatedovertheirusefullives
rangingfrom7to15years.Leaseholdimprovementsareamortizedovertheshorteroftheirestimatedusefullives,nottoexceed15years,ortheremainingterm
oftherelatedlease.Otherproperty,plantandequipmenthaveusefullivesrangingfrom2to25years.Leasedpropertymeetingcertaincapitalleasecriteriais
capitalized,andthenetpresentvalueoftherelatedleasepaymentsisrecordedasaliability.Amortizationofassetsundercapitalleasesisrecordedusingthe
straight-linemethodovertheshorteroftheestimatedusefullivesortheleaseterms.Maintenance,repairsandminorrenewalsorbettermentsarechargedto
expenseasincurred.

Goodwill
and
Other
Intangible
Assets.
Goodwillrepresentstheexcessofpurchasepriceoverthevalueassignedtothenettangibleandidentifiableintangible
assetsofbusinessesacquired.Acquiredintangibleassetsotherthangoodwillareamortizedovertheirusefullivesunlessthelivesaredeterminedtobeindefinite.
Forintangibleassetspurchasedinabusinesscombination,theestimatedfairvaluesoftheassetsreceivedareusedtoestablishtheirrecordedvalues.Forintangible
assetsacquiredinanon-monetaryexchange,theestimatedfairvaluesoftheassetstransferred(ortheestimatedfairvaluesoftheassetsreceived,ifmoreclearly
evident)areusedtoestablishtheirrecordedvalues,unlessthevaluesofneithertheassetsreceivednortheassetstransferredaredeterminablewithinreasonable
limits,inwhichcasetheassetsreceivedaremeasuredbasedonthecarryingvaluesoftheassetstransferred.Valuationtechniquesconsistentwiththemarket
approach,incomeapproachand/orcostapproachareusedtomeasurefairvalue.

Impairment
of
Goodwill,
Other
Indefinite-Lived
Assets
and
Long-Lived
Assets.
Goodwillandotherindefinite-livedintangibleassetsaretestedannuallyfor
impairmentinthefourthfiscalquarterandininterimperiodsifcertaineventsoccurindicatingthatthecarryingamountsmaybeimpaired.Ifaqualitative
assessmentisusedandtheCompanydeterminesthatthefairvalueofareportingunitorindefinite-livedintangibleassetismorelikelythannot(i.e.,alikelihoodof
morethan50%)lessthanitscarryingamount,aquantitativeimpairmenttestwillbeperformed.Ifgoodwillisquantitativelyassessedforimpairment,atwo-step
approachisapplied.First,theCompanycomparestheestimatedfairvalueofthereportingunitinwhichthegoodwillresidestoitscarryingvalue.Thesecondstep,
ifnecessary,measurestheamountofimpairment,ifany,bycomparingtheimpliedfairvalueofgoodwilltoitscarryingvalue.Otherindefinite-livedintangible
assetsarequantitativelyassessedforimpairment,ifnecessary,bycomparingtheirestimatedfairvaluestotheircarryingvalues.Ifthecarryingvalueexceedsthe
fairvalue,thedifferenceisrecordedasanimpairment.

Long-livedassets,suchasproperty,plantandequipmentandintangibleassetssubjecttoamortization,arereviewedforimpairmentwhenthereisevidence
thateventsorchangesincircumstancesindicatethatthecarryingamountofanassetorassetgroupmaynotberecoverable.Recoverabilityofassetstobeheldand
usedismeasuredbycomparingthecarryingamountofanassetorassetgrouptoestimatedundiscountedfuturecashflowsexpectedtobegeneratedbytheassetor
assetgroup.Ifthecarryingamountofanassetorassetgroupexceedsitsestimatedfuturecashflows,animpairmentchargeisrecognizedfortheamountbywhich
thecarryingamountoftheassetorassetgroupexceedstheestimatedfairvalueoftheassetorassetgroup.Long-livedassetstobedisposedofbysalearereported
attheloweroftheircarryingamountsortheirestimatedfairvalueslesscoststosellandarenotdepreciated.

Revenue
Recognition.
TheCompanyderivesrevenuesprincipallyfromsalesofintegratedcircuitproductsandlicensingofitsintellectualpropertyandalso
generatesrevenuesthroughsalesofsoftwarehosting,softwaredevelopmentandotherservices.Thetimingofrevenuerecognitionandtheamountofrevenue
actuallyrecognizedineachcasedependsuponavarietyoffactors,includingthespecifictermsofeacharrangementandthenatureoftheCompanysdeliverables
andobligations.Unearnedrevenuesconsistprimarilyoflicensefeesforintellectualpropertywithcontinuingperformanceobligations.

F-11

Exhibit 21
Page 222
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2172 Page 158 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RevenuesfromsalesoftheCompanysproductsarerecognizedatthetimeofshipment,orwhentitleandriskoflosspasstothecustomerandallothercriteria
forrevenuerecognitionaremet,iflater.Revenuesfromprovidingservicesarerecognizedwhenearned.Revenuesfromprovidingserviceswerelessthan10%of
totalrevenuesforallperiodspresented.

TheCompanylicensesorotherwiseprovidesrightstouseportionsofitsintellectualpropertyportfolio,whichincludescertainpatentrightsessentialtoand/or
usefulinthemanufactureandsaleofcertainwirelessproducts.Licenseestypicallypayafixedlicensefeeinoneormoreinstallmentsandroyaltiesbasedontheir
salesofproductsincorporatingorusingtheCompanyslicensedintellectualproperty.Licensefeesarerecognizedovertheestimatedperiodofbenefitofthe
licensetothelicensee,typically5to15years.TheCompanyearnsroyaltiesonsuchlicensedproductssoldworldwidebyitslicenseesatthetimethatthe
licenseessalesoccur.TheCompanyslicensees,however,donotreportandpayroyaltiesowedforsalesinanygivenquarteruntilaftertheconclusionofthat
quarter.TheCompanyrecognizesroyaltyrevenuesbasedonroyaltiesreportedbylicenseesduringthequarterandwhenallotherrevenuerecognitioncriteriaare
met.

TheCompanyrecordsreductionstorevenuesforcustomerincentivearrangements,includingvolume-relatedandotherpricingrebatesandcost
reimbursementsformarketingandotheractivitiesinvolvingcertainoftheCompanysproductsandtechnologies.TheCompanyrecognizesthemaximumpotential
liabilityatthelaterofthedateatwhichtheCompanyrecordstherelatedrevenuesorthedateatwhichtheCompanyofferstheincentiveor,ifpaymentis
contingent,whenthecontingencyisresolved.Incertainarrangements,theliabilitiesarebasedoncustomerforecasts.TheCompanyreversesaccrualsfor
unclaimedincentiveamountstorevenueswhentheunclaimedamountsarenolongersubjecttopayment.

Concentrations.
AsignificantportionoftheCompanysrevenuesisconcentratedwithasmallnumberofcustomers/licenseesoftheCompanysQCTand
QTLsegments.Revenuesrelatedtotheproductsoftwocustomers/licenseescomprised16%and24%oftotalconsolidatedrevenuesinfiscal2016,comparedto
20%and25%infiscal2015and28%and21%infiscal2014.Aggregateaccountsreceivablefromtwocustomers/licenseescomprised44%and19%ofgross
accountsreceivableatSeptember25,2016andSeptember27,2015,respectively.

TheCompanyreliesonsole-orlimited-sourcesuppliersforsomeproducts,particularlyproductsintheQCTsegment,subjectingtheCompanytopossible
shortagesofrawmaterialsormanufacturingcapacity.WhiletheCompanyhasestablishedalternatesuppliersforcertaintechnologiesthattheCompanyconsiders
critical,thelossofasupplierortheinabilityofasuppliertomeetperformanceorqualityspecificationsordeliveryschedulescouldharmtheCompanysabilityto
meetitsdeliveryobligationsand/ornegativelyimpacttheCompanysrevenues,businessoperationsandabilitytocompeteforfuturebusiness.

Shipping
and
Handling
Costs.
Costsincurredforshippingandhandlingareincludedincostofrevenues.Amountsbilledtoacustomerforshippingand
handlingarereportedasrevenues.

Share-Based
Compensation.
Share-basedcompensationexpenseforequity-classifiedawards,principallyrelatedtorestrictedstockunits(RSUs),ismeasured
atthegrantdate,orattheacquisitiondateforawardsassumedinbusinesscombinations,basedontheestimatedfairvalueoftheawardandisrecognizedoverthe
employeesrequisiteserviceperiod.Share-basedcompensationexpenseisadjustedtoexcludeamountsrelatedtoshare-basedawardsthatareexpectedtobe
forfeited.

ThefairvaluesofRSUsareestimatedbasedonthefairmarketvaluesoftheunderlyingstockonthedatesofgrantordatestheRSUsareassumed.IfRSUsdo
nothavetherighttoparticipateindividends,thefairvaluesarediscountedbythedividendyield.Theweighted-averageestimatedfairvaluesofemployeeRSUs
grantedduringfiscal2016,2015and2014were$53.56,$68.77and$72.81pershare,respectively.Uponvesting,theCompanyissuesnewsharesofcommon
stock.ForthemajorityofRSUs,sharesareissuedonthevestingdatesnetoftheamountofsharesneededtosatisfystatutorytaxwithholdingrequirementstobe
paidbytheCompanyonbehalfoftheemployees.Asaresult,theactualnumberofsharesissuedwillbefewerthanthenumberofRSUsoutstanding.Theannual
pre-vestforfeiturerateforRSUswasestimatedtobeapproximately4%infiscal2016and3%inbothfiscal2015and2014.

F-12

Exhibit 21
Page 223
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2173 Page 159 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Totalshare-basedcompensationexpense,relatedtoalloftheCompanysshare-basedawards,wascomprisedasfollows(inmillions):

2016 2015 2014


Costofrevenues $ 40 $ 42 $ 49
Researchanddevelopment 614 659 672
Selling,generalandadministrative 289 325 338
Share-basedcompensationexpensebeforeincometaxes 943 1,026 1,059
Relatedincometaxbenefit (190) (190) (203)
$ 753 $ 836 $ 856

Legal
Proceedings.
TheCompanyiscurrentlyinvolvedincertainlegalproceedings.TheCompanydisclosesalosscontingencyifthereisatleastareasonable
possibilitythatamateriallosshasbeenincurred.TheCompanyrecordsitsbestestimateofalossrelatedtopendinglegalproceedingswhenthelossisconsidered
probableandtheamountcanbereasonablyestimated.Wherearangeoflosscanbereasonablyestimatedwithnobestestimateintherange,theCompanyrecords
theminimumestimatedliability.Asadditionalinformationbecomesavailable,theCompanyassessesthepotentialliabilityrelatedtopendinglegalproceedings
andrevisesitsestimatesandupdatesitsdisclosuresaccordingly.TheCompanyslegalcostsassociatedwithdefendingitselfarerecordedtoexpenseasincurred.

Foreign
Currency.
Certainforeignsubsidiariesusealocalcurrencyasthefunctionalcurrency.Resultingtranslationgainsorlossesarerecognizedasa
componentofaccumulatedothercomprehensiveincome.Transactiongainsorlossesrelatedtobalancesdenominatedinacurrencyotherthanthefunctional
currencyarerecognizedintheconsolidatedstatementsofoperations.

Income
Taxes.
Theassetandliabilityapproachisusedtorecognizedeferredtaxassetsandliabilitiesfortheexpectedfuturetaxconsequencesoftemporary
differencesbetweenthecarryingamountsandthetaxbasesofassetsandliabilities.Taxlawandratechangesarereflectedinincomeintheperiodsuchchangesare
enacted.TheCompanyrecordsavaluationallowancetoreducedeferredtaxassetstotheamountthatismorelikelythannottoberealized.TheCompanyincludes
interestandpenaltiesrelatedtoincometaxes,includingunrecognizedtaxbenefits,withinincometaxexpense.

TheCompanysincometaxreturnsarebasedoncalculationsandassumptionsthataresubjecttoexaminationbytheInternalRevenueServiceandothertax
authorities.Inaddition,thecalculationoftheCompanystaxliabilitiesinvolvesdealingwithuncertaintiesintheapplicationofcomplextaxregulations.The
Companyrecognizesliabilitiesforuncertaintaxpositionsbasedonatwo-stepprocess.Thefirststepistoevaluatethetaxpositionforrecognitionbydetermining
iftheweightofavailableevidenceindicatesthatitismorelikelythannotthatthepositionwillbesustainedonaudit,includingresolutionofrelatedappealsor
litigationprocesses,ifany.Thesecondstepistomeasurethetaxbenefitasthelargestamountthatismorethan50%likelyofbeingrealizeduponsettlement.
WhiletheCompanybelievesithasappropriatesupportforthepositionstakenonitstaxreturns,theCompanyregularlyassessesthepotentialoutcomesof
examinationsbytaxauthoritiesindeterminingtheadequacyofitsprovisionforincometaxes.TheCompanycontinuallyassessesthelikelihoodandamountof
potentialadjustmentsandadjuststheincometaxprovision,incometaxespayableanddeferredtaxesintheperiodinwhichthefactsthatgiverisetoarevision
becomeknown.

TheCompanyrecognizeswindfalltaxbenefitsassociatedwithshare-basedawardsdirectlytostockholdersequitywhenrealized.Awindfalltaxbenefit
occurswhentheactualtaxbenefitrealizedbytheCompanyuponanemployeesdispositionofashare-basedawardexceedsthedeferredtaxasset,ifany,
associatedwiththeawardthattheCompanyhadrecorded.TheCompanyrecordswindfalltaxbenefitstostockholdersequity.Ashortfalloccurswhentheactual
taxbenefitrealizedbytheCompanyuponanemployeesdispositionofashare-basedawardislessthanthedeferredtaxasset,ifany,associatedwiththeaward
thattheCompanyhasrecorded.TheCompanyrecordsshortfalltaxdetrimentswhenrealizedtostockholdersequitytotheextentthatpreviouswindfalltax
benefitsexist(referredtoastheAPICwindfallpool),withanyremainderrecognizedinincometaxexpense.TheCompanyhadasufficientAPICwindfallpoolto
absorballshortfallsthatoccurredinfiscal2016.Whenassessingwhetherataxbenefitrelatingtoshare-basedcompensationhasbeenrealized,theCompany
followsthetaxlaworderingmethod,underwhichcurrentyearshare-basedcompensationdeductionsareassumedtobeutilizedbeforenetoperatingloss
carryforwardsandothertaxattributes.

Earnings
Per
Common
Share.
BasicearningspercommonsharearecomputedbydividingnetincomeattributabletoQualcommbytheweighted-average
numberofcommonsharesoutstandingduringthereportingperiod.Dilutedearningspercommonsharearecomputedbydividingnetincomeattributableto
Qualcommbythecombinationofdilutivecommonshare

F-13

Exhibit 21
Page 224
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2174 Page 160 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

equivalents,comprisedofsharesissuableundertheCompanysshare-basedcompensationplansandsharessubjecttowrittenputoptionsand/oracceleratedshare
repurchaseagreements,ifany,andtheweighted-averagenumberofcommonsharesoutstandingduringthereportingperiod.Dilutivecommonshareequivalents
includethedilutiveeffectofin-the-moneyshareequivalents,whicharecalculatedbasedontheaveragesharepriceforeachperiodusingthetreasurystock
method.Underthetreasurystockmethod,theexercisepriceofanaward,ifany,theamountofcompensationcostforfutureservicethattheCompanyhasnotyet
recognized,ifany,andtheestimatedtaxbenefitsthatwouldberecordedinpaid-incapitalwhenanawardissettled,ifany,areassumedtobeusedtorepurchase
sharesinthecurrentperiod.Thedilutivecommonshareequivalents,calculatedusingthetreasurystockmethod,forfiscal2016,2015and2014were13,864,000,
20,724,000and30,655,000,respectively.Sharesofcommonstockequivalentsoutstandingthatwerenotincludedinthecomputationofdilutedearningsper
commonsharebecausetheeffectwouldbeanti-dilutiveorcertainperformanceconditionswerenotsatisfiedattheendoftheperiodwere2,435,000,4,652,000
(whichwereprimarilyattributabletotheASRAgreements(Note4))and846,000duringfiscal2016,2015and2014,respectively.

Recent
Accounting
Pronouncements.
InNovember2015,theFinancialAccountingStandardsBoard(FASB)issuednewguidancerelatedtoaccountingfor
incometaxes,whichrequiresalldeferredtaxassetsandliabilitiestobeclassifiedasnoncurrentonthebalancesheet.TheCompanyearlyadoptedthenew
guidanceprospectivelyinthesecondquarteroffiscal2016.Priorperiodamountshavenotbeenadjusted.

InMay2014,theFASBissuednewguidancerelatedtorevenuerecognition,whichoutlinesacomprehensiverevenuerecognitionmodelandsupersedesmost
currentrevenuerecognitionguidance.Thenewguidancerequiresacompanytorecognizerevenueupontransferofgoodsorservicestoacustomeratanamount
thatreflectstheexpectedconsiderationtobereceivedinexchangeforthosegoodsorservices.Itdefinesafive-stepapproachforrecognizingrevenue,whichmay
requireacompanytousemorejudgmentandmakemoreestimatesthanunderthecurrentguidance.ThenewguidancewillbeeffectivefortheCompanystarting
inthefirstquarteroffiscal2019.Adoptiononeyearearlyispermitted.Twomethodsofadoptionarepermitted:(a)fullretrospectiveadoption,meaningthe
standardisappliedtoallperiodspresentedor(b)modifiedretrospectiveadoption,meaningthecumulativeeffectofapplyingthenewguidanceisrecognizedasan
adjustmenttotheopeningretainedearningsbalance.TheCompanydoesnotintendtoadoptthenewguidanceearlyandisintheprocessofdeterminingthe
adoptionmethodaswellastheeffectstheadoptionwillhaveonitsconsolidatedfinancialstatements.

InJanuary2016,theFASBissuednewguidanceonclassifyingandmeasuringfinancialinstruments,whichrequiresthat(i)allequityinvestments,otherthan
equity-methodinvestments,inunconsolidatedentitiesgenerallybemeasuredatfairvaluethroughearningsand(ii)whenthefairvalueoptionhasbeenelectedfor
financialliabilities,changesinfairvalueduetoinstrument-specificcreditriskberecognizedseparatelyinothercomprehensiveincome.Additionally,itchanges
thedisclosurerequirementsforfinancialinstruments.ThenewguidancewillbeeffectivefortheCompanystartinginthefirstquarteroffiscal2019.Earlyadoption
ispermittedforcertainprovisions.TheCompanyisintheprocessofdeterminingtheeffectstheadoptionwillhaveonitsconsolidatedfinancialstatementsaswell
aswhethertoadoptcertainprovisionsearly.

InFebruary2016,theFASBissuednewguidancerelatedtoleasesthatoutlinesacomprehensiveleaseaccountingmodelandsupersedesthecurrentlease
guidance.Thenewguidancerequireslesseestorecognizeleaseliabilitiesandcorrespondingright-of-useassetsforallleaseswithleasetermsofgreaterthan
12months.Italsochangesthedefinitionofaleaseandexpandsthedisclosurerequirementsofleasearrangements.Thenewguidancemustbeadoptedusingthe
modifiedretrospectiveapproachandwillbeeffectivefortheCompanystartinginthefirstquarteroffiscal2020.Earlyadoptionispermitted.TheCompanyisin
theprocessofdeterminingtheeffectstheadoptionwillhaveonitsconsolidatedfinancialstatementsaswellaswhethertoadoptthenewguidanceearly.

InMarch2016,theFASBissuednewguidancethatchangestheaccountingforshare-basedpayments.Underthenewguidance,excesstaxbenefitsassociated
withshare-basedpaymentawardswillberecognizedthroughearningswhentheawardsvestorsettle,ratherthaninstockholdersequity.Inaddition,itwill
increasethenumberofsharesanemployercanwithholdtocoverincometaxesonshare-basedpaymentawardsandstillqualifyfortheexemptiontoliability
classification.ThenewguidancewillbeeffectivefortheCompanystartinginthefirstquarteroffiscal2018.Earlyadoptionispermittedinanyannualorinterim
period.TheCompanyisintheprocessofdeterminingtheeffectstheadoptionwillhaveonitsconsolidatedfinancialstatementsaswellaswhethertoadoptthe
newguidanceearly.

InJune2016,theFASBissuednewguidancethatchangestheaccountingforrecognizingimpairmentsoffinancialassets.Underthenewguidance,credit
lossesforcertaintypesoffinancialinstrumentswillbeestimatedbasedonexpectedlosses.Thenewguidancealsomodifiestheimpairmentmodelsforavailable-
for-saledebtsecuritiesandforpurchasedfinancialassetswithcreditdeteriorationsincetheirorigination.ThenewguidancewillbeeffectivefortheCompany
startinginthefirstquarteroffiscal2021.Earlyadoptionispermittedstartinginthefirstquarteroffiscal2020.TheCompanyisinthe

F-14

Exhibit 21
Page 225
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2175 Page 161 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

processofdeterminingtheeffectstheadoptionwillhaveonitsconsolidatedfinancialstatementsaswellaswhethertoadoptthenewguidanceearly.

InAugust2016,theFASBissuednewguidancerelatedtotheclassificationofcertaincashreceiptsandcashpaymentsonthestatementofcashflows.The
accountingstandardupdatewillbeeffectivefortheCompanybeginninginthefirstquarteroffiscal2019onaretrospectivebasis,andearlyadoptionispermitted.
TheCompanyiscurrentlyevaluatingtheimpactofthisaccountingstandardupdateonitsconsolidatedfinancialstatementsaswellaswhethertoadoptthenew
guidanceearly.

InOctober2016,theFASBissuednewguidancethatchangestheaccountingforincometaxeffectsofintra-entitytransfersofassetsotherthaninventory.
Underthenewguidance,theselling(transferring)entityisrequiredtorecognizeacurrenttaxexpenseorbenefitupontransferoftheasset.Similarly,the
purchasing(receiving)entityisrequiredtorecognizeadeferredtaxassetordeferredtaxliability,aswellastherelateddeferredtaxbenefitorexpense,upon
receiptoftheasset.ThenewguidancewillbeeffectivefortheCompanystartinginthefirstquarteroffiscal2019onamodifiedretrospectivebasis,andearly
adoptionispermitted.TheCompanyiscurrentlyevaluatingtheimpactofthisaccountingstandardupdateonitsconsolidatedfinancialstatementsaswellas
whethertoadoptthenewguidanceearly.

Note 2. Composition of Certain Financial Statement Items

Accounts
Receivable
(in
millions)
September 25, 2016 September 27, 2015
Trade,netofallowancesfordoubtfulaccountsof$1and$6,respectively $ 2,194 $ 1,941
Long-termcontracts 20 11
Other 5 12
$ 2,219 $ 1,964

Inventories
(in
millions)
September 25, 2016 September 27, 2015
Rawmaterials $ 1 $ 1
Work-in-process 847 550
Finishedgoods 708 941
$ 1,556 $ 1,492

Property,
Plant
and
Equipment
(in
millions) September 25, 2016 September 27, 2015
Land $ 192 $ 212
Buildingsandimprovements 1,545 1,544
Computerequipmentandsoftware 1,426 1,422
Machineryandequipment 2,454 2,287
Furnitureandofficeequipment 77 83
Leaseholdimprovements 254 274
Constructioninprogress 92 72
6,040 5,894
Lessaccumulateddepreciationandamortization (3,734) (3,360)
$ 2,306 $ 2,534

Depreciationandamortizationexpenserelatedtoproperty,plantandequipmentforfiscal2016,2015and2014was$624million,$625millionand$609
million,respectively.ThegrossbookvaluesofpropertyundercapitalleasesincludedinbuildingsandimprovementswerenegligibleatSeptember25,2016and
September27,2015.

Goodwill
and
Other
Intangible
Assets.
TheCompanyallocatesgoodwilltoitsreportingunitsforannualimpairment

F-15

Exhibit 21
Page 226
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2176 Page 162 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

testingpurposes.ThefollowingtablepresentsthegoodwillallocatedtotheCompanysreportableandnonreportablesegments,asdescribedinNote8,aswellas
thechangesinthecarryingamountsofgoodwillduringfiscal2016and2015(inmillions):

Nonreportable
QCT QTL Segments Total
Balance at September 28, 2014 $ 3,467 $ 712 $ 309 $ 4,488
Acquisitions 998 6 254 1,258
Impairments (260) (260)
Other(1) (4) (3) (7)
Balance at September 27, 2015 (2) 4,461 718 300 5,479
Acquisitions 172 172
Impairments (17) (17)
Other(1) 41 4 45
Balance at September 25, 2016 (2) $ 4,674 $ 718 $ 287 $ 5,679

(1) Includeschangesingoodwillamountsresultingfromforeigncurrencytranslation,purchaseaccountingadjustmentsand,infiscal2016,thesaleoftheCompanysbusiness
thatprovidedaugmentedrealityapplications.

(2) Cumulativegoodwillimpairmentswere$537millionand$520millionatSeptember25,2016andSeptember27,2015,respectively.

Thecomponentsofotherintangibleassets,netwereasfollows(inmillions):

September 25, 2016 September 27, 2015


Weighted-average Weighted-average
amortization amortization
Gross Carrying Accumulated period Gross Carrying Accumulated period
Amount Amortization (years) Amount Amortization (years)
Wirelessspectrum $ 2 $ (2) 5 $ 2 $ (2) 5
Marketing-related 119 (77) 8 93 (59) 8
Technology-based 5,900 (2,459) 10 5,735 (2,078) 10
Customer-related 21 (4) 7 111 (60) 4
$ 6,042 $ (2,542) 10 $ 5,941 $ (2,199) 10

Alloftheseintangibleassetsaresubjecttoamortization,otherthanacquiredin-processresearchanddevelopmentwithcarryingvaluesof$83millionand
$196millionatSeptember25,2016andSeptember27,2015,respectively.Amortizationexpenserelatedtotheseintangibleassetswas$804million,$591million
and$543millionforfiscal2016,2015and2014,respectively.Amortizationexpenserelatedtotheseintangibleassetsandacquiredin-processresearchand
development,beginningupontheexpectedcompletionoftheunderlyingprojects,isexpectedtobe$674million,$635million,$597million,$494millionand
$374millionforeachofthesubsequentfiveyearsfromfiscal2017through2021,respectively,and$726millionthereafter.

Other
Current
Liabilities
(in
millions)
September 25, September 27,
2016 2015
Customerincentivesandothercustomer-relatedliabilities $ 1,710 $ 1,894
Other 551 462
$ 2,261 $ 2,356

Accumulated
Other
Comprehensive
Income.
Changesinthecomponentsofaccumulatedothercomprehensiveincome,netofincometaxes,inQualcomm
stockholdersequityduringfiscal2016wereasfollows(inmillions):

F-16

Exhibit 21
Page 227
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2177 Page 163 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Noncredit Other-than-
Temporary Impairment
Losses and Subsequent Net Unrealized Gain
Foreign Currency Changes in Fair Value for (Loss) on Other Net Unrealized Gain Total Accumulated
Translation Certain Available-for- Available-for-Sale (Loss) on Derivative Other Comprehensive
Adjustment Sale Debt Securities Securities Instruments Income
BalanceatSeptember27,2015 $ (160) $ 4 $ 297 $ 54 $ 195
Othercomprehensive(loss)income
beforereclassifications (22) 14 306 (4) 294
Reclassificationsfromaccumulated
othercomprehensiveincome 21 (12) (71) 1 (61)
Othercomprehensive(loss)income (1) 2 235 (3) 233
BalanceatSeptember25,2016 $ (161) $ 6 $ 532 $ 51 $ 428

Reclassificationsfromaccumulatedothercomprehensiveincomerelatedtonetgainsonavailable-for-salesecuritiesof$83million,$212millionand$360
millionduringfiscal2016,2015and2014,respectively,wererecordedininvestmentincome,net(Note2).Reclassificationsfromaccumulatedother
comprehensiveincomerelatedtoforeigncurrencytranslationlossesof$21millionduringfiscal2016wererecordedinselling,generalandadministrative
expensesandotheroperatingexpenses.Reclassificationsfromaccumulatedothercomprehensiveincomerelatedtoforeigncurrencytranslationadjustmentsduring
fiscal2015and2014werenegligible.Reclassificationsfromaccumulatedothercomprehensiveincomerelatedtoderivativeinstrumentsduringfiscal2016and
2015werenegligible.Reclassificationsfromaccumulatedothercomprehensiveincomerelatedtoderivativeinstrumentsof$26millionforfiscal2014were
recordedinrevenues,costofrevenues,researchanddevelopmentexpensesandselling,generalandadministrativeexpenses.

Other
Income,
Costs
and
Expenses.
Otherincomeforfiscal2016includedagainof$380milliononthesaleofwirelessspectrumintheUnitedKingdomthat
washeldbytheQSI(QualcommStrategicInitiatives)segmentinthefirstquarteroffiscal2016for$232millionincashand$275millionindeferredpayments
duein2020to2023,whichwererecordedattheirpresentvaluesinotherassets.Otherincomeforfiscal2016alsoincluded$202millioninrestructuringand
restructuring-relatedcharges,whichwerepartiallyoffsetbya$48milliongainonthesaleoftheCompanysbusinessthatprovidedaugmentedrealityapplications,
allofwhichrelatedtotheCompanysStrategicRealignmentPlan.
OnFebruary9,2015,theCompanyannouncedthatithadreachedaresolutionwiththeChinaNationalDevelopmentandReformCommission(NDRC)
regardingitsinvestigationoftheCompanyrelatingtoChinasAnti-MonopolyLaw(AML)andtheCompanyslicensingbusinessandcertaininteractionsbetween
theCompanyslicensingbusinessanditschipsetbusiness.TheNDRCissuedanAdministrativeSanctionDecisionfindingthattheCompanyhadviolatedthe
AML,andtheCompanyagreedtoimplementarectificationplanthatmodifiescertainofitsbusinesspracticesinChina.Inaddition,theNDRCimposedafineon
theCompanyof6.088billionChineserenminbi(approximately$975million),whichtheCompanypaid.TheCompanyrecordedtheamountofthefineinthe
secondquarteroffiscal2015inotherexpenses.Otherexpensesinfiscal2015alsoincluded$255millionand$11millioninimpairmentchargesongoodwilland
intangibleassets,respectively,relatedtotheCompanyscontentandpush-to-talkservicesanddisplaybusinessesand$190millioninrestructuringand
restructuring-relatedchargesrelatedtotheCompanysStrategicRealignmentPlan(Note10),partiallyoffsetby$138millioningainsonsalesofcertainproperty,
plantandequipment.
Otherexpensesinfiscal2014werecomprisedof$507millionand$100millionincertainproperty,plantandequipmentandgoodwillimpairmentcharges,
respectively,and$19millioninrestructuring-relatedcostsincurredbyoneoftheCompanysdisplaybusinesses.Otherexpensesinfiscal2014alsoincludeda$16
milliongoodwillimpairmentchargerelatedtotheCompanysformerQRS(QualcommRetailSolutions)divisionanda$15millionlegalsettlement,partially
offsetbythereversalofthe$173millionaccrualrecordedinfiscal2013relatedtotheParkerVisionverdictagainstus,whichwasoverturned(Note7).

F-17

Exhibit 21
Page 228
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2178 Page 164 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investment
Income,
Net
(in
millions)
2016 2015 2014
Interestanddividendincome $ 611 $ 527 $ 586
Netrealizedgainsonmarketablesecurities 239 451 770
Netrealizedgainsonotherinvestments 49 49 56
Impairmentlossesonmarketablesecurities (112) (163) (156)
Impairmentlossesonotherinvestments (60) (37) (24)
Net(losses)gainsonderivativeinstruments (8) 17 5
Equityinnetlossesofinvestees (84) (32) (10)
Netgainsondeconsolidationofsubsidiaries 3 6
$ 635 $ 815 $ 1,233

Netimpairmentlossesonmarketablesecuritiesrelatedtothenoncreditportionoflossesondebtsecuritiesrecognizedinothercomprehensiveincomewere
$37million,$23millionandnegligibleinfiscal2016,2015and2014,respectively.Theendingbalanceofthecreditlossportionofother-than-temporary
impairmentsondebtsecuritiesheldbytheCompanywas$55millionand$12millionatSeptember25,2016andSeptember27,2015,respectively.

Note 3. Income Taxes

Thecomponentsoftheincometaxprovisionforcontinuingoperationswereasfollows(inmillions):

2016 2015 2014


Currentprovision(benefit):
Federal $ 4 $ (67) $ 172
State 4 4 10
Foreign 1,411 1,307 1,116
1,419 1,244 1,298
Deferred(benefit)provision:
Federal (184) (9) (30)
State 6 1 (10)
Foreign (110) (17) (14)
(288) (25) (54)
$ 1,131 $ 1,219 $ 1,244

TheforeigncomponentoftheincometaxprovisionconsistsprimarilyofforeignwithholdingtaxesonroyaltyfeesincludedinUnitedStatesearnings.

ThecomponentsofincomefromcontinuingoperationsbeforeincometaxesbyUnitedStatesandforeignjurisdictionswereasfollows(inmillions):

2016 2015 2014


UnitedStates $ 3,032 $ 2,993 $ 3,213
Foreign 3,801 3,494 5,565
$ 6,833 $ 6,487 $ 8,778

F-18

Exhibit 21
Page 229
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2179 Page 165 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ThefollowingisareconciliationoftheexpectedstatutoryfederalincometaxprovisiontotheCompanysactualincometaxprovisionforcontinuing
operations(inmillions):

2016 2015 2014


Expectedincometaxprovisionatfederalstatutorytaxrate $ 2,392 $ 2,270 $ 3,072
Stateincometaxprovision,netoffederalbenefit 19 18 24
ForeignincometaxedatotherthanU.S.rates (1,068) (937) (1,750)
Researchanddevelopmenttaxcredits (143) (148) (61)
Worthlessstockdeductionofdomesticsubsidiary (101)
Other 32 16 (41)
$ 1,131 $ 1,219 $ 1,244

Duringfiscal2016,theCompanyrecordedataxbenefitof$101millionfromaworthlessstockdeductiononadomesticsubsidiaryofoneoftheCompanys
formerdisplaybusinesses.Also,duringfiscal2016,theUnitedStatesgovernmentpermanentlyreinstatedthefederalresearchanddevelopmenttaxcredit
retroactivelytoJanuary1,2015.Asaresultofthereinstatement,theCompanyrecordedataxbenefitof$79millioninfiscal2016relatedtofiscal2015.
Duringfiscal2015,theNDRCimposedafineof$975million(Note2),whichwasnotdeductiblefortaxpurposesandwassubstantiallyattributabletoa
foreignjurisdiction.Additionally,duringfiscal2015,theCompanyrecordedataxbenefitof$101millionrelatedtofiscal2014resultingfromtheUnitedStates
governmentreinstatingthefederalresearchanddevelopmenttaxcreditretroactivelytoJanuary1,2014throughDecember31,2014.Theeffectivetaxratefor
fiscal2015alsoreflectedtheUnitedStatesfederalresearchanddevelopmenttaxcreditgeneratedthroughDecember31,2014,thedateonwhichthecreditexpired,
anda$61milliontaxbenefitasaresultofafavorabletaxauditsettlementwiththeInternalRevenueService(IRS)relatedtoQualcommAtheros,Inc.spre-
acquisition2010and2011taxreturns.

TheCompanysQCTsegmentsnon-UnitedStatesheadquartersislocatedinSingapore.TheCompanyhasobtainedtaxincentivesinSingaporethat
commencedinMarch2012,whichareeffectivethroughMarch2027,thatresultinataxexemptionforthefirstfiveyearsprovidedthattheCompanymeets
specifiedemploymentandinvestmentcriteria.TheCompanysSingaporetaxratewillincreaseinfiscal2017andagaininfiscal2027asaresultoftheexpiration
oftheseincentives.HadtheCompanyestablishedQCTsnon-UnitedStatesheadquartersinSingaporewithoutthesetaxincentives,theCompanysincometax
expensewouldhavebeenhigherandimpactedearningspershareattributabletoQualcommasfollows(inmillions,exceptpershareamounts):

2016 2015 2014


Additionalincometaxexpense $ 487 $ 656 $ 690
Reductiontodilutedearningspershare $ 0.32 $ 0.40 $ 0.40

TheCompanyconsiderstheoperatingearningsofcertainnon-UnitedStatessubsidiariestobeindefinitelyreinvestedoutsidetheUnitedStatesbasedonthe
Companysplansforuseand/orinvestmentoutsidetheUnitedStatesandtheCompanysbeliefthatitssourcesofcashandliquidityintheUnitedStateswillbe
sufficienttomeetfuturedomesticcashneeds.TheCompanyhasnotrecordedadeferredtaxliabilityofapproximately$11.5billionrelatedtotheUnitedStates
federalandstateincometaxesandforeignwithholdingtaxesonapproximately$32.5billionofundistributedearningsofcertainnon-UnitedStatessubsidiaries
indefinitelyreinvestedoutsidetheUnitedStates.ShouldtheCompanydecidetonolongerindefinitelyreinvestsuchearningsoutsidetheUnitedStates,the
Companywouldhavetoadjusttheincometaxprovisionintheperiodmanagementmakessuchdetermination.

TheCompanyfilesincometaxreturnsintheUnitedStatesfederaljurisdictionandvariousstateandforeignjurisdictions.TheCompanyiscurrentlya
participantintheIRSComplianceAssuranceProcess,wherebytheIRSandtheCompanyendeavortoagreeonthetreatmentofalltaxissuespriortothetaxreturn
beingfiled.TheIRScompleteditsexaminationoftheCompanystaxreturnforfiscal2014andissuedanochangeletterinDecember2015,resultinginnochange
totheincometaxprovision.TheCompanyisnolongersubjecttoUnitedStatesfederalincometaxexaminationsforyearspriortofiscal2014.TheCompanyis
subjecttoexaminationbytheCaliforniaFranchiseTaxBoardforfiscalyearsafter2011.TheCompanyisalsosubjecttoincometaxesinothertaxingjurisdictions
intheUnitedStatesandaroundtheworld,manyof

F-19

Exhibit 21
Page 230
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2180 Page 166 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

whichareopentotaxexaminationsforperiodsafterfiscal2000.Theoutcomeofanystateorforeignincometaxexaminationisnotexpectedtobematerialtothe
Companysconsolidatedfinancialstatements.

TheCompanyhaddeferredtaxassetsanddeferredtaxliabilitiesasfollows(inmillions):

September 25, 2016 September 27, 2015


Unusedtaxcredits $ 1,256 $ 897
Unearnedrevenues 920 1,029
Unrealizedlossesonmarketablesecurities 493 441
Accruedliabilitiesandreserves 409 317
Share-basedcompensation 277 331
Unusednetoperatinglosses 218 265
Other 107 95
Totalgrossdeferredtaxassets 3,680 3,375
Valuationallowance (754) (635)
Totalnetdeferredtaxassets 2,926 2,740
Intangibleassets (502) (548)
Unrealizedgainsonmarketablesecurities (430) (273)
Other (133) (105)
Totaldeferredtaxliabilities (1,065) (926)
Netdeferredtaxassets $ 1,861 $ 1,814
Reportedas:
Currentdeferredtaxassets $ $ 635
Non-currentdeferredtaxassets 2,030 1,453
Currentdeferredtaxliabilities(1) (4)
Non-currentdeferredtaxliabilities(1) (169) (270)
$ 1,861 $ 1,814

(1) Currentdeferredtaxliabilitiesandnon-currentdeferredtaxliabilitieswereincludedinothercurrentliabilitiesandotherliabilities,respectively,intheconsolidatedbalance
sheets.

AtSeptember25,2016,theCompanyhadunusedfederalnetoperatinglosscarryforwardsof$267millionexpiringfrom2021through2034,unusedstatenet
operatinglosscarryforwardsof$892millionexpiringfrom2017through2036andunusedforeignnetoperatinglosscarryforwardsof$287millionexpiringfrom
2019through2025.AtSeptember25,2016,theCompanyhadunusedstatetaxcreditsof$637million,ofwhichsubstantiallyallmaybecarriedforward
indefinitely,unusedfederaltaxcreditsof$595millionexpiringfrom2025through2036andunusedtaxcreditsof$24millioninforeignjurisdictionsexpiring
from2033through2036.TheCompanydoesnotexpectitsfederalnetoperatinglosscarryforwardstoexpireunused.

TheCompanybelieves,morelikelythannot,thatitwillhavesufficienttaxableincomeafterdeductionsrelatedtoshare-basedawardstoutilizethemajorityof
itsdeferredtaxassets.AtSeptember25,2016,theCompanyhasprovidedavaluationallowanceoncertainstatetaxcredits,foreigndeferredtaxassetsandstate
netoperatinglossesof$627million,$94millionand$33million,respectively.ThevaluationallowancesreflecttheuncertaintiessurroundingtheCompanys
abilitytogeneratesufficientfuturetaxableincomeincertainforeignandstatetaxjurisdictionstoutilizeitsnetoperatinglossesandtheCompanysabilityto
generatesufficientcapitalgainstoutilizeallcapitallosses.

F-20

Exhibit 21
Page 231
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2181 Page 167 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Asummaryofthechangesintheamountofunrecognizedtaxbenefitsforfiscal2016,2015and2014follows(inmillions):

2016 2015 2014


Beginningbalanceofunrecognizedtaxbenefits $ 40 $ 87 $ 221
Additionsbasedonprioryeartaxpositions 20 31 1
Reductionsforprioryeartaxpositionsandlapseinstatuteoflimitations (6) (70) (67)
Additionsforcurrentyeartaxpositions 218 5 5
Settlementswithtaxingauthorities (1) (13) (73)
Endingbalanceofunrecognizedtaxbenefits $ 271 $ 40 $ 87

TheCompanydoesnotexpectanyunrecognizedtaxbenefitsrecordedatSeptember25,2016toresultinasignificantcashpaymentinfiscal2017.
UnrecognizedtaxbenefitsatSeptember25,2016included$191millionfortaxpositionsthat,ifrecognized,wouldimpacttheeffectivetaxrate.Theunrecognized
taxbenefitsdifferfromtheamountthatwouldaffecttheCompanyseffectivetaxrateprimarilybecausetheunrecognizedtaxbenefitswereincludedonagross
basisanddidnotreflectsecondaryimpactssuchasthefederaldeductionforstatetaxes,adjustmentstodeferredtaxassetsandthevaluationallowancethatmight
berequirediftheCompanystaxpositionsaresustained.Theincreaseinunrecognizedtaxbenefitsinfiscal2016wasprimarilyduetotaxpositionsrelatedto
classificationofincome.Thedecreaseinunrecognizedtaxbenefitsinfiscal2015primarilyresultedfromafavorabletaxauditsettlementwiththeIRSrelatedto
QualcommAtheros,Inc.spre-acquisition2010and2011taxreturns,whichwaspartiallyoffsetbyanincreaserelatedtotheCSRacquisition(Note9).The
decreaseinunrecognizedtaxbenefitsinfiscal2014wasprimarilyduetoanagreementreachedwiththeIRSoncomponentsoftheCompanysfiscal2013tax
returns.TheCompanybelievesthatitisreasonablypossiblethatthetotalamountofunrecognizedtaxbenefitsatSeptember25,2016mayincreaseordecreasein
fiscal2017.

Cashamountspaidforincometaxes,netofrefundsreceived,were$1.3billion,$1.2billionand$1.2billionforfiscal2016,2015and2014,respectively.

Note 4. Capital Stock

Preferred
Stock.
TheCompanyhas8,000,000sharesofpreferredstockauthorizedforissuanceinoneormoreseries,ataparvalueof$0.0001pershare.In
conjunctionwiththeAmendedandRestatedRightsAgreementdatedasofSeptember25,2005betweentheCompanyandComputershareTrustCompany,N.A.,
assuccessorRightsAgenttoComputershareInvestorServicesLLC,asamended(theRightsAgreement),4,000,000sharesofpreferredstockweredesignatedas
SeriesAJuniorParticipatingPreferredStock.TheRightsAgreementexpiredonitsscheduledexpirationdateofSeptember25,2015,andallsharesofpreferred
stockpreviouslydesignatedasSeriesAJuniorParticipatingPreferredStockwereeliminatedandreturnedtothestatusofauthorizedbutunissuedsharesof
preferredstock,withoutdesignationonSeptember28,2015.AtSeptember25,2016andSeptember27,2015,nosharesofpreferredstockwereoutstanding.

Stock
Repurchase
Program.
OnMarch9,2015,theCompanyannouncedastockrepurchaseprogramauthorizingittorepurchaseupto$15billionofthe
Companyscommonstock.Thestockrepurchaseprogramhasnoexpirationdate.Duringfiscal2015,theCompanyenteredintotwoacceleratedsharerepurchase
agreements(ASRAgreements)withtwofinancialinstitutionsunderwhichtheCompanypaidanaggregateof$5.0billiontothefinancialinstitutionsandreceived
fromthematotalof78,276,000sharesoftheCompanyscommonstockbasedontheaveragedailyvolumeweighted-averagestockpriceoftheCompanys
commonstockduringtherespectivetermsoftheASRAgreements,lessadiscount.Theshareswereretiredandrecordedasareductiontostockholdersequity.

Duringfiscal2016,2015and2014,theCompanyrepurchasedandretiredanadditional73,782,000,94,159,000and60,253,000sharesofcommonstock,
respectively,for$3.9billion,$6.2billionand$4.5billion,respectively,beforecommissions.Toreflectsharerepurchasesintheconsolidatedbalancesheet,the
Company(i)reducescommonstockfortheparvalueoftheshares,(ii)reducespaid-incapitalfortheamountinexcessofpartozeroduringthequarterinwhich
thesharesarerepurchasedand(iii)recordstheresidualamounttoretainedearnings.AtSeptember25,2016,$3.0billionremainedauthorizedforrepurchase
undertheCompanysstockrepurchaseprogram.SinceSeptember25,2016,theCompanyrepurchasedandretired1,865,000sharesofcommonstockfor$124
million.

F-21

Exhibit 21
Page 232
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2182 Page 168 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dividends.
OnOctober6,2016,theCompanyannouncedacashdividendof$0.53pershareontheCompanyscommonstock,payableonDecember16,
2016tostockholdersofrecordasofthecloseofbusinessonNovember30,2016.Dividendschargedtoretainedearningsinfiscal2016,2015and2014wereas
follows(inmillions,exceptpersharedata):

2016 2015 2014


Per Share Total Per Share Total Per Share Total
Firstquarter $ 0.48 $ 730 $ 0.42 $ 710 $ 0.35 $ 599
Secondquarter 0.48 726 0.42 702 0.35 599
Thirdquarter 0.53 794 0.48 771 0.42 718
Fourthquarter 0.53 796 0.48 749 0.42 713
$ 2.02 $ 3,046 $ 1.80 $ 2,932 $ 1.54 $ 2,629

Note 5. Employee Benefit Plans

Employee
Savings
and
Retirement
Plan.
TheCompanyhasa401(k)planthatallowseligibleemployeestocontributeupto85%oftheireligible
compensation,subjecttoannuallimits.TheCompanymatchesaportionoftheemployeecontributionsandmay,atitsdiscretion,makeadditionalcontributions
baseduponearnings.TheCompanyscontributionexpensewas$74million,$81millionand$77millioninfiscal2016,2015and2014,respectively.

Equity
Compensation
Plans.
OnMarch8,2016,theCompanysstockholdersapprovedtheQualcommIncorporated2016Long-TermIncentivePlan(the
2016Plan),whichreplacedtheQualcommIncorporated2006Long-TermIncentivePlan(thePriorPlan).Effectiveonandafterthatdate,nonewawardswillbe
grantedunderthePriorPlan,althoughalloutstandingawardsunderthePriorPlanwillremainoutstandingaccordingtotheirtermsandthetermsofthePriorPlan.
The2016Planprovidesforthegrantofincentiveandnonstatutorystockoptions,stockappreciationrights,restrictedstock,unrestrictedstock,restrictedstock
units,performanceunits,performanceshares,deferredcompensationawardsandotherstock-basedawards.Thesharereserveunderthe2016Planisequalto
90,000,000shares,plusapproximately20,120,000sharesthatwereavailableforfuturegrantunderthePriorPlanonMarch8,2016,foratotalofapproximately
110,120,000sharesavailableforgrantunderthe2016Planonthatdate.Thissharereserveisautomaticallyincreasedasprovidedinthe2016Planbythenumber
ofsharessubjecttostockoptionsgrantedunderthePriorPlanandoutstandingasofMarch8,2016,whichafterthatdateexpireorforanyreasonareforfeited,
canceledorterminated,andbytwotimesthenumberofsharessubjecttoanyawardsotherthanstockoptionsgrantedunderthePriorPlanandoutstandingasof
March8,2016,whichafterthatdateexpire,areforfeited,canceledorterminated,failtovest,arenotearnedduetoanyperformancegoalthatisnotmet,are
otherwisereacquiredwithouthavingbecomevested,orarepaidincash,exchangedbyaparticipantorwithheldbytheCompanytosatisfyanytaxwithholdingor
taxpaymentobligationsrelatedtosuchaward.TheBoardofDirectorsoftheCompanymayamendorterminatethe2016Planatanytime.Certainamendments,
includinganincreaseinthesharereserve,requirestockholderapproval.Thesharereserveremainingunderthe2016Planwasapproximately114,041,000at
September25,2016.

RSUsareshareawardsthatentitletheholdertoreceivesharesoftheCompanyscommonstockuponvesting.TheRSUsgenerallyincludedividend-
equivalentrightsandvestoverperiodsofthreeyearsfromthedateofgrant.AsummaryofRSUtransactionsforallequitycompensationplansfollows:

Weighted-Average
Grant Date Fair Aggregate Intrinsic
Number of Shares Value Value
(In thousands) (In billions)
RSUsoutstandingatSeptember27,2015 27,747 $ 69.35
RSUsgranted 14,782 53.56
RSUscanceled/forfeited (4,017) 65.37
RSUsvested (12,434) 68.48
RSUsoutstandingatSeptember25,2016 26,078 $ 61.42 $ 1.6

AtSeptember25,2016,totalunrecognizedcompensationexpenserelatedtonon-vestedRSUsgrantedpriortothatdatewas$1.0billion,whichisexpectedto
berecognizedoveraweighted-averageperiodof1.7years.Thetotalvest-datefair

F-22

Exhibit 21
Page 233
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2183 Page 169 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

valueofRSUsthatvestedduringfiscal2016,2015and2014was$685million,$1.0billionand$1.1billion,respectively.Thetotalshareswithheldtosatisfy
statutorytaxwithholdingrequirementsrelatedtoallshare-basedawardswereapproximately4,300,000,5,043,000and5,568,000infiscal2016,2015and2014,
respectively,andwerebasedonthevalueoftheawardsontheirvestingdatesasdeterminedbytheCompanysclosingstockprice.Totalpaymentsforthe
employeestaxobligationstothetaxingauthoritieswere$224million,$351millionand$417millioninfiscal2016,2015and2014,respectively,andwere
includedasareductiontonetcashprovidedbyoperatingactivitiesintheconsolidatedstatementsofcashflows.

TheBoardofDirectorsmaygrantstockoptionstoemployees,directorsandconsultantstotheCompanytopurchasesharesoftheCompanyscommonstock
atanexercisepricenotlessthanthefairmarketvalueofthestockatthedateofgrant.Stockoptionsvestoverperiodsnotexceedingfiveyearsandareexercisable
foruptotenyearsfromthegrantdate.Asummaryofstockoptiontransactionsforallequitycompensationplansfollows:

Weighted- Average
Exercise Average Remaining Aggregate Intrinsic
Number of Shares Price Contractual Term Value
(In thousands) (Years) (In millions)
StockoptionsoutstandingatSeptember27,2015 29,377 $ 41.40
Stockoptionscanceled/forfeited/expired (690) 51.47
Stockoptionsexercised (10,708) 41.49
StockoptionsoutstandingatSeptember25,2016 17,979 $ 40.96 2.0 $ 392
ExercisableatSeptember25,2016 17,940 $ 41.05 2.0 $ 389

Thetotalintrinsicvalueofstockoptionsexercisedduringfiscal2016,2015and2014was$147million,$371millionand$971million,respectively,andthe
amountofcashreceivedfromtheexerciseofstockoptionswas$436million,$519millionand$1.2billion,respectively.Uponoptionexercise,theCompany
issuesnewsharesofstock.

Thetotaltaxbenefitsrealized,includingtheexcesstaxbenefits,relatedtoshare-basedawardsduringfiscal2016,2015and2014was$253million,$437
millionand$690million,respectively.

Employee
Stock
Purchase
Plan.
TheCompanyhasanemployeestockpurchaseplanforeligibleemployeestopurchasesharesofcommonstockat85%of
thelowerofthefairmarketvalueonthefirstorthelastdayofeachofferingperiod,whichisgenerallysixmonths.EmployeesmayauthorizetheCompanyto
withholdupto15%oftheircompensationduringanyofferingperiod,subjecttocertainlimitations.Theemployeestockpurchaseplanincludesanon-423(b)plan.
Thesharesauthorizedundertheemployeestockpurchaseplanwereapproximately71,709,000atSeptember25,2016.Thesharesreservedforfutureissuance
wereapproximately20,395,000atSeptember25,2016.Duringfiscal2016,2015and2014,approximately5,966,000,4,977,000and4,376,000shares,
respectively,wereissuedundertheplanatanaveragepriceof$38.89,$53.92and$58.81pershare,respectively.AtSeptember25,2016,totalunrecognized
compensationexpenserelatedtonon-vestedpurchaserightsgrantedpriortothatdatewas$22million.TheCompanyrecordedcashreceivedfromtheexerciseof
purchaserightsof$232million,$268millionand$257millionduringfiscal2016,2015and2014,respectively.

Note 6. Debt

Revolving
Credit
Facility.
TheCompanyhasaRevolvingCreditFacilitythatprovidesforunsecuredrevolvingfacilityloans,swinglineloansandlettersof
creditinanaggregateamountofupto$4.0billion,expiringinFebruary2020.ProceedsfromtheRevolvingCreditFacilitywillbeusedforgeneralcorporate
purposes.LoansundertheRevolvingCreditFacilitybearinterest,attheoptionoftheCompany,ateitherLIBOR(determinedinaccordancewiththeRevolving
CreditFacility)plusamarginof0.7%perannumortheBaseRate(determinedinaccordancewiththeRevolvingCreditFacility),plusaninitialmarginof0%per
annum.TheRevolvingCreditFacilityhasafacilityfee,whichaccruesatarateof0.05%perannum.TheRevolvingCreditFacilityrequiresthattheCompany
complywithcertaincovenants,includingonefinancialcovenanttomaintainaratioofconsolidatedearningsbeforeinterest,taxes,depreciationandamortizationto
consolidatedinterestexpense,asdefinedintheRevolvingCreditFacility,ofnotlessthanthreetooneattheendofeachfiscalquarter.AtSeptember25,2016and
September27,2015,theCompanywasincompliancewiththecovenants,andtheCompanyhadnotborrowedanyfundsundertheRevolvingCreditFacility.

F-23

Exhibit 21
Page 234
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2184 Page 170 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commercial
Paper
Program.
TheCompanyhasanunsecuredcommercialpaperprogram,whichprovidesfortheissuanceofupto$4.0billionofcommercial
paper.Netproceedsfromthisprogramareusedforgeneralcorporatepurposes.Maturitiesofcommercialpapercanrangefrom1daytoupto397days.At
September25,2016andSeptember27,2015,theCompanyhad$1.7billionand$1.0billion,respectively,ofoutstandingcommercialpaperrecordedasshort-
termdebtwithaweighted-averageinterestrateof0.52%and0.19%,respectively,whichincludedfeespaidtothecommercialpaperdealers,andweighted-
averageremainingdaystomaturityof36daysand38days,respectively.Thecarryingvalueoftheoutstandingcommercialpaperapproximateditsestimatedfair
valueatSeptember25,2016andSeptember27,2015.

Long-term
Debt.
InMay2015,theCompanyissuedanaggregateprincipalamountof$10.0billionofunsecuredfloating-andfixed-ratenotes(thenotes)
withvaryingmaturities.Theproceedsfromthenotesof$9.9billion,netofunderwritingdiscountsandofferingexpenses,wereusedtofundtheASRAgreements
(Note4)andalsoforothergeneralcorporatepurposes.ThefollowingtableprovidesasummaryoftheCompanyslong-termdebt(inmillionsexceptpercentages):

September 25, 2016 September 27, 2015

Amount Effective Rate Amount Effective Rate


Floating-ratenotesdueMay18,2018 $ 250 1.14% $ 250 0.66%
Floating-ratenotesdueMay20,2020 250 1.42% 250 0.94%
Fixed-rate1.40%notesdueMay18,2018 1,250 0.93% 1,250 0.43%
Fixed-rate2.25%notesdueMay20,2020 1,750 1.69% 1,750 1.62%
Fixed-rate3.00%notesdueMay20,2022 2,000 2.04% 2,000 2.08%
Fixed-rate3.45%notesdueMay20,2025 2,000 3.46% 2,000 3.46%
Fixed-rate4.65%notesdueMay20,2035 1,000 4.74% 1,000 4.74%
Fixed-rate4.80%notesdueMay20,2045 1,500 4.71% 1,500 4.71%
Totalprincipal 10,000 10,000
Unamortizeddiscount,includingdebtissuancecosts (57) (63)
Hedgeaccountingfairvalueadjustments 65 32
Totallong-termdebt $ 10,008 $ 9,969

Theinterestrateonthefloatingratenotesduein2018and2020foraparticularinterestperiodwillbeaperannumrateequaltothree-monthLIBORas
determinedontheinterestdeterminationdateplus0.27%and0.55%,respectively.Interestispayableinarrearsquarterlyforthefloating-ratenotesandsemi-
annuallyforthefixed-ratenotes.TheCompanymayredeemthefixed-ratenotesatanytimeinwhole,orfromtimetotimeinpart,atspecifiedmake-whole
premiumsasdefinedintheapplicableformofnote.TheCompanymaynotredeemthefloating-ratenotespriortomaturity.TheCompanyisnotsubjecttoany
financialcovenantsunderthenotesnoranycovenantsthatwouldprohibittheCompanyfromincurringadditionalindebtednessrankingequaltothenotes,paying
dividends,issuingsecuritiesorrepurchasingsecuritiesissuedbyitoritssubsidiaries.AtSeptember25,2016andSeptember27,2015,theaggregatefairvalueof
thenotes,basedonLevel2inputs,wasapproximately$10.6billionand$9.6billion,respectively.

Inthethirdquarteroffiscal2015,theCompanyenteredintointerestrateswapswithanaggregatenotionalamountof$3.0billion,whicheffectively
convertedallofthefixed-ratenotesduein2018andapproximately43%and50%ofthefixed-ratenotesduein2020and2022,respectively,intofloating-rate
notes(Note1).Thenetgainsandlossesontheinterestrateswaps,aswellastheoffsettinggainsorlossesontherelatedfixed-ratenotesattributabletothehedged
risks,arerecognizedinearningsasinterestexpenseinthecurrentperiod.Theeffectiveinterestratesforthenotesincludetheinterestonthenotes,amortizationof
thediscount,whichincludesdebtissuancecostsand,ifapplicable,adjustmentsrelatedtohedging.

NoprincipalpaymentsaredueontheCompanysnotespriortofiscal2018.AtSeptember25,2016,futureprincipalpaymentswere$1.5billioninfiscal
2018,$2.0billioninfiscal2020and$6.5billionafterfiscal2021;noprincipalpaymentsaredueinfiscal2019and2021.Cashinterestpaidrelatedtothe
Companyscommercialpaperprogramandlong-termdebt,netofcashreceivedfromtherelatedinterestrateswaps,was$282millionand$8millionduringfiscal
2016and2015,respectively.

Note 7. Commitments and Contingencies

F-24

Exhibit 21
Page 235
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2185 Page 171 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal
Proceedings.
ParkerVision,
Inc.
v.
QUALCOMM
Incorporated
:OnMay1,2014,ParkerVisionfiledacomplaintagainsttheCompanyintheUnited
StatesDistrictCourtfortheMiddleDistrictofFloridaallegingthatcertainoftheCompanysproductsinfringecertainParkerVisionpatents.OnAugust21,2014,
ParkerVisionamendedthecomplaint,nowcaptionedParkerVision,Inc.v.QUALCOMMIncorporated,QualcommAtheros,Inc.,HTCCorporation,HTC
America,Inc.,SamsungElectronicsCo.,LTD.,SamsungElectronicsAmerica,Inc.andSamsungTelecommunicationsAmerica,LLC,broadeningtheallegations.
ParkerVisionallegedthattheCompanyinfringes11ParkerVisionpatentsandseeksdamagesandinjunctiveandotherrelief.OnSeptember25,2015,ParkerVision
filedamotionwiththecourttoseversomeclaimsagainsttheCompanyandallotherdefendantsintoaseparatelawsuit.Inaddition,onDecember3,2015,
ParkerVisiondismissedsixpatentsfromthelawsuitandgrantedtheCompanyandallotherdefendantsacovenantnottoassertthosepatentsagainstanyexisting
products.OnFebruary2,2016,afteragreementamongtheparties,theDistrictCourtstayedtheremainderofthecasependingtheresolutionofthecomplaintfiled
byParkerVisionagainsttheCompanyandotherpartieswiththeUnitedStatesInternationalTradeCommission(ITC)describedbelow.

OnDecember14,2015,ParkerVisionfiledanothercomplaintagainsttheCompanyintheUnitedStatesDistrictCourtfortheMiddleDistrictofFlorida
allegingpatentinfringement.AppleInc.,SamsungElectronicsCo.,LTD.,SamsungElectronicsAmerica,Inc.,SamsungTelecommunicationsAmerica,LLC,
SamsungSemiconductor,Inc.,LGElectronics,Inc.,LGElectronicsU.S.A.,Inc.andLGElectronicsMobileCommU.S.A.,Inc.arealsonameddefendants.The
complaintassertsthatcertainoftheCompanysproductsinfringefouradditionalParkerVisionpatentsandseeksdamagesandotherrelief.OnDecember15,2015,
ParkerVisionfiledacomplaintwiththeITCpursuanttoSection337oftheTariffActof1930againstthesamepartiesassertingthesamefourpatents.The
complaintseeksanexclusionorderbarringtheimportationofproductsthatuseeitheroftwoCompanytransceiversoroneSamsungtransceiverandaceaseand
desistorderpreventingtheCompanyandtheotherdefendantsfromcarryingoutcommercialactivitieswithintheUnitedStatesrelatedtosuchproducts.On
January13,2016,theCompanyserveditsanswertotheDistrictCourtcomplaint.OnJanuary15,2016,theITCinstitutedaninvestigation.TheITChearingis
scheduledtobeginonMarch13,2017.TheITCstargetdateforcompletionoftheinvestigationisOctober23,2017.TheDistrictCourtcasewasstayedon
February12,2016pendingcompletionoftheITCinvestigation.TheCompanybelievesParkerVisionsclaimsintheabovemattersarewithoutmerit.

Blackberry
Limited
(Blackberry)
Arbitration:
OnApril20,2016,theCompanyandBlackberryenteredintoanagreementtoarbitrateBlackberrysallegation
thatitoverpaidroyaltiesoncertainpastsalesofsubscriberunitsbasedontheallegedeffectofspecificprovisionsinitslicenseagreement.Thearbitration,whichis
scheduledtobeginonFebruary27,2017,isbeingconductedundertherulesoftheJudicialArbitrationandMediationServicesinSanDiego,California.
Blackberryseeksthereturnoftheallegedoverpayment.TheCompanybelievesBlackberrysclaimsarewithoutmerit.

3226701
Canada,
Inc.
v.
Qualcomm
Incorporated
et
al:
OnNovember30,2015,plaintiffsfiledasecuritiesclassactioncomplaintagainsttheCompanyand
certainofitscurrentandformerofficersintheUnitedStatesDistrictCourtfortheSouthernDistrictofCalifornia.OnApril29,2016,plaintiffsfiledanamended
complaintallegingthattheCompanyandcertainofitscurrentandformerofficersviolatedSections10(b)and20(a)oftheSecuritiesExchangeActof1934,as
amended,bymakingfalseandmisleadingstatementsregardingtheCompanysbusinessoutlookandproductdevelopmentbetweenApril7,2014andJuly22,
2015.Theamendedcomplaintseeksunspecifieddamages,interest,attorneysfeesandothercosts.OnJune28,2016,theCompanyfiledaMotiontoDismiss.The
Companybelievestheplaintiffsclaimsarewithoutmerit.

QUALCOMM
Incorporated
v.
Meizu
Technology
Co.,
Ltd.
et
al
:OnJune23,2016andJune29,2016,theCompanyfiledaseriesofactionsagainstMeizu
TechnologyCo.,Ltd.,akaZhuhaiMeizuTechnologyCo.,Ltd.(Meizu)andcertainofitsdistributorsintheIntellectualPropertyCourtsinBeijingandShanghai
(China).Thefirstcomplaint,filedinBeijingonJune23,2016,requestsrulingsthatthetermsofapatentlicenseofferedbytheCompanytoMeizucomplywith
ChinasAnti-MonopolyLawandtheCompanysapplicablefair,reasonableandnon-discriminatorylicensingcommitment.Thecomplaintalsoseeksarulingthat
theofferedpatentlicensetermsshouldformthebasisforapatentlicensewithMeizufortheCompanysfundamentalmobiledevicetechnologiespatentedin
China,includingthoserelatingto3G(WCDMAandCDMA2000)and4G(LTE)wirelesscommunicationsstandards,andseeksdamagesforMeizuspastuseof
theCompanyspatentedinventions.OnJune29,2016,theCompanyfiledpatentinfringementcomplaintsintheIntellectualPropertyCourtsinBeijingand
Shanghaialleginginfringementof17patentsbyMeizu.Thepatentinfringementactionsconcernabroadrangeoffeaturesandtechnologiesusedinsmartphones,
includingfeaturesrelatingto3G(WCDMAandCDMA2000)and4G(LTE)wirelesscommunicationsstandards,andseektoenjoinMeizufrommanufacturing,
sellingandofferingforsalemobiledevicesthatinfringetheassertedpatents.Thecourtsarecurrentlyconsideringvariousjurisdictionalchallengesraisedby
Meizu.Nofinalscheduleshavebeensetbythecourts.MeizuhasalsofiledactionsbeforeChinasPatentReexaminationBoardchallengingthevalidityofeachof
theassertedpatents.Theseactionsareproceedinginparallelwiththelitigation.

F-25

Exhibit 21
Page 236
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2186 Page 172 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OnOctober14,2016,theCompanyfiledpatentinfringementcomplaintsagainstMeizuintheUnitedStatesITCandtheMannheimRegionalCourtin
Germany.TheITCcomplaintseeksanexclusionorderenjoiningMeizuandcertainofitsdistributorsfromtheimportation,saleforimportationandsaleafter
importationofMeizumobiledevicesthatinfringecertainoftheCompanyspatentsrelatedtosemiconductor,radiofrequencyanddigitalcameratechnologies.The
GermancomplaintseeksdamagesandtoenjoinMeizufromoffering,puttingintocirculation,using,possessingorimportingintoGermanymobiledevicesthat
infringeoneoftheCompanyspatentsrelatedtowirelessmessagingtechnology.Onthesameday,theCompanyalsoinitiatedaseizureactioninFrancepursuant
toordersfromtheParisDistrictCourttoobtainevidenceforapossiblefutureinfringementactioninthatcountry.

Japan
Fair
Trade
Commission
(JFTC)
Complaint
:TheJFTCreceivedunspecifiedcomplaintsallegingthattheCompanysbusinesspracticesare,insome
way,aviolationofJapaneselaw.OnSeptember29,2009,theJFTCissuedaceaseanddesistorderconcludingthattheCompanysJapaneselicenseeswereforced
tocross-licensepatentstotheCompanyonaroyalty-freebasisandwereforcedtoacceptaprovisionunderwhichtheyagreednottoasserttheiressentialpatents
againsttheCompanysotherlicenseeswhomadeasimilarcommitmentintheirlicenseagreementswiththeCompany.Theceaseanddesistorderseekstorequire
theCompanytomodifyitsexistinglicenseagreementswithJapanesecompaniestoeliminatetheseprovisionswhilepreservingthelicenseoftheCompanys
patentstothosecompanies.TheCompanydisagreeswiththeconclusionsthatitforceditsJapaneselicenseestoagreetoanyprovisioninthepartiesagreements
andthatthoseprovisionsviolatetheJapaneseAntimonopolyAct.TheCompanyhasinvokeditsrightunderJapaneselawtoanadministrativehearingbeforethe
JFTC.InFebruary2010,theTokyoHighCourtgrantedtheCompanysmotionandissuedastayoftheceaseanddesistorderpendingtheadministrativehearing
beforetheJFTC.TheJFTChasheldhearingson33differentdates,withthenexthearingscheduledforJanuary17,2017.

Korea
Fair
Trade
Commission
(KFTC)
Complaint
:OnJanuary4,2010,theKFTCissuedawrittendecisionfindingthattheCompanyhadviolatedKorean
lawbyofferingcertaindiscountsandrebatesforpurchasesofitsCDMAchipsetsandforincludingincertainagreementslanguagerequiringthecontinued
paymentofroyaltiesafteralllicensedpatentshaveexpired.TheKFTCleviedafine,whichtheCompanypaidandrecordedasanexpenseinfiscal2010.The
CompanyappealedtotheSeoulHighCourt,andonJune19,2013,theSeoulHighCourtaffirmedtheKFTCsdecision.OnJuly4,2013,theCompanyfiledan
appealwiththeKoreaSupremeCourt.Therehavebeennomaterialdevelopmentssincethenwithrespecttothismatter.

Korea
Fair
Trade
Commission
(KFTC)
Investigation
:OnMarch17,2015,theKFTCnotifiedtheCompanythatitisconductinganinvestigationofthe
CompanyrelatingtotheKoreanMonopolyRegulationandFairTradeAct(MRFTA).OnNovember13,2015,theCompanyreceivedacaseExaminersReport
(ER)preparedbytheKFTCsinvestigativestaff.TheERalleges,amongotherthings,thattheCompanyisinviolationofKoreancompetitionlawbylicensingits
patentsexhaustivelyonlytodevicemanufacturersandrequiringthatitschipsetcustomersbelicensedtotheCompanysintellectualproperty.TheERalsoalleges
thattheCompanyobtainscertainterms,includingroyaltyterms,thatareunfairorunreasonableinitslicenseagreementsthroughnegotiationsthatdonotconform
toKoreancompetitionlaw.TheERproposesremediesincludingmodificationstocertainbusinesspracticesandmonetarypenalties.OnMay27,2016,the
CompanysubmittedawrittenresponsetotheER.TheKFTCisholdinghearings,whichcommencedonJuly20,2016.Itremainsdifficulttopredicttheoutcome
ofthismatter.TheCompanybelievesthatitsbusinesspracticesdonotviolatetheMRFTA.TheCompanycontinuestocooperatewiththeKFTCasitconductsits
investigation.

Icera
Complaint
to
the
European
Commission
(Commission)
:OnJune7,2010,theCommissionnotifiedandprovidedtheCompanywitharedactedcopyofa
complaintfiledwiththeCommissionbyIcera,Inc.(subsequentlyacquiredbyNvidiaCorporation)allegingthattheCompanyhasengagedinanticompetitive
activity.TheCompanywasaskedbytheCommissiontosubmitapreliminaryresponsetotheportionsofthecomplaintdisclosedtoit,andtheCompanysubmitted
itsresponseinJuly2010.Subsequently,theCompanyprovidedadditionaldocumentsandinformationasrequestedbytheCommission.OnJuly16,2015,the
Commissionannouncedthatithadinitiatedformalproceedingsinthismatter.OnDecember8,2015,theCommissionannouncedthatithadissuedaStatementof
Objectionsexpressingitspreliminaryviewthatbetween2009and2011,theCompanyengagedinpredatorypricingbysellingcertainbasebandchipsetstotwo
customersatpricesbelowcost,withtheintentionofhinderingcompetition.AStatementofObjectionsinformsthesubjectoftheinvestigationoftheallegations
againstitandprovidesanopportunitytorespondtosuchallegations.Itisnotadeterminationofthefinaloutcomeoftheinvestigation.OnAugust15,2016,the
CompanysubmitteditsresponsetotheStatementofObjections.Ifaviolationisfound,abroadrangeofremediesispotentiallyavailabletotheCommission,
includingimposingafineand/orinjunctivereliefprohibitingorrestrictingcertainbusinesspractices.Itisdifficulttopredicttheoutcomeofthismatterorwhat
remedies,ifany,maybeimposedbytheCommission.TheCompanybelievesthatitsbusinesspracticesdonotviolatetheEUcompetitionrules.

F-26

Exhibit 21
Page 237
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2187 Page 173 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

European
Commission
(Commission)
Investigation
:OnOctober15,2014,theCommissionnotifiedtheCompanythatitisconductinganinvestigationofthe
CompanyrelatingtoArticles101and/or102oftheTreatyontheFunctioningoftheEuropeanUnion(TFEU).OnJuly16,2015,theCommissionannouncedthatit
hadinitiatedformalproceedingsinthismatter.OnDecember8,2015,theCommissionannouncedthatithadissuedaStatementofObjectionsexpressingits
preliminaryviewthatsince2011theCompanyhaspaidsignificantamountstoacustomeronconditionthatitexclusivelyusetheCompanysbasebandchipsetsin
itssmartphonesandtablets.ThisconducthasallegedlyreducedthecustomersincentivestosourcechipsetsfromtheCompanyscompetitorsandharmed
competitionandinnovationforcertainbasebandchipsets.AStatementofObjectionsinformsthesubjectoftheinvestigationoftheallegationsagainstitand
providesanopportunitytorespondtosuchallegations.Itisnotadeterminationofthefinaloutcomeoftheinvestigation.OnJune27,2016,theCompany
submitteditsresponsetotheStatementofObjections.Ifaviolationisfound,abroadrangeofremediesispotentiallyavailabletotheCommission,including
imposingafineand/orinjunctivereliefprohibitingorrestrictingcertainbusinesspractices.Itisdifficulttopredicttheoutcomeofthismatterorwhatremedies,if
any,maybeimposedbytheCommission.TheCompanybelievesthatitsbusinesspracticesdonotviolatetheEUcompetitionrules.

Federal
Trade
Commission
(FTC)
Investigation
:OnSeptember17,2014,theFTCnotifiedtheCompanythatitisconductinganinvestigationofthe
CompanyrelatingtoSection5oftheFederalTradeCommissionAct(FTCA).TheFTChasnotifiedtheCompanythatitisinvestigatingconductunderthe
antitrustandunfaircompetitionlawsrelatedtostandardessentialpatentsandpricingandcontractingpracticeswithrespecttobasebandprocessorsandrelated
products.Ifaviolationisfound,abroadrangeofremediesispotentiallyavailabletotheFTC,includingimposingafineorrequiringmodificationstothe
Companysbusinesspractices.Atthisstageoftheinvestigation,itisdifficulttopredicttheoutcomeofthismatterorwhatremedies,ifany,maybeimposedbythe
FTC.TheCompanybelievesthatitsbusinesspracticesdonotviolatetheantitrustorunfaircompetitionlaws.TheCompanycontinuestocooperatewiththeFTC
asitconductsitsinvestigation.

Taiwan
Fair
Trade
Commission
(TFTC)
Investigation
:OnDecember4,2015,theTFTCnotifiedtheCompanythatitisconductinganinvestigationinto
whethertheCompanyspatentlicensingarrangementsviolatetheTaiwanFairTradeAct(TFTA).OnApril27,2016,theTFTCspecifiedthattheallegationsunder
investigationincludewhether:(i)theCompanyjointlylicenseditspatentsratherthanseparatelylicensingstandard-essentialpatentsandnon-standard-essential
patents;(ii)theCompanysroyaltychargesareunreasonable;(iii)theCompanyunreasonablyrequiredlicenseestograntitcross-licenses;(iv)theCompanyfailed
toprovidelistsoflicensedpatentstolicensees;(v)theCompanyviolatedaFRANDlicensingcommitmentbydecliningtograntlicensestochipsetmakers;(vi)the
Companydeclinedtosellchipsetstounlicensedpotentialcustomers;and(vii)theCompanyprovidedroyaltyrebatestocertaincompaniesinexchangefortheir
exclusiveuseoftheCompanyschipsets.Ifaviolationisfound,abroadrangeofremediesispotentiallyavailabletotheTFTC,includingimposingafineor
requiringmodificationstotheCompanysbusinesspractices.Atthisstageoftheinvestigation,itisdifficulttopredicttheoutcomeofthismatterorwhatremedies,
ifany,maybeimposedbytheTFTC.TheCompanybelievesthatitsbusinesspracticesdonotviolatetheTFTA.TheCompanycontinuestocooperatewiththe
TFTCasitconductsitsinvestigation.

TheCompanywillcontinuetovigorouslydefenditselfintheforegoingmatters.However,litigationandinvestigationsareinherentlyuncertain.Accordingly,
theCompanycannotpredicttheoutcomeofthesematters.TheCompanyhasnotrecordedanyaccrualatSeptember25,2016forcontingentlossesassociatedwith
thesemattersbasedonitsbeliefthatlosses,whilepossible,arenotprobable.Further,anypossiblerangeoflosscannotbereasonablyestimatedatthistime.The
unfavorableresolutionofoneormoreofthesematterscouldhaveamaterialadverseeffectontheCompanysbusiness,resultsofoperations,financialconditionor
cashflows.TheCompanyisengagedinnumerousotherlegalactionsnotdescribedabovearisingintheordinarycourseofitsbusinessand,whiletherecanbeno
assurance,believesthattheultimateoutcomeoftheseotherlegalactionswillnothaveamaterialadverseeffectonitsbusiness,resultsofoperations,financial
conditionorcashflows.

Indemnifications
.TheCompanygenerallydoesnotindemnifyitscustomersandlicenseesforlossessustainedfrominfringementofthird-partyintellectual
propertyrights.However,theCompanyiscontingentlyliableundercertainproductsales,services,licenseandotheragreementstoindemnifycertaincustomers
againstcertaintypesofliabilityand/ordamagesarisingfromqualifyingclaimsofpatent,copyright,trademarkortradesecretinfringementbyproductsorservices
soldorprovidedbytheCompany.TheCompanysobligationsundertheseagreementsmaybelimitedintermsoftimeand/oramount,andinsomeinstances,the
CompanymayhaverecourseagainstthirdpartiesforcertainpaymentsmadebytheCompany.

ThroughSeptember25,2016,theCompanyhasreceivedanumberofclaimsfromitsdirectandindirectcustomersandotherthirdpartiesforindemnification
undersuchagreementswithrespecttoallegedinfringementofthird-partyintellectualpropertyrightsbyitsproducts.Theseindemnificationarrangementsarenot
initiallymeasuredandrecognizedatfairvalue

F-27

Exhibit 21
Page 238
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2188 Page 174 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

becausetheyaredeemedtobesimilartoproductwarrantiesinthattheyrelatetoclaimsand/orotheractionsthatcouldimpairtheabilityoftheCompanysdirect
orindirectcustomerstousetheCompanysproductsorservices.Accordingly,theCompanyrecordsliabilitiesresultingfromthearrangementswhentheyare
probableandcanbereasonablyestimated.ReimbursementsunderindemnificationarrangementshavenotbeenmaterialtotheCompanysconsolidatedfinancial
statements.TheCompanyhasnotrecordedanyaccrualforcontingentliabilitiesatSeptember25,2016associatedwiththeseindemnificationarrangements,other
thannominalamounts,basedontheCompanysbeliefthatadditionalliabilities,whilepossible,arenotprobable.Further,anypossiblerangeoflosscannotbe
reasonablyestimatedatthistime.

Purchase
Obligations
.TheCompanyhasagreementswithsuppliersandotherpartiestopurchaseinventory,othergoodsandservicesandlong-livedassets.
ObligationsundertheseagreementsatSeptember25,2016foreachofthesubsequentfiveyearsfromfiscal2017through2021were$4.2billion,$886million,
$749million,$223millionand$37million,respectively,and$5millionthereafter.Oftheseamounts,foreachofthesubsequentfouryearsfromfiscal2017
through2020,commitmentstopurchaseintegratedcircuitproductinventoriescomprised$3.4billion,$766million,$673million,and$158million,
respectively,andtherewerenopurchasecommitmentsthereafter.Integratedcircuitproductinventoryobligationsrepresentpurchasecommitmentsfor
semiconductordie,finishedgoodsandmanufacturingservices,suchaswaferbump,probe,assemblyandfinaltest.UndertheCompanysmanufacturing
relationshipswithitsfoundrysuppliersandassemblyandtestserviceproviders,cancelationofoutstandingpurchasecommitmentsisgenerallyallowedbut
requirespaymentofcostsincurredthroughthedateofcancelation,andinsomecases,incrementalfeesrelatedtocapacityunderutilization.

Operating
Leases
.TheCompanyleasescertainofitsland,facilitiesandequipmentundernoncancelableoperatingleases,withtermsrangingfromlessthan
oneyearto21yearsandwithprovisionsincertainleasesforcost-of-livingincreases.Rentalexpenseforfiscal2016,2015and2014was$116million,$99
millionand$91million,respectively.FutureminimumleasepaymentsatSeptember25,2016foreachofthesubsequentfiveyearsfromfiscal2017through2021
were$94million,$74million,$58million,$43millionand$33million,respectively,and$36millionthereafter.

Note 8. Segment Information

TheCompanyisorganizedonthebasisofproductsandservices.TheCompanyconductsbusinessprimarilythroughtworeportablesegments,QCT
(QualcommCDMATechnologies)andQTL(QualcommTechnologyLicensing),anditsQSI(QualcommStrategicInitiatives)reportablesegmentmakesstrategic
investmentsandincludesrevenuesandrelatedcostsassociatedwithdevelopmentcontractswithanequitymethodinvestee.QCTdevelopsandsuppliesintegrated
circuitsandsystemsoftwareforuseinmobiledevices,wirelessnetworks,broadbandgatewayequipmentandconsumerelectronicdevices.QTLgrantslicensesto
useportionsofitsintellectualpropertyportfolio,whichincludescertainpatentrightsessentialtoand/orusefulinthemanufactureandsaleofcertainwireless
products.TheCompanyalsohasnonreportablesegments,includingitsmobilehealth,datacenter,smallcellandotherwirelesstechnologyandserviceinitiatives.

TheCompanyevaluatestheperformanceofitssegmentsbasedonearnings(loss)beforeincometaxes(EBT)fromcontinuingoperations.SegmentEBT
includestheallocationofcertaincorporateexpensestothesegments,includingdepreciationandamortizationexpenserelatedtounallocatedcorporateassets.
CertainincomeandchargesarenotallocatedtosegmentsintheCompanysmanagementreportsbecausetheyarenotconsideredinevaluatingthesegments
operatingperformance.Unallocatedincomeandchargesincludecertaininterestexpense;certainnetinvestmentincome;certainshare-basedcompensation;and
certainresearchanddevelopmentexpenses,selling,generalandadministrativeexpensesandotherexpensesorincomethatweredeemedtobenotdirectlyrelated
tothebusinessesofthesegments.Additionally,unallocatedchargesincluderecognitionofthestep-upofinventoriestofairvalue,amortizationandimpairmentof
certainintangibleassetsandcertainotheracquisition-relatedcharges,andbeginninginthefirstquarteroffiscal2015,third-partyacquisitionandintegration
servicescostsandcertainotheritems,whichmayincludemajorrestructuringandrestructuring-relatedcosts,goodwillandlong-livedassetimpairmentchargesand
litigationsettlementsand/ordamages.Thetablebelowpresentsrevenues,EBTandtotalassetsforreportablesegments(inmillions):

F-28

Exhibit 21
Page 239
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2189 Page 175 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciling
QCT QTL QSI Items Total
2016
Revenues $ 15,409 $ 7,664 $ 47 $ 434 $ 23,554
EBT 1,812 6,528 386 (1,893) 6,833
Totalassets 2,995 644 910 47,810 52,359
2015
Revenues $ 17,154 $ 7,947 $ 4 $ 176 $ 25,281
EBT 2,465 6,882 (74) (2,786) 6,487
Totalassets 2,923 438 812 46,623 50,796
2014
Revenues $ 18,665 $ 7,569 $ $ 253 $ 26,487
EBT 3,807 6,590 (7) (1,612) 8,778
Totalassets 3,639 161 484 44,290 48,574

TheCompanyreportsrevenuesfromexternalcustomersbycountrybasedonthelocationtowhichitsproductsorservicesaredelivered,whichforQCTis
generallythecountryinwhichitscustomersmanufacturetheirproducts,orforlicensingrevenues,theinvoicedaddressesofitslicensees.Asaresult,therevenues
bycountrypresentedhereinarenotnecessarilyindicativeofeitherthecountryinwhichthedevicescontainingtheCompanysproductsand/orintellectualproperty
areultimatelysoldtoconsumersorthecountryinwhichthecompaniesthatsellthedevicesareheadquartered.Forexample,Chinarevenuescouldinclude
revenuesrelatedtoshipmentsofintegratedcircuitstoacompanythatisheadquarteredinSouthKoreabutthatmanufacturesdevicesinChina,whichdevicesare
thensoldtoconsumersinEuropeand/ortheUnitedStates.Revenuesbycountrywereasfollows(inmillions):

2016 2015 2014


China(includingHongKong) $ 13,503 $ 13,337 $ 13,200
SouthKorea 3,918 4,107 6,172
Taiwan 2,846 3,294 2,876
UnitedStates 386 246 372
Otherforeign 2,901 4,297 3,867
$ 23,554 $ 25,281 $ 26,487

SegmentassetsarecomprisedofaccountsreceivableandinventoriesforallreportablesegmentsotherthanQSI.QSIsegmentassetsincludecertain
marketablesecurities,otherinvestmentsandallassetsofconsolidatedsubsidiariesincludedinQSI.QSIassetsatSeptember25,2016,September27,2015and
September28,2014included$162million,$163millionand$18million,respectively,relatedtoinvestmentsinequitymethodinvestees.TheincreaseinQSI
assetswasprimarilyaresultofareceivablethatwasrecordedinconnectionwiththesaleofwirelessspectrumduringfiscal2016(Note2)andinvestmentsin
equitymethodinvestees.Totalsegmentassetsdifferfromtotalassetsonaconsolidatedbasisasaresultofunallocatedcorporateassetsprimarilycomprisedof
certaincash,cashequivalents,marketablesecurities,property,plantandequipment,deferredtaxassets,intangibleassetsandassetsofnonreportablesegments.The
netbookvaluesoflong-livedtangibleassetslocatedoutsideoftheUnitedStateswere$404million,$414millionand$288millionatSeptember25,2016,
September27,2015andSeptember28,2014,respectively.Thenetbookvaluesoflong-livedtangibleassetslocatedintheUnitedStateswere$1.9billion,$2.1
billionand$2.2billionatSeptember25,2016,September27,2015andSeptember28,2014,respectively.

F-29

Exhibit 21
Page 240
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2190 Page 176 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconcilingitemsintheprevioustablewereasfollows(inmillions):

2016 2015 2014


Revenues
Nonreportablesegments $ 438 $ 181 $ 258
Intersegmenteliminations (4) (5) (5)
$ 434 $ 176 $ 253
EBT
Unallocatedcostofrevenues $ (495) $ (314) $ (300)
Unallocatedresearchanddevelopmentexpenses (799) (809) (860)
Unallocatedselling,generalandadministrativeexpenses (478) (497) (412)
Unallocatedother(expense)income (154) (1,289) 142
Unallocatedinterestexpense (292) (101) (2)
Unallocatedinvestmentincome,net 667 855 1,215
Nonreportablesegments (342) (630) (1,395)
Intersegmenteliminations (1)
$ (1,893) $ (2,786) $ (1,612)

Unallocatedotherexpenseforfiscal2016wascomprisedofnetrestructuringandrestructuring-relatedchargesrelatedtotheCompanysStrategic
RealignmentPlan(Note10).Unallocatedotherexpenseforfiscal2015wascomprisedofachargerelatedtotheresolutionreachedwiththeNDRC,goodwilland
intangibleassetimpairmentchargesrelatedtothreeoftheCompanysnonreportablesegmentsandrestructuringandrestructuring-relatedchargesrelatedtothe
CompanysStrategicRealignmentPlan,partiallyoffsetbyagainonthesaleofcertainproperty,plantandequipment(Note2).NonreportablesegmentsEBTfor
fiscal2014includedimpairmentchargesrelatedtocertainproperty,plantandequipmentandgoodwill(Note2).
Unallocatedacquisition-relatedexpenseswerecomprisedasfollows(inmillions):

2016 2015 2014


Costofrevenues $ 434 $ 272 $ 251
Researchanddevelopmentexpenses 10 14 30
Selling,generalandadministrativeexpenses 99 72 25

Note 9. Acquisitions

Duringfiscal2016,theCompanyacquiredfourbusinessesfortotalcashconsiderationof$392million,netofcashacquired.Technology-basedintangible
assetsof$257millionwererecognizedwithaweighted-averageusefullifeoffouryears.TheCompanyrecognized$172millioningoodwillrelatedtothese
transactions,allofwhichwasassignedtotheCompanysQCTsegmentandofwhich$24millionisexpectedtobedeductiblefortaxpurposes.

InJanuary2016,theCompanyannouncedthatithadreachedagreementwithTDKCorporationtoformajointventure,underthenameRF360Holdings
SingaporePte.Ltd.,toenabledeliveryofradiofrequencyfront-end(RFFE)modulesandRFfiltersintofullyintegratedproductsformobiledevicesandInternetof
Things(IoT)applications,amongothers.Thejointventurewillinitiallybeowned51%bytheCompanyand49%byTDK.Certainintellectualproperty,patents
andfilterandmoduledesignandmanufacturingassetswillbecarvedoutofexistingTDKbusinessesandbeacquiredbythejointventure,withcertainassets
acquiredbytheCompany.ThepurchasepriceoftheCompanysinterestinthejointventureandtheassetstobetransferredtotheCompanyis$1.2billion,tobe
adjustedforworkingcapital,outstandingindebtednessandcertaincapitalexpenditures,amongotherthings.Additionally,theCompanyhastheoptiontoacquire
(andTDKhasanoptiontosell)TDKsinterestinthejointventurefor$1.15billion30monthsaftertheclosingdate.TDKwillbeentitledtouptoatotalof$200
millioninpaymentsbasedonsalesofRFfilterfunctionsoverthethree-yearperiodaftertheclosingdate,whichisasubstituteforandinlieuofanyrightofTDK
toreceiveanyprofitsharing,distributions,dividendsorotherpaymentsofanykindornature.Thetransactionissubjecttoreceiptofregulatoryapprovalsandother
closingconditionsandisexpectedtocloseinearlycalendar2017.

F-30

Exhibit 21
Page 241
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2191 Page 177 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OnAugust13,2015,theCompanyacquiredCSRplc,whichwasrenamedCSRLimited(CSR),fortotalcashconsiderationof$2.3billion(netof$176
millionofcashacquired).Inaddition,$28millionofthird-partyacquisitionandintegrationservicescostswereincludedinselling,generalandadministrative
expensesinfiscal2015.CSRisaninnovatorinthedevelopmentofmultifunctionsemiconductorplatformsandtechnologiesfortheautomotive,consumerand
voiceandmusiccategories.TheacquisitioncomplementstheCompanyscurrentofferingsbyaddingproducts,channelsandcustomersinthegrowthcategoriesof
theIoTandautomotiveinfotainment.CSRwasintegratedintotheQCTsegment.

Theallocationofthepurchasepricetotheassetsacquiredandliabilitiesassumedbasedontheirfairvalueswasasfollows(inmillions):

Currentassets $ 560
Intangibleassetssubjecttoamortization:
Technology-basedintangibleassets 953
Customer-relatedintangibleassets 45
Marketing-relatedintangibleassets 15
In-processresearchanddevelopment(IPR&D) 182
Goodwill 969
Otherassets 131
Totalassets 2,855
Liabilities (411)
Netassetsacquired $ 2,444

GoodwillrecognizedinthistransactionisnotdeductiblefortaxpurposesandwasallocatedtotheQCTsegmentforannualimpairmenttestingpurposes.
Goodwillisprimarilyattributabletosynergiesexpectedtoariseaftertheacquisition.Eachcategoryofintangibleassetsacquiredwillbeamortizedonastraight-
linebasisovertheirweighted-averageusefullivesoffiveyearsfortechnology-basedintangibleassetsandfouryearsforcustomer-relatedandmarketing-related
intangibleassets.Ontheacquisitiondate,IPR&Dconsistedofthreeprojects,primarilyrelatedtoBluetoothaudioandBluetoothlowenergy(alsoknownas
BluetoothSmart)technologies,oneofwhichwascompletedduringfiscal2016andwillbeamortizedoveritsusefullifeofsevenyears.Theremainingtwo
projectsareexpectedtobecompletedinfiscal2017andwillbeamortizedovertheirusefullives,whichareexpectedtobesixyears.Theestimatedfairvaluesof
theintangibleassetsacquiredwereprimarilydeterminedusingtheincomeapproachbasedonsignificantinputsthatwerenotobservable.

TheCompanysresultsofoperationsforfiscal2015includedtheoperatingresultsofCSRsincethedateofacquisition,theamountsofwhichwerenot
material.Thefollowingtablepresentstheunauditedproformaresultsforfiscal2015and2014.Theunauditedproformafinancialinformationcombinesthe
resultsofoperationsofQualcommandCSRasthoughthecompanieshadbeencombinedasofthebeginningoffiscal2014,andtheproformainformationis
presentedforinformationalpurposesonlyandisnotindicativeoftheresultsofoperationsthatwouldhavebeenachievediftheacquisitionhadtakenplaceatsuch
time.Theunauditedproformaresultspresentedbelowincludeamortizationchargesforacquiredintangibleassets,eliminationsofintercompanytransactions,
adjustmentsforincreasedfairvalueofacquiredinventory,adjustmentsfordepreciationexpenseforproperty,plantandequipmentandrelatedtaxeffects(in
millions):

2015 2014
(unaudited)
Revenues $ 25,939 $ 27,282
NetincomeattributabletoQualcomm 5,157 7,730

Duringfiscal2015,theCompanyacquiredfourotherbusinessesfortotalcashconsiderationof$405million,netofcashacquired.Technology-based
intangibleassetsrecognizedintheamountof$84millionarebeingamortizedonastraight-linebasisoveraweighted-averageusefullifeofeightyears.The
Companyrecognized$289millioningoodwillrelatedtothesetransactions,ofwhich$35millionisexpectedtobedeductiblefortaxpurposes.Goodwillof$29
million,$6millionand$254millionwasassignedtotheCompanysQCT,QTLandnonreportablesegments,respectively.

Duringfiscal2014,theCompanyacquired11businessesfortotalcashconsiderationof$761million,netofcashacquired,andtheexchangeofunvested
stockoptionsthathadanegligiblefairvalue.Technology-basedintangibleassets

F-31

Exhibit 21
Page 242
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2192 Page 178 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recognizedintheamountof$146millionarebeingamortizedonastraight-linebasisoveraweighted-averageusefullifeofsixyears.Goodwillof$624million
wasrecognizedinthesetransactions,ofwhich$294millionisexpectedtobedeductiblefortaxpurposes.Goodwillof$589million,$6millionand$29million
wasassignedtotheCompanysQCT,QTLandnonreportablesegments,respectively.

Note 10. Strategic Realignment Plan

OnJuly22,2015,theCompanyannouncedaStrategicRealignmentPlandesignedtoimproveexecution,enhancefinancialperformanceanddriveprofitable
growthastheCompanyworkstocreatesustainablelong-termvalueforstockholders.Aspartofthis,amongotheractions,theCompanyimplementedacost
reductionplan,whichincludesaseriesoftargetedreductionsacrosstheCompanysbusinesses,particularlyinQCT,andareductiontoitsannualshare-based
compensationgrants.Thesecostreductioninitiativeswereachievedbytheendoffiscal2016.Duringfiscal2016,theCompanyrecordedrestructuringchargesof
$144million,includingconsultingcostsof$73millionandseverancecostsof$67million,restructuring-relatedchargesof$58millionwhich,primarilyconsisted
ofassetimpairments,anda$48milliongainonthesaleoftheCompanysbusinessthatprovidedaugmentedrealityapplication,sincesuchsalewasexecutedin
connectionwiththeStrategicRealignmentPlan,allofwhichwereincludedinotherexpenses(Note2)inreconcilingitems(Note8).Restructuringactivitieswere
initiatedinthefourthquarteroffiscal2015,andatotalof$344millioninnetrestructuringandrestructuring-relatedchargeswereincurredthroughtheendoffiscal
2016.Theremainingrestructuringandrestructuring-relatedchargestobeincurredrelatedtotheplanareexpectedtobenegligible.

Therestructuringaccrual,aportionofwhichisincludedinpayrollandotherbenefitsrelatedliabilitieswiththeremainderincludedinothercurrentliabilities,
isexpectedtobesubstantiallypaidwithinthenext12months.Changesintherestructuringaccrualduringfiscal2016wereasfollows(inmillions):

Severance Costs Other Costs Total


Beginningbalanceofrestructuringaccrual $ 122 $ 31 $ 153
Additionalcosts 78 81 159
Cashpayments (162) (93) (255)
Adjustments (11) (4) (15)
Endingbalanceofrestructuringaccrual $ 27 $ 15 $ 42

Note 11. Discontinued Operations

OnNovember25,2013,theCompanycompleteditssaleoftheNorthandLatinAmericaoperationsofitsOmnitracsdivisiontoaU.S.-basedprivateequity
firmforcashconsiderationof$788million(netofcashsold).Asaresult,theCompanyrecordedagainindiscontinuedoperationsof$665million($430million
netofincometaxexpense)duringfiscal2014.TherevenuesandoperatingresultsoftheNorthandLatinAmericaoperationsoftheOmnitracsdivision,which
comprisedsubstantiallyalloftheOmnitracsdivision,werenotpresentedasdiscontinuedoperationsinanyfiscalperiodbecausetheywereimmaterial.

Note 12. Fair Value Measurements

ThefollowingtablepresentstheCompanysfairvaluehierarchyforassetsandliabilitiesmeasuredatfairvalueonarecurringbasisatSeptember25,2016(in
millions):

F-32

Exhibit 21
Page 243
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2193 Page 179 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Level 1 Level 2 Level 3 Total


Assets
Cashequivalents $ 2,679 $ 2,598 $ $ 5,277
Marketablesecurities
U.S.Treasurysecuritiesandgovernment-relatedsecurities 867 1,348 2,215
Corporatebondsandnotes 18,743 18,743
Mortgage-andasset-backedandauctionratesecurities 1,854 43 1,897
Equityandpreferredsecuritiesandequityfunds 1,005 741 1,746
Debtfunds 1,803 1,803
Totalmarketablesecurities 1,872 24,489 43 26,404
Derivativeinstruments 71 71
Otherinvestments 303 303
Totalassetsmeasuredatfairvalue $ 4,854 $ 27,158 $ 43 $ 32,055
Liabilities
Derivativeinstruments $ $ 11 $ $ 11
Otherliabilities 302 302
Totalliabilitiesmeasuredatfairvalue $ 302 $ 11 $ $ 313

Activity
between
Levels
of
the
Fair
Value
Hierarchy.
TherewerenosignificanttransfersbetweenLevel1andLevel2duringfiscal2016and2015.Whena
determinationismadetoclassifyanassetorliabilitywithinLevel3,thedeterminationisbaseduponthesignificanceoftheunobservableinputstotheoverallfair
valuemeasurement.Thefollowingtableincludestheactivityformortgage-andasset-backedandauctionratesecuritiesclassifiedwithinLevel3ofthevaluation
hierarchy(inmillions):

2016 2015
BeginningbalanceofLevel3 $ 224 $ 269
Totalrealizedandunrealizedgainsorlosses:
Includedininvestmentincome,net (4) 3
Includedinothercomprehensiveincome(loss) (1) (4)
Purchases 2 69
Sales (106) (46)
Settlements (45) (64)
TransfersoutofLevel3 (27) (3)
EndingbalanceofLevel3 $ 43 $ 224

TheCompanyrecognizestransfersintoandoutoflevelswithinthefairvaluehierarchyattheendofthefiscalmonthinwhichtheactualeventorchangein
circumstancesthatcausedthetransferoccurs.TransfersoutofLevel3duringfiscal2016and2015primarilyconsistedofdebtsecuritieswithsignificantupgrades
increditratingsorforwhichtherewereobservableinputs.TherewerenotransfersintoLevel3duringfiscal2016and2015.

Nonrecurring
Fair
Value
Measurements.
TheCompanymeasurescertainassetsatfairvalueonanonrecurringbasis.Theseassetsincludecostandequity
methodinvestmentswhentheyaredeemedtobeother-than-temporarilyimpaired,assetsacquiredandliabilitiesassumedinanacquisitionorinanonmonetary
exchange,andproperty,plantandequipmentandintangibleassetsthatarewrittendowntofairvaluewhentheyareheldforsaleordeterminedtobeimpaired.
Duringfiscal2016,theCompanyrecordedimpairmentchargesof$43milliontowritedowncertainintangibleassetsbasedonupdatedcashflowprojections.
Suchchargeswererecordedincostofrevenues,researchanddevelopmentexpensesandselling,generalandadministrativeexpenses.Theestimationoffairvalue
andcashflowsusedinthefairvaluemeasurementsrequiredtheuseofsignificantunobservableinputs,andasaresult,thefairvaluemeasurementswereclassified
asLevel3.Duringfiscal2015and2014,theCompanyupdatedthebusinessplansandrelatedinternalforecastsrelatedtocertainoftheCompanysbusinesses,
resultinginimpairmentchargestowritedowncertainproperty,plantandequipment,intangibleassetsandgoodwill(Note2).TheCompanydeterminedthefair
valuesusingcost,incomeandmarketapproaches.Theestimationoffairvalueandcashflowsusedinthefairvaluemeasurementsrequiredtheuseofsignificant
unobservableinputs,andasa

F-33

Exhibit 21
Page 244
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2194 Page 180 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

result,thefairvaluemeasurementswereclassifiedasLevel3.Duringfiscal2016,2015and2014,theCompanydidnothaveanyothersignificantassetsor
liabilitiesthatweremeasuredatfairvalueonanonrecurringbasisinperiodssubsequenttoinitialrecognition.

Note 13. Marketable Securities

Marketablesecuritieswerecomprisedasfollows(inmillions):

Current Noncurrent
September 25, September 27, September 25, September 27,
2016 2015 2016 2015
Trading:
U.S.Treasurysecuritiesandgovernment-relatedsecurities $ $ $ $ 12
Corporatebondsandnotes 364
Mortgage-andasset-backedandauctionratesecurities 242
Totaltrading 618
Available-for-sale:
U.S.Treasurysecuritiesandgovernment-relatedsecurities 1,116 156 1,099 691
Corporatebondsandnotes 10,159 7,926 8,584 7,112
Mortgage-andasset-backedandauctionratesecurities 1,363 1,302 534 263
Equityandpreferredsecuritiesandequityfunds 64 377 1,682 1,253
Debtfunds 1,803 2,909
Totalavailable-for-sale 12,702 9,761 13,702 12,228
Fairvalueoption:
Debtfund 780
Totalmarketablesecurities $ 12,702 $ 9,761 $ 13,702 $ 13,626

Duringfiscal2016,theCompanyexitedaninvestmentinadebtfundforwhichtheCompanyelectedthefairvalueoption.Theinvestmentwouldhave
otherwisebeenrecordedusingtheequitymethod.Changesinfairvalueassociatedwiththisinvestmentwererecognizedinnetinvestmentincome.Duringfiscal
2016and2015,thenetdecreaseinfairvalueassociatedwiththisinvestmentwasnegligibleand$10million,respectively.Duringfiscal2014,thenetincreasein
fairvalueassociatedwiththisinvestmentwas$33million.

TheCompanyclassifiescertainportfoliosofdebtsecuritiesthatutilizederivativeinstrumentstoacquireorreduceforeignexchange,interestrateand/or
equity,prepaymentandcreditrisksastrading.NetlossesrecognizedondebtsecuritiesclassifiedastradingheldatSeptember27,2015andSeptember28,2014,
respectively,werenegligible.

AtSeptember25,2016,thecontractualmaturitiesofavailable-for-saledebtsecuritieswereasfollows(inmillions):

Years to Maturity
No Single
Less Than One to Five to Greater Than Maturity
One Year Five Years Ten Years Ten Years Date Total
$ 4,892 $ 12,819 $ 2,269 $ 978 $ 3,700 $ 24,658

Debtsecuritieswithnosinglematuritydateincludeddebtfunds,mortgage-andasset-backedsecuritiesandauctionratesecurities.

TheCompanyrecordedrealizedgainsandlossesonsalesofavailable-for-salesecuritiesasfollows(inmillions):
Gross Realized
Gross Realized Gains Losses Net Realized Gains
2016 $ 277 $ (37) $ 240
2015 540 (52) 488
2014 732 (18) 714

F-34

Exhibit 21
Page 245
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2195 Page 181 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Available-for-salesecuritieswerecomprisedasfollows(inmillions):

Cost Unrealized Gains Unrealized Losses Fair Value


September 25, 2016
Equitysecurities $ 1,554 $ 204 $ (12) $ 1,746
Debtsecurities(includingdebtfunds) 24,363 388 (93) 24,658
$ 25,917 $ 592 $ (105) $ 26,404
September 27, 2015
Equitysecurities $ 1,394 $ 264 $ (28) $ 1,630
Debtsecurities(includingdebtfunds) 20,459 185 (285) 20,359
$ 21,853 $ 449 $ (313) $ 21,989

ThefollowingtableshowsthegrossunrealizedlossesandfairvaluesoftheCompanysinvestmentsinindividualsecuritiesthatareclassifiedasavailable-for-
saleandhavebeeninacontinuousunrealizedlosspositiondeemedtobetemporaryforlessthan12monthsandformorethan12months,aggregatedby
investmentcategory(inmillions):

September 25, 2016


Less than 12 months More than 12 months
Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S.Treasurysecuritiesandgovernment-relatedsecurities $ 444 $ (5) $ 16 $
Corporatebondsandnotes 2,775 (12) 1,033 (65)
Mortgage-andasset-backedandauctionratesecurities 337 (3) 211 (2)
Equityandpreferredsecuritiesandequityfunds 312 (4) 130 (8)
Debtfunds 309 (6)
$ 3,868 $ (24) $ 1,699 $ (81)

September 27, 2015


Less than 12 months More than 12 months
Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S.Treasurysecuritiesandgovernment-relatedsecurities $ 304 $ (4) $ $
Corporatebondsandnotes 7,656 (93) 368 (62)
Mortgage-andasset-backedandauctionratesecurities 862 (3) 108 (1)
Equityandpreferredsecuritiesandequityfunds 392 (28) 17
Debtfunds 1,792 (117) 124 (5)
$ 11,006 $ (245) $ 617 $ (68)

AtSeptember25,2016,theCompanyconcludedthattheunrealizedlossesonitsavailable-for-salesecuritiesweretemporary.Further,forcommonstockand
forequityanddebtfundswithunrealizedlosses,asofSeptember25,2016,theCompanyhadtheabilityandtheintenttoholdsuchsecuritiesuntiltheyrecovered,
whichwasexpectedtobewithinareasonableperiodoftime,andfordebtsecuritiesandpreferredstockwithunrealizedlosses,theCompanydidnothavethe
intenttosell,norwasitmorelikelythannotthattheCompanywouldberequiredtosell,suchsecuritiesbeforerecoveryormaturity.Inthefirstquarteroffiscal
2017,theCompanyannouncedthatitenteredintoanagreementtoacquireNXPSemiconductorsN.V.(Note14).Asaresult,priortotheclosing,theCompany
expectstodivestasubstantialportionofitsmarketablesecuritiesportfolioinordertofinancethattransaction.GiventhechangeintheCompanysintentiontosell
certainmarketablesecurities,theCompanymayrecognizelosses.

Note 14. Subsequent Event

OnOctober27,2016,theCompanyannouncedadefinitiveagreementunderwhichQualcommRiverHoldings,B.V.,anindirect,whollyownedsubsidiaryof
QualcommIncorporated,willacquireNXPSemiconductorsN.V.Pursuanttothe

F-35

Exhibit 21
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Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2196 Page 182 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

definitiveagreement,QualcommRiverHoldingswillcommenceatenderoffertoacquirealloftheissuedandoutstandingcommonsharesofNXPfor$110per
shareincash,forestimatedtotalcashconsiderationof$38billion.NXPisaleaderinhigh-performance,mixed-signalsemiconductorelectronicsinautomotive,
broad-basedmicrocontrollers,secureidentification,networkprocessingandRFpowerproducts.

Thetransactionisexpectedtoclosebytheendofcalendar2017andissubjecttoreceiptofregulatoryapprovalsinvariousjurisdictionsandotherclosing
conditions,includingthetenderofspecifiedpercentages(whichvaryfrom70%to95%basedoncertaincircumstancesasprovidedinthedefinitiveagreement)of
theissuedandoutstandingcommonsharesofNXPintheoffer.AnExtraordinaryGeneralMeetingofNXPsshareholderswillbeconvenedinconnectionwiththe
offertoadopt,amongotherthings,certainresolutionsrelatingtothetransaction.Thetenderofferisnotsubjecttoanyfinancingcondition;however,theCompany
intendstofundthetransactionwithcashheldbyforeignentitiesandnewdebt.Asaresult,theCompanysecured$13.6billionincommittedfinancingin
connectionwithsigningthedefinitiveagreement.

QualcommRiverHoldingsandNXPmayterminatethedefinitiveagreementundercertaincircumstances.IfthedefinitiveagreementisterminatedbyNXPin
certaincircumstances,NXPwillberequiredtopayQualcommRiverHoldingsaterminationfeeof$1.25billion.Ifthedefinitiveagreementisterminatedby
QualcommRiverHoldingsundercertaincircumstancesinvolvingthefailuretoobtaintherequiredregulatoryapprovalsorthefailureofNXPtocompletecertain
pre-closingreorganizationstepsinallmaterialrespects,QualcommRiverHoldingswillberequiredtopayNXPaterminationfeeof$2.0billion.

F-36

Exhibit 21
Page 247
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2197 Page 183 of
QUALCOMM232
Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15. Summarized Quarterly Data (Unaudited)

Thefollowingfinancialinformationreflectsallnormalrecurringadjustmentsthatare,intheopinionofmanagement,necessaryforafairstatementofthe
resultsoftheinterimperiods.

Thetablebelowpresentsquarterlydataforfiscal2016and2015(inmillions,exceptpersharedata):

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter


2016 (1)
Revenues $ 5,775 $ 5,551 $ 6,044 $ 6,184
Operatingincome 1,685 1,415 1,592 1,804
Netincome 1,496 1,164 1,443 1,599
NetincomeattributabletoQualcomm 1,498 1,164 1,444 1,599

BasicearningspershareattributabletoQualcomm(2): $ 1.00 $ 0.78 $ 0.98 $ 1.08
DilutedearningspershareattributabletoQualcomm(2): 0.99 0.78 0.97 1.07

2015 (1)
Revenues $ 7,099 $ 6,894 $ 5,832 $ 5,456
Operatingincome 2,064 1,336 1,235 1,140
Netincome 1,971 1,052 1,183 1,060
NetincomeattributabletoQualcomm 1,972 1,053 1,184 1,061

BasicearningspershareattributabletoQualcomm(2): $ 1.19 $ 0.64 $ 0.74 $ 0.68
DilutedearningspershareattributabletoQualcomm(2): 1.17 0.63 0.73 0.67

(1) Amounts,otherthanpershareamounts,areroundedtomillionseachquarter.Therefore,thesumofthequarterlyamountsmaynotequaltheannualamountsreported.

(2) EarningspershareattributabletoQualcommarecomputedindependentlyforeachquarterandthefullyearbaseduponrespectiveaveragesharesoutstanding.Therefore,
thesumofthequarterlyearningspershareamountsmaynotequaltheannualamountsreported.

F-37

Exhibit 21
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232
SCHEDULE II

QUALCOMM INCORPORATED

VALUATION AND QUALIFYING ACCOUNTS

(In millions)

Charged
Balance at (Credited) to Balance at
Beginning of Costs and End of
Period Expenses Deductions Other Period
YearendedSeptember25,2016
Allowances:
tradereceivables $ 6 $ (5) $ $ $ 1
Valuationallowanceondeferredtaxassets 635 118 1 (a) 754
$ 641 $ 113 $ $ 1 $ 755
YearendedSeptember27,2015
Allowances:
tradereceivables $ 5 $ 1 $ $ $ 6
notesreceivable 4 (3) (1) (b)
Valuationallowanceondeferredtaxassets 414 130 91 (a) 635
$ 423 $ 131 $ (3) $ 90 $ 641
YearendedSeptember28,2014
Allowances:
tradereceivables $ 2 $ 5 $ (2) $ $ 5
notesreceivable 10 (3) (1) (2) (b) 4
Valuationallowanceondeferredtaxassets 265 148 1 (a) 414
$ 277 $ 150 $ (3) $ (1) $ 423

(a) Thisamountwasrecordedtogoodwillinconnectionwithabusinessacquisition.

(b) Thisamountrelatestonotesreceivableonstrategicinvestmentsthatwereconvertedtocostmethodequityinvestments.

S-1

Exhibit 21
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232
EXHIBIT 10.36

QUALCOMM INCORPORATED
2016 LONG-TERM INCENTIVE PLAN
EXECUTIVE RESTRICTED STOCK UNIT GRANT NOTICE

Qualcomm Incorporated (theCompany


),pursuanttoits2016Long-TermIncentivePlan(thePlan
)herebygrantstoyou,theParticipantnamedbelow,the
numberofRestrictedStockUnitssetforthbelow,eachofwhichrepresentstherighttoreceiveone(1)shareoftheCompanyscommonstock,subjecttoallofthe
termsandconditionsassetforthinthisExecutiveRestrictedStockUnitGrantNotice(theGrant
Notice
)andtheExecutiveRestrictedStockUnitAgreement
(attachedhereto)andthePlanwhichareincorporatedhereinintheirentirety.CapitalizedtermsnototherwisedefinedinthisGrantNoticeortheExecutive
RestrictedStockUnitAgreementshallhavethemeaningsetforthinthePlan.AcopyofthePlancanbeobtainedfromtheStockAdministrationwebsite,located
ontheCompanysinternalwebpage,oryoumayrequestahardcopyfromtheStockAdministrationDepartment.

Participant
:EmployeeGrant
No.
:Number
Emp
#
:ID Number
of
Restricted
Stock
Units
:Shares_Granted
Date
of
Grant
:Grant_Date

Performance
Period
:Date_Range

Performance
Measure
:AdjustedGAAPOperatingIncomedefinedastheCompanysoperatingincome,determinedinaccordancewithgenerallyaccepted
accountingprinciplesintheUnitedStates,butdeterminedexcluding(a)resultsfromoperationsoftheQualcommStrategicInitiativesegment;(b)allshare-based
compensationotherthanamountssettleableincash;(c)thefollowingitemsresultingfromacquisitionscompletedinorafterthethirdfiscalquarterof2011:
acquiredin-processresearchanddevelopmentexpenses,recognitionofthestep-upofinventoriestofairvalue,amortizationofcertainintangibleassetsand
expensesrelatedtotheterminationofcontractsthatlimittheuseoftheacquiredintellectualproperty;and(d)disclosedlossesorexpensesattributableto
discontinuedoperations,impairments,restructurings,oractionsofgovernmentorquasi-governmentbodies.

Performance
Target
:$_AmountinAdjustedGAAPOperatingIncomeforthePerformancePeriod

Vesting
Dates
:

RestrictedStockUnitsVestedVestingDate
1/3Shares1stVestingDate
1/3Shares2ndVestingDate
1/3Shares3rdVestingDate

Additional Terms/Acknowledgments :Youmustacknowledge,intheformdeterminedbytheCompany,receiptof,andrepresentthatyouhaveread,understand,


acceptandagreetothetermsandconditionsof,thisGrantNotice,theAgreementincludingtheExclusiveConsultingAgreementattachedtotheAgreementand
thePlan(including,butnotlimitedto,thebindingarbitrationprovisioninSection3.7ofthePlan).

Qualcomm Incorporated:

By:/s/StevenM.Mollenkopf
StevenM.Mollenkopf
ChiefExecutiveOfficer
Dated:Grant_Date
Attachment:ExecutiveRestrictedStockUnitAgreement(RSU-EX-A11)

Exhibit 21
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Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2200 Page 186 of
232
QUALCOMM INCORPORATED
2016 LONG-TERM INCENTIVE PLAN
EXECUTIVE RESTRICTED STOCK UNIT AGREEMENT

QualcommIncorporated(theCompany
)hasgrantedanumberofRestrictedStockUnits(thisAward
)withrespectto
thenumberofsharesoftheCompanyscommonstock(Stock
)specifiedintheExecutiveRestrictedStockUnitGrantNotice(the
Grant
Notice
)toyou,theParticipantnamedintheGrantNoticepursuanttothetermsandconditionssetforthintheGrant
Notice,thisExecutiveRestrictedStockUnitAgreementandtheattachmentshereto(togetherwiththeGrantNotice,theAgreement
)andthe2016Long-TermIncentivePlan(thePlan
).CapitalizedtermsthatarenotexplicitlydefinedintheGrantNoticeorthis
AgreementbutaredefinedinthePlanshallhavethesamedefinitionsasinthePlan.

ThetermsandconditionsofthisAwardareasfollows:

1. VESTING.

1.1 VESTING CONTINGENT ON ACHIEVING PERFORMANCE TARGET .YourRestrictedStockUnits


willbecomevestedasprovidedinSections1.2through1.6andbepaidasprovidedinSection2onlyifthePerformanceMeasure
equalsorexceedsthePerformanceTargetforthePerformancePeriod(aseachcapitalizedtermisdefinedintheGrantNotice).Any
determinationthatthePerformanceMeasureequalsorexceedsthePerformanceTargetforthePerformancePeriodshallbemadeby
writtencertificationoftheCommitteenolaterthantheNovember30ththatnextfollowstheendofthePerformancePeriod.Ifthe
PerformanceMeasuredoesnotequalorexceedthePerformanceTarget,thisAwardshallterminateandnoRestrictedStockUnits
willvestorbepaid.

1.2 SERVICE VESTING. ExcepttotheextentthatyourRestrictedStockUnitsmayvestearlierasprovidedin


Sections1.3through1.6,below,yourRestrictedStockUnitswillvesttotheextentyouareinServiceontheapplicableVesting
Date(s)specifiedintheGrantNotice.

1.3 ATTAINMENT OF NORMAL RETIREMENT AGE. YourRestrictedStockUnitswillbefullyvestedon


thelaterof(a)thedatewhichissix(6)monthsaftertheGrantDateor(b)thedateonwhichyouhaveattainedagefifty-five(55)and
completedatleastten(10)yearsofconsecutiveService.

1.4 DEATH. IfyourServiceterminatesbecauseofyourdeath,thevestingofyourRestrictedStockUnitsshallbe


acceleratedinfulleffectiveuponyourdeath.

1.5 DISABILITY. IfyourServiceterminatesbecauseofyourDisability,thevestingofyourRestrictedStock


UnitsshallbeacceleratedinfulleffectiveasofthedateonwhichyourServiceterminatesduetoyourDisability.

1.6 TERMINATION AFTER CHANGE IN CONTROL. IfyourServiceterminatesasaresultofTermination


AfterChangeinControl(asdefinedbelow),thenthevestingofyourRestrictedStockUnitsshallbeacceleratedinfulleffectiveas
ofthedateon

Exhibit 21
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Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2201 Page 187 of
232
whichyourServiceterminates.Forthispurpose,Termination
After
Change
in
Control
shallmeaneitherofthefollowingevents
occurringwithintwenty-four(24)monthsafteraChangeinControl(asdefinedinthePlan):

(a)terminationbytheParticipatingCompanyGroupofyourServicewiththeParticipatingCompanyGroup
foranyreasonotherthanforCause(asdefinedbelow);or

(b)yourresignationforGoodReason(asdefinedbelow)fromallcapacitiesinwhichyouarethen
renderingServicetotheParticipatingCompanyGroupwithinareasonableperiodoftimefollowingtheeventconstitutingGood
Reason.

Notwithstandinganyprovisionhereintothecontrary,TerminationAfterChangeinControlshallnotincludeanyterminationofyour
ServicewiththeParticipatingCompanyGroupwhich(A)isforCause;(B)isaresultofyourdeathorDisability;(C)isaresultof
yourvoluntaryterminationofServiceotherthanforGoodReason;or(D)occurspriortotheeffectivenessofaChangeinControl.

ForpurposesofthisSection1:

Cause
shallmeananyofthefollowing:(i)yourtheft,dishonesty,orfalsificationofany
ParticipatingCompanydocumentsorrecords;(ii)yourimproperuseordisclosureofaParticipatingCompanysconfidentialor
proprietaryinformation;(iii)anyactionbyyouwhichhasadetrimentaleffectonaParticipatingCompanysreputationorbusiness;
(iv)yourfailureorinabilitytoperformanyreasonableassigneddutiesafterwrittennoticefromaParticipatingCompanyof,anda
reasonableopportunitytocure,suchfailureorinability;(v)anymaterialbreachbyyouofanyemploymentorserviceagreement
betweenyouandaParticipatingCompany,whichbreachisnotcuredpursuanttothetermsofsuchagreement;(vi)yourconviction
(includinganypleaofguiltyornolo
contendere
)ofanycriminalactwhichimpairsyourabilitytoperformyourdutieswitha
ParticipatingCompany;or(vii)violationofamaterialCompanyorParticipatingCompanypolicy.

Good
Reason
shallmeananyoneormoreofthefollowing:

(i) withoutyourexpresswrittenconsent,theassignmenttoyouofanyduties,oranylimitation
ofyourresponsibilities,substantiallyinconsistentwithyourpositions,duties,responsibilitiesandstatuswiththeParticipating
CompanyGroupimmediatelypriortothedateofaChangeinControl;
(ii) withoutyourexpresswrittenconsent,therelocationoftheprincipalplaceofyour
employmentorservicetoalocationthatismorethanfifty(50)milesfromyourprincipalplaceofemploymentorservice
immediatelypriortothedateofaChangeinControl,ortheimpositionoftravelrequirementssubstantiallymoredemandingofyou
thansuchtravelrequirementsexistingimmediatelypriortothedateoftheChangeinControl;
(iii) anyfailurebytheParticipatingCompanyGrouptopay,oranymaterialreductionbythe
ParticipatingCompanyGroupof,(A)yourbasesalaryineffectimmediatelypriortothedateoftheChangeinControl(unless
reductionscomparableinamountanddurationareconcurrentlymadeforallotheremployeesoftheParticipatingCompanyGroup

Exhibit 21
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withresponsibilities,organizationallevelandtitlecomparabletoyours),or(B)yourbonuscompensation,ifany,ineffect
immediatelypriortothedateofaChangeinControl(subjecttoapplicableperformancerequirementswithrespecttotheactual
amountofbonuscompensationearnedbyyou);
(iv) anyfailurebytheParticipatingCompanyGroupto(A)continuetoprovideyouwiththe
opportunitytoparticipate,ontermsnolessfavorablethanthoseineffectforthebenefitofanyemployeeorserviceprovidergroup
whichcustomarilyincludesapersonholdingtheemploymentorserviceproviderpositionoracomparablepositionwiththe
ParticipatingCompanyGroupthenheldbyyou,inanybenefitorcompensationplansandprograms,including,butnotlimitedto,
theParticipatingCompanyGroupslife,disability,health,dental,medical,savings,profitsharing,stockpurchaseandretirement
plans,ifany,inwhichyouwereparticipatingimmediatelypriortothedateoftheChangeinControl,ortheirequivalent,or
(B)provideyouwithallotherfringebenefits(ortheirequivalent)fromtimetotimeineffectforthebenefitofanyemployeegroup
whichcustomarilyincludesapersonholdingtheemploymentorserviceproviderpositionoracomparablepositionwiththe
ParticipatingCompanyGroupthenheldbyyou;
(v) anybreachbytheParticipatingCompanyGroupofanymaterialagreementbetweenyou
andaParticipatingCompanyconcerningyouremployment;or
(vi) anyfailurebytheCompanytoobtaintheassumptionofanymaterialagreementbetween
youandtheCompanyconcerningyouremploymentbyasuccessororassignoftheCompany.

2. PAYMENT OF YOUR RESTRICTED STOCK UNITS.

2.1 TIMING OF PAYMENT.

(a)SubjecttotheothertermsofthePlanandthisAgreement,anyRestrictedStockUnitsthatvestin
accordancewithSection1.2willbepaidtoyouasfollows:(i)thefirstinstallmentshallbepaidtoyounolaterthan30daysafterthe
laterof(1)theearliestVestingDatespecifiedintheGrantNoticeor(2)thedateonwhichtheCommitteecertifiesinwritingthatthe
PerformanceMeasureequalsorexceedsthePerformanceTargetforthePerformancePeriod;and(ii)anysubsequentinstallments
shallbepaidtoyounolaterthan30daysaftertheapplicableVestingDatespecifiedintheGrantNotice.

(b)SubjecttotheothertermsofthePlanandthisAgreement,anyRestrictedStockUnitsthatvestand
becomenonforfeitableinaccordancewithSection1.3willbepaidtoyouasfollows:(i)thefirstinstallmentshallbepaidtoyouno
laterthan30daysafterthelaterof(1)theearliestVestingDatespecifiedintheGrantNoticeor(2)thedateonwhichtheCommittee
certifiesinwritingthatthePerformanceMeasureequalsorexceedsthePerformanceTargetforthePerformancePeriod;and(ii)any
subsequentinstallmentsshallbepaidtoyounolaterthan30daysaftertheapplicableVestingDatespecifiedintheGrantNotice;
provided,however,thatpaymentsshallbemadepursuanttothisSection2.1(b)followingterminationofyouremploymentwiththe
ParticipatingCompanyonlyifsuchterminationwasnotforCauseandyou(A)executeageneralreleaseofclaimsinaform
satisfactorytotheCompanyandthatgeneralreleasebecomesirrevocablebeforethe60thdayfollowingyourterminationof

Exhibit 21
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employment,and(B)complywiththerequirementscontainedintheExclusiveConsultingAgreementattachedheretoasAttachment
1(theConsulting
Agreement
).Notwithstandingtheforegoing,intheeventyouviolateanyoftheprovisionscontainedinthe
ConsultingAgreement,anyRestrictedStockUnitsthatbecamevestedpursuanttoSection1.3shallbeimmediatelyforfeitedwithout
consideration.IntheeventthatyouremploymentisterminatedforCause,youshallimmediatelyforfeityourrighttopaymentofany
RestrictedStockUnitsfollowingthedateofsuchterminationunderthisSection2.1(b).

(c)SubjecttotheothertermsofthePlanandthisAgreement,anyRestrictedStockUnitsthatvestand
becomenonforfeitableinaccordancewithSections1.4,1.5or1.6willbepaidtoyounolaterthan30daysafterthelaterofthedate
yourServiceterminatesorthedateonwhichtheCommitteecertifiesinwritingthatthePerformanceMeasureequalsorexceedsthe
PerformanceTarget.

2.2 FORM OF PAYMENT. YourvestedRestrictedStockUnitsshallbepaidinwholesharesofStockexceptas


otherwiseprovidedinSection10.3ofthePlanregardingfractionalsharesattributabletoDividendEquivalents.

2.3 TAX WITHHOLDING. YouacknowledgethattheCompanyand/ortheParticipatingCompanythatemploys


you(theEmployer
)maybesubjecttowithholdingtaxobligationsarisingbyreasonofthevestingand/orpaymentofthisAward.
YouauthorizeyourEmployertosatisfythewithholdingtaxobligationsbyoneoracombinationofthefollowingmethods,as
selectedbytheCompanyinitssolediscretion:(a)withholdingfromyourpayandanyotheramountspayabletoyou;(b)withholding
ofStockand/orcashfromthepaymentofthisAward;(c)arrangingforthesaleofsharesofStockpayableinconnectionwiththis
Award(onyourbehalfandatyourdirectionwhichyouauthorizebyacceptingthisAward);or(d)anyothermethodallowedbythe
Planorapplicablelaw.IfyourEmployersatisfiesthewithholdingobligationsbywithholdinganumberofwholesharesofStockas
describedinsubsection(b)herein,youwillbedeemedtohavebeenissuedthefullnumberofsharesofStocksubjecttothisAward,
notwithstandingthatanumberofsharesisheldbackinordertosatisfythewithholdingobligations.TheFair
Market
Value
of
anyStockwithheldpursuanttothisSection2.3shallbeequaltotheclosingpriceofashareofStockasquotedonanynationalor
regionalsecuritiesexchangeormarketsystemconstitutingtheprimarymarketfortheStockonthedateofdetermination(or,ifthere
isnoclosingpriceonthatday,thelasttradingdaypriortothatday)or,iftheStockisnotlistedonanationalorregionalsecurities
exchangeormarketsystem,thevalueofashareofStockasdeterminedbytheCommitteeingoodfaithwithoutregardtoany
restrictionotherthanarestrictionwhich,byitsterms,willneverlapse.TheCompanyshallnotberequiredtoissueanysharesof
StockpursuanttothisAgreementunlessanduntilthewithholdingobligationsaresatisfied.

3. TAX ADVICE. Yourepresent,warrantandacknowledgethattheCompanyand,ifdifferent,yourEmployer,hasmade


nowarrantiesorrepresentationstoyouwithrespecttotheincometaxconsequencesofthetransactionscontemplatedbythisAward,
andyouareinnomannerrelyingontheCompany,yourEmployerortheirrepresentativesforanassessmentofsuchtax
consequences.YOUUNDERSTANDTHATTHETAXLAWSANDREGULATIONSARESUBJECTTOCHANGE.YOU
SHOULDCONSULTYOUROWNTAXADVISORREGARDINGTHETAXTREATMENTOFTHISORANYOTHER
AWARD.NOTHING

Exhibit 21
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STATEDHEREINISINTENDEDORWRITTENTOBEUSED,ANDCANNOTBEUSED,FORTHEPURPOSEOF
AVOIDINGTAXPAYERPENALTIES.

4. DIVIDEND EQUIVALENTS. IftheBoarddeclaresacashdividendontheCompanysStock,youwillbeentitledto


DividendEquivalentsintheform,payableonthetermsandatsuchtimesasprovidedinSection10.3ofthePlan.

5. SECURITIES LAW COMPLIANCE. Notwithstandinganythingtothecontrarycontainedherein,nosharesofStock


willbeissuedtoyouuponvestingorpaymentofthisAwardunlesstheStockisthenregisteredundertheSecuritiesActor,ifsuch
Stockisnotthensoregistered,theCompanyhasdeterminedthatsuchvestingandissuancewouldbeexemptfromtheregistration
requirementsoftheSecuritiesAct.ByacceptingthisAward,youagreenottosellanyofthesharesofStockreceivedunderthis
AwardatatimewhenapplicablelawsorCompanypoliciesprohibitasale.

6. TRANSFERABILITY. PriortotheissuanceofsharesofStockinpaymentofallRestrictedStockUnits,your
RestrictedStockUnitsshallnotbesubjectinanymannertoanticipation,alienation,sale,exchange,transfer,assignment,pledge,
encumbrance,orgarnishmentbyyourcreditorsorbyyourbeneficiary,except(a)transferbywillorbythelawsofdescentand
distributionor(b)transferbywrittendesignationofabeneficiary,inaformacceptabletotheCompany,withsuchdesignation
takingeffectuponyourdeath.AllrightswithrespecttoyourRestrictedStockUnitsshallbeexercisableduringyourlifetimeonlyby
youoryourguardianorlegalrepresentative.PriortoactualpaymentofanyRestrictedStockUnits,suchRestrictedStockUnitswill
representanunsecuredobligationoftheCompany,payable(ifatall)onlyfromthegeneralassetsoftheCompany.

7. AWARD NOT A SERVICE CONTRACT. ThisAwardisnotanemploymentorservicecontractandnothinginthis


Agreement,theGrantNoticeorthePlanshallbedeemedtocreateinanywaywhatsoeveranyobligationonyourparttocontinuein
theServiceofaParticipatingCompany,orofaParticipatingCompanytocontinueyourServicewiththeParticipatingCompany.In
addition,nothinginthisAwardshallobligatetheCompany,itsstockholders,Board,OfficersorEmployeestocontinueany
relationshipwhichyoumighthaveasaDirectororConsultantfortheCompany.

8. RESTRICTIVE LEGEND. StockissuedpursuanttothevestingandpaymentthisAwardmaybesubjecttosuch


restrictionsuponthesale,pledgeorothertransferoftheStockastheCompanyandtheCompanyscounseldeemnecessaryunder
applicablelaworpursuanttothisAgreement.

9. REPRESENTATIONS, WARRANTIES, COVENANTS, AND ACKNOWLEDGMENTS. Youherebyagreethat


intheeventtheCompanyandtheCompanyscounseldeemitnecessaryoradvisableintheexerciseoftheirdiscretion,thetransfer
orissuanceofthesharesofStockissuedpursuanttothisAwardmaybeconditioneduponyoumakingcertainrepresentations,
warranties,andacknowledgmentsrelatingtocompliancewithapplicablesecuritieslaws.

Exhibit 21
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10. VOTING AND OTHER RIGHTS. SubjecttothetermsofthisAgreement,youshallnothaveanyvotingrightsor
anyotherrightsandprivilegesofashareholderoftheCompanyunlessanduntilsharesofStockareissueduponpaymentofthis
Award.

11. CODE SECTION 409A. ItistheintentthatthetermsrelatingtothevestingandpaymentoftheAwardassetforthin


thisAgreementshallqualifyforexemptionfromorcomplywiththerequirementsofSection409AoftheCode,andanyambiguities
hereinwillbeinterpretedtosoqualifyorcomply.Notwithstandingtheforegoingoranythinghereintothecontrary,ifitis
determinedthatthisAwardfailstosatisfytherequirementsoftheshort-termdeferralexemptionandisotherwisedeferred
compensationsubjecttoSection409AoftheCode,andifyouareaspecifiedemployee(asdefinedunderSection409A(a)(2)(B)
(i)oftheCode)asofthedateofyourseparationfromservice(asdefinedunderTreasuryRegulationSection1.409A-1(h)),then
theissuanceofanysharesofStockthatwouldotherwisebemadeuponthedateoftheseparationfromserviceorwithinthefirstsix
(6)monthsthereafterwillnotbemadeontheoriginallyscheduleddateandwillinsteadbeissuedinalumpsumonthedatethatis
six(6)monthsandonedayafterthedateoftheseparationfromservice,butonlyifsuchdelayintheissuanceofthesharesis
necessarytoavoidtheimpositionofadditionaltaxationonyouinrespectofthesharesunderSection409AoftheCode.The
Companyreservestheright,totheextenttheCompanydeemsnecessaryoradvisableinitssolediscretion,tounilaterallyamendor
modifythisAgreementasmaybenecessarytoensurethatallpaymentsprovidedforunderthisAgreementaremadeinamanner
thatqualifiesforexemptionfromorcomplieswithSection409AoftheCode;provided,however,thattheCompanymakesno
representationthatthevestingorpaymentspursuanttothisAwardprovidedforunderthisAgreementwillbeexemptfromor
complywithSection409AoftheCodeandmakesnoundertakingtoprecludeSection409AoftheCodefromapplyingtothe
vestingorpaymentspursuanttothisAwardorrequirethatanyvestingorpaymentspursuanttothisAwardcomplywiththerequire
Sectionof409AoftheCode.TheCompanywillhavenoliabilitytoyouoranyotherpartyiftheAward,thedeliveryofsharesof
StockuponpaymentoftheAwardorotherpaymenthereunderthatisintendedtobeexemptfrom,orcompliantwith,CodeSection
409A,isnotsoexemptorcompliantorforanyactiontakenbytheCompanywithrespectthereto.

12. NOTICES. AnynoticesprovidedforinthisAgreement,theGrantNoticeorthePlanshallbegiveninwritingand


shallbedeemedeffectivelygivenuponreceiptor,inthecaseofnoticesdeliveredbytheCompanytoyou,five(5)daysafterdeposit
intheUnitedStatesmail,postageprepaid,addressedtoyouatthelastaddressyouprovidedtotheCompany.

13. NATURE OF GRANT. InacceptingtheAward,youacknowledgeandagreethat:

(a)thePlanisestablishedvoluntarilybytheCompany,itisdiscretionaryinnatureanditmaybemodified,
amended,suspendedorterminatedbytheCompanyatanytime,(subjecttoanylimitationssetforthinthePlan);

(b)theAwardisvoluntaryandoccasionalanddoesnotcreateanycontractualorotherrighttoreceivefuture
awards,orbenefitsinlieuofawards,evenifotherawardshavebeenawardedrepeatedlyinthepast;

Exhibit 21
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(c)alldecisionswithrespecttofutureAwards,ifany,willbeatthesolediscretionoftheCompany;

(d)yourparticipationinthePlanisvoluntary;

(e)theAwardandthesharesofStocksubjecttotheAwardarenotintendedtoreplaceanypensionrightsor
compensation;

(f)theAwardandthesharesofStocksubjecttotheAwardarenotpartofnormalorexpectedcompensationor
salaryforanypurposes,including,butnotlimitedto,calculatinganyseverance,resignation,termination,redundancy,dismissal,end
ofservicepayments,bonuses,long-serviceawards,pensionorretirementorwelfarebenefitsorsimilarpaymentsandinnoevent
shouldbeconsideredascompensationfor,orrelatinginanywayto,pastservicesfortheCompany,theEmployerorany
ParticipatingCompany;

(g)thefuturevalueoftheunderlyingsharesofStockisunknownandcannotbepredictedwithanycertainty;

(h)noclaimorentitlementtocompensationordamagesshallarisefromforfeitureofyourAwardresultingfrom
terminationofyouremploymentorServiceoryourbreachofanytermshereof(foranyreasonwhatsoeverandwhetherornotin
breachoflocallaborlawsorlaterfoundinvalid),andinconsiderationofthegrantoftheAwardtowhichyouareotherwisenot
entitled,youirrevocablyagreenevertoinstituteanyclaimagainsttheCompany,waiveyourability,ifany,tobringanysuchclaim,
andreleasetheCompanyfromanysuchclaim;if,notwithstandingtheforegoing,anysuchclaimisallowedbyacourtofcompetent
jurisdiction,then,byparticipatinginthePlan,youshallbedeemedirrevocablytohaveagreednottopursuesuchclaimandagreeto
executeanyandalldocumentsnecessarytorequestdismissalorwithdrawalofsuchclaim;

(i)theAwardandthebenefitsevidencedbythisAgreementdonotcreateanyentitlement,nototherwise
specificallyprovidedforinthePlanorprovidedbytheCompanyinitsdiscretion,tohavetheAwardoranysuchbenefitstransferred
to,orassumedby,anothercompany,nortobeexchanged,cashedoutorsubstitutedfor,inconnectionwithanycorporatetransaction
affectingtheCompanysStock;

(j)theAwardissubjecttovestingbasedonsatisfactionofPerformanceGoalsasprovidedinSection10.2ofthe
Plan,asprovidedherein.TheAwardshallbeinterpretedandadministeredtosatisfytherequirementsofSection162(m)(4)(C)ofthe
Codeandtheregulationsthereunder;and

(k)theCompanyisnotprovidinganytax,legalorfinancialadvice,noristheCompanymakingany
recommendationsregardingyourparticipationinthePlan,oryouracquisitionorsaleoftheunderlyingsharesofStock;youare
herebyadvisedtoconsultwithyourownpersonaltax,legalandfinancialadvisorsregardingyourparticipationinthePlanbefore
takinganyactionrelatedtothePlan.

Exhibit 21
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14. APPLICABLE LAW. ThisAgreementshallbegovernedbythelawsoftheStateofCaliforniaasiftheAgreement
werebetweenCaliforniaresidentsandasifitwereenteredintoandtobeperformedentirelywithintheStateofCalifornia.

15. ARBITRATION. AnydisputeorclaimconcerninganyRestrictedStockUnitsgranted(ornotgranted)pursuanttothe


PlanandanyotherdisputesorclaimsrelatingtoorarisingoutofthisAgreementorthePlanshallbefully,finallyandexclusively
resolvedbybindingarbitrationconductedbytheAmericanArbitrationAssociationpursuanttothecommercialarbitrationrulesin
SanDiego,California.ByacceptingthisAward,youandtheCompanywaiveyourrespectiverightstohaveanysuchdisputesor
claimstriedbyajudgeorjury.

16. AMENDMENT. YourAwardmaybeamendedasprovidedinthePlanatanytime,providednosuchamendmentmay


adverselyaffectthisAwardwithoutyourconsentunlesssuchamendmentisnecessarytocomplywithanyapplicablelawor
governmentregulation,oriscontemplatedinSection11hereof.NoamendmentoradditiontothisAgreementshallbeeffective
unlessinwritingorinsuchelectronicformasmaybedesignatedbytheCompany.

17. GOVERNING PLAN DOCUMENT. ThisAwardissubjecttothisAgreement,theGrantNoticeandallthe


provisionsofthePlan,theprovisionsofwhichareherebymadeapartofthisAgreement,andisfurthersubjecttoallinterpretations,
amendments,rulesandregulationswhichmayfromtimetotimebepromulgatedandadoptedpursuanttothePlan.Intheeventof
anyconflictbetweentheprovisionsofthisAgreement,theGrantNoticeandthoseofthePlan,theprovisionsofthePlanshall
control.

18. SEVERABILITY. IfanyprovisionofthisAgreementisheldtobeunenforceableforanyreason,itshallbeadjusted


ratherthanvoided,ifpossible,inordertoachievetheintentofthepartiestotheextentpossible.Inanyevent,allotherprovisionsof
thisAgreementshallbedeemedvalidandenforceabletothefullextentpossible.

19. DESCRIPTION OF ELECTRONIC DELIVERY .


ThePlandocuments,whichmayincludebutdonotnecessarily
include:thePlan,theGrantNotice,thisAgreement,andanyreportsoftheCompanyprovidedgenerallytotheCompanys
stockholders,maybedeliveredtoyouelectronically.Inaddition,ifpermittedbytheCompany,youmayelectronicallyacceptand
acknowledgetheGrantNoticeand/orthisAgreementand/ordeliversuchdocumentstotheCompanyortosuchthirdpartyinvolved
inadministeringthePlanastheCompanymaydesignatefromtimetotime.Suchmeansofelectronicacknowledgement,acceptance
and/ordeliverymayincludebutdonotnecessarilyincludeuseofalinktoaCompanyintranetortheinternetsiteofathirdparty
involvedinadministeringthePlan,thedeliveryofthedocumentviaelectronicmail(e-mail)orsuchothermeansspecifiedbythe
Company.Youherebyconsenttoreceivetheabove-listeddocumentsbyelectronicdeliveryand,ifpermittedbytheCompany,agree
toparticipateinthePlanthroughanon-lineorelectronicsystemestablishedandmaintainedbytheCompanyorathirdparty
designatedbytheCompany,assetforthherein.

20. WAIVER. ThewaiverbytheCompanywithrespecttoyour(oranyotherParticipants)complianceofanyprovision


ofthisAgreementshallnotoperateorbeconstruedasawaiverofanyotherprovisionofthisAgreement,orofanysubsequent
breachofsuchpartyofaprovisionofthisAgreement.

Exhibit 21
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21. REPAYMENT/FORFEITURE. Anybenefitsyoumayreceivehereundershallbesubjecttorepaymentorforfeiture
asmayberequiredtocomplywith(a)anyapplicablelistingstandardsofanationalsecuritiesexchangeadoptedinaccordancewith
Section954oftheDodd-FrankWallStreetReformandConsumerProtectionAct(regardingrecoveryoferroneouslyawarded
compensation)andanyimplementingrulesandregulationsoftheU.S.SecuritiesandExchangeCommissionadoptedthereunder,(b)
similarrulesunderthelawsofanyotherjurisdictionand(c)anypoliciesadoptedbytheCompanytoimplementsuchrequirements,
alltotheextentdeterminedbytheCompanyinitsdiscretiontobeapplicabletoyou.

Exhibit 21
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Attachment 1

QUALCOMM INCORPORATED
EXCLUSIVE CONSULTING AGREEMENT

1. ConsultingServicesFollowingNormalRetirementAge.IntheeventyouterminateyouremploymentwiththeParticipating
Companiesandreceiveorareentitledtoreceiveadditionalvesting,paymentsorotherrightsorbenefitsundertheAwardtowhich
thisExclusiveConsultingAgreementisattachedasaresultofhavingpreviouslyattainedNormalRetirementAge,youwillprovide
the Company consulting services related to the subject matter of that employment as provided in this Exclusive Consulting
Agreement.Suchconsultingserviceswillnotexceedfive(5)hourspermonth,andtherewillbenoseparatecompensationforsuch
servicesbeyondthatprovidedintheAward.ShouldtheCompanyrequestservicesinexcessoffive(5)hourspermonth,youand
Companywillnegotiateappropriatecompensationforsuchadditionalservicesbeforetheyareundertaken.Yourepresent,warrant
and covenant that you will perform any services under this Exclusive Consulting Agreement in a timely, professional and
workmanlikemannerandthatallservices,materials,informationanddeliverablesprovidedbyyouhereunderwillcomplywith(i)
therequirementscommunicatedbyCompany,(ii)theCompanyspoliciesandprocedures;and(iii)anyotheragreementsbetween
youandtheCompany,includingbutnotlimitedtoanyseverance,confidentialityorproprietaryagreements.Allcapitalizedtermsin
thisExclusiveConsultingAgreementnototherwisedefinedhereinshallhavethemeaningprescribedbytheQualcommIncorporated
2016Long-TermIncentivePlan(thePlan
)ortheAwardthereundertowhichthisExclusiveConsultingAgreementisattached.

2. TheAward.Youareaformerhigh-level executivewithatleast10yearsservicewiththeCompanyandassuchyouare
entitledtoadditionalvesting,paymentsorotherrightsorbenefitsundertheAwardasaresultofhavingreachedNormalRetirement
Age.YouragreementtothetermsandconditionsofthisExclusiveConsultingAgreementisanexpressconditionoftheAwardand
theadditionalprovisionsoftheAwardapplicabletoyoufollowingattainmentofNormalRetirementAge.

3. IndependentContractorRelationship.YourrelationshipwithCompanyunderthisExclusiveConsultingAgreementisthatof
an independent contractor, and nothing herein is intended to, or shall be construed to, create a partnership, agency, joint venture,
employment, or similar relationship. You will not be entitled to any of the benefits that Company may make available to its
employees, including, but not limited to, group health or life insurance, profitsharing benefits, or retirement benefits, or awards
underthePlanunlessexpresslyprovidedinwritingotherwise.YouagreethatprovidingservicesunderthisExclusiveConsulting
AgreementshallnotbetreatedasServiceforpurposesofthePlanortheAward.Youarenotauthorizedtomakeanyrepresentation,
contract, or commitment on behalf of Company unless specifically requested or authorized in writing to do so by a Company
officer. Youaresolelyresponsible for,andwillfile,onatimelybasis,alltaxreturnsandpaymentsrequired tobefiledwith,or
madeto,anyfederal,state,orlocaltaxauthority.YouwillindemnifyandholdharmlessCompanyfromandagainstanyandalltax
liabilityrelatedtothisExclusiveConsultingAgreementaswellasanyclaims,actions,orchargesarisingoutoforcausedbyyour
classificationasanindependentcontractor.

4.Exclusivity.

Exhibit 21
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4.1 TheconsultancyarrangementcontemplatedbythisExclusiveConsultingAgreementshallbeonanexclusivebasis.
Youshallnot,duringtheTerm,withoutthepriorwrittenconsentoftheCompensationCommittee,engageinanywork,services,or
otheractivitiesforanypersonorentitywhichdirectlyorindirectlycompeteswithCompanyinanyway.Thisincludes,butisnot
limited to acting as an employee, officer, director, contractor, owner, consultant, or agent of any such person or entity. The
determinationofwhetherapersonorentityiscompetitivewithCompanyshallbesubjecttothesoleandexclusivediscretionofthe
CompensationCommittee.Notwithstandingtheabove,theCompensationCommitteemayelecttowaivethisExclusivityprovision
as to any particular person or entity in its sole and exclusive discretion. Such a waiver shall not extend to any other persons or
entities.YoushallactinthebestinterestofCompanywhileprovidingtheExclusiveConsultingServicestoCompany.

5.TermandTermination.

5.1 Term.ThisExclusiveConsultingAgreementiseffectiveasofthedateofyourterminationofemployment
withCompanyfollowingNormalRetirementAgeandwillterminateonthetwoyearanniversarythereofunlessterminatedearlieras
setforthbelow(theTerm
).

5.2 TerminationbyCompany.CompanymayterminatethisExclusiveConsultingAgreementbeforetheendof
theTermforanybreachofSection4hereofbyyouoranymaterialbreachbyyouofanyotherprovisionhereof.ShouldCompany
believethatyoubreachedthisExclusiveConsultingAgreementinamannerthatallowsaterminationpursuanttothisSection5.2,
Companywillnotifyyouinwritingandallowyoutocureanybreach(ifsuchbreachiscurable)withinten(10)daysafterthedateof
Companyswrittennoticeofbreach.YouunderstandthatifCompanyterminatesthisExclusiveConsultingAgreementpursuantto
thisSection5.2,youwillforfeitalladditionalvesting,paymentsorotherrightsorbenefitsundertheAwardasaresultofhaving
attainedNormalRetirementAgeandyouwillbesubjecttotheEquityClawbackprovisionsofSection6,below.

5.3TerminationbyYou.YoumaynotterminatethisExclusiveConsultingAgreementduringtheTermexceptor
unless Company materially breaches this Consulting Agreement. Should you believe that Company materially breached this
ExclusiveConsultingAgreement,youwillnotifytheCompanyinwritingandallowCompanytocureanybreach(ifsuchbreachis
curable)withinten(10)daysafterthedateofyourwrittennoticeofbreach.

6. EquityClawback.IntheeventofanybreachbyyouofSection4hereoforanymaterialbreachbyyouofanyotherprovision
hereof, then any additional vesting, payments or other rights or benefits you may have as a result of having attained Normal
Retirement Age shall automatically and immediately terminate and be forfeited. In addition, you shall, within 30 days following
noticefromCompany, paytotheCompanyanamountequaltotheaggregatebenefit,valueorgainyourealizedorobtainedasa
result of anyadditional vesting, payments orother rights orbenefits youreceived under theAward asaresult of having attained
NormalRetirementAge.

Exhibit 21
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EXHIBIT 10.37

QUALCOMM INCORPORATED
2016 LONG-TERM INCENTIVE PLAN
EXECUTIVE PERFORMANCE STOCK UNIT AWARD
GRANT NOTICE

Qualcomm Incorporated (the Company


), pursuant to its 2016 Long-Term Incentive Plan (the Plan
), hereby grants to you, the
Participant named below, a Performance Stock Unit Award (the Award
) subject to all of the terms and conditions as set forth in this
ExecutivePerformanceStockUnitAwardGrantNotice(Grant
Notice
),theExecutivePerformanceStockUnitAwardAgreement(the
Agreement
),whichisattachedhereto,andthePlan,whichareincorporatedhereinintheirentirety.AcopyofthePlancanbeobtainedfrom
the Stock Administration website, located on the Companys internal webpage, or you may request a hard copy from the Stock
AdministrationDepartment.

Participant
:First_NameLast_NameGrant
No
.:Number

Emp
#
:ID Date
of
Grant
:Grant_Date

Target
Relative
Total
Shareholder
Return
(RTSR)
Shares
:TargetRTSRShares

Target
Return
on
Invested
Capital
(ROIC)
Shares
:TargetROICShares

Performance
Period
:1stMeasurementPeriod

Vesting
Date
:Date

Additional Terms/Acknowledgments: Youmustacknowledge,intheformdeterminedbytheCompany,receiptof,andrepresentthatyou


haveread,understand,acceptandagreetothetermsandconditionsof,thisGrantNotice,theAgreementincludingtheExclusiveConsulting
AgreementattachedtotheAgreementandthePlan(including,butnotlimitedto,thebindingarbitrationprovisioninSection3.7ofthePlan).

Qualcomm Incorporated:
By:/s/StevenM.Mollenkopf
StevenM.Mollenkopf
ChiefExecutiveOfficer
Dated:Grant_Date

Attachment:ExecutivePerformanceStockUnitAwardAgreement(U.S.PSU-EX-A10)

Exhibit 21
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QUALCOMM INCORPORATED
2016 LONG-TERM INCENTIVE PLAN
EXECUTIVE PERFORMANCE STOCK UNIT AWARD
AGREEMENT

QualcommIncorporated(theCompany
)hasgrantedthisPerformanceStockUnitAward(thisAward
)toyou,the
ParticipantnamedintheExecutivePerformanceStockUnitAwardGrantNotice(theGrant
Notice
)pursuanttothetermsand
conditionssetforthintheGrantNotice,thisExecutivePerformanceStockUnitAwardAgreementandtheattachmentshereto
(togetherwiththeGrantNotice,theAgreement
)andthe2016Long-TermIncentivePlan(thePlan
).Capitalizedtermsthat
arenotexplicitlydefinedintheGrantNoticeorthisAgreementbutaredefinedinthePlanshallhavethesamedefinitionsasinthe
Plan.

ThedetailsofthisAwardareasfollows:

1. VESTING.

1.1 SERVICE VESTING. ExcepttotheextentprovidedinSection1.2andSection6,youwillbefullyvestedin


thisAwardontheVestingDatespecifiedintheGrantNoticeifandtotheextentthatyoucontinueinServicethroughthatVesting
Date.IfyourServiceterminatesbeforetheVestingDateforanyreasonotherthanasspecifiedinSection1.2,thisAwardshallbe
forfeited.

1.2 VESTING UPON TERMINATION OF SERVICE DUE TO DEATH, DISABILITY OR


TERMINATION AFTER CHANGE IN CONTROL, OR UPON ATTAINMENT OF NORMAL RETIREMENT AGE. You
willbevestedinthisAwardifyourServiceterminatesbeforetheVestingDatespecifiedintheGrantNoticeduetodeath,Disability
orTerminationAfterChangeinControl(asdefinedbelow)oruponthedateyouhaveattainedNormalRetirementAge(asdefined
below),ifandtotheextentthatyoucontinueinServicethroughthedateofsuchterminationofServiceorthedateyouhaveattained
NormalRetirementAge.IfyourServiceterminatesforanyreasonotherthanduetodeath,DisabilityorTerminationAfterChange
inControl(asdefinedbelow),orpriortothedateonwhichyouhaveattainedNormalRetirementAge,thisAwardshallbeforfeited.

(a)Certain Definitions.

(i)Cause
shallmeananyofthefollowing:(1)yourtheftof,dishonestywithrespectto,orfalsification
ofanyParticipatingCompanydocumentsorrecords;(2)yourimproperuseordisclosureofaParticipating
Companysconfidentialorproprietaryinformation;(3)anyactionbyyouwhichhasadetrimentaleffectona
ParticipatingCompanysreputationorbusiness;(4)yourfailureorinabilitytoperformanyreasonableassigned
dutiesafterwrittennoticefromaParticipatingCompanyof,andareasonableopportunitytocure,suchfailureor
inability;(5)anymaterialbreachbyyouofanyemploymentorserviceagreementbetweenyouandaParticipating
Company,whichbreachisnotcuredpursuanttothetermsofsuchagreement;(6)yourconviction(includingany

Exhibit 21
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pleaofguiltyornolo
contendere
)ofanycriminalactwhichimpairsyourabilitytoperformyourdutieswitha
ParticipatingCompany;or(7)violationofamaterialCompanyorParticipatingCompanypolicy.

(ii)Good
Reason
shallmeananyoneormoreofthefollowing:

a)withoutyourexpresswrittenconsent,theassignmenttoyouofanyduties,oranylimitationof
yourresponsibilities,substantiallyinconsistentwithyourpositions,duties,responsibilitiesandstatuswiththe
ParticipatingCompanyGroupimmediatelypriortothedateofaChangeinControl;

b)withoutyourexpresswrittenconsent,therelocationoftheprincipalplaceofyouremploymentor
servicetoalocationthatismorethanfifty(50)milesfromyourprincipalplaceofemploymentorservice
immediatelypriortothedateofaChangeinControl,ortheimpositionoftravelrequirementssubstantially
moredemandingofyouthansuchtravelrequirementsexistingimmediatelypriortothedateoftheChangein
Control;

c)anyfailurebytheParticipatingCompanyGrouptopay,oranymaterialreductionbythe
ParticipatingCompanyGroupof,(A)yourbasesalaryineffectimmediatelypriortothedateofaChangein
Control(unlessreductionscomparableinamountanddurationareconcurrentlymadeforallotheremployees
oftheParticipatingCompanyGroupwithresponsibilities,organizationallevelandtitlecomparabletoyours),
or(B)yourbonuscompensation,ifany,ineffectimmediatelypriortothedateofaChangeinControl(subject
toapplicableperformancerequirementswithrespecttotheactualamountofbonuscompensationearnedby
you);

d)anyfailurebytheParticipatingCompanyGroupto(A)continuetoprovideyouwiththe
opportunitytoparticipate,ontermsnolessfavorablethanthoseineffectforthebenefitofanyemployeeor
serviceprovidergroupwhichcustomarilyincludesapersonholdingtheemploymentorserviceprovider
positionoracomparablepositionwiththeParticipatingCompanyGroupthenheldbyyou,inanybenefitor
compensationplansandprograms,including,butnotlimitedto,theParticipatingCompanyGroupslife,
disability,health,dental,medical,savings,profitsharing,stockpurchaseandretirementplans,ifany,inwhich
youwereparticipatingimmediatelypriortothedateoftheChangeinControl,ortheirequivalent,or(B)
provideyouwithallotherfringebenefits(ortheirequivalent)fromtimetotimeineffectforthebenefitofany
employeegroupwhichcustomarilyincludesapersonholdingtheemploymentorserviceproviderpositionor
acomparablepositionwiththeParticipatingCompanyGroupthenheldbyyou;

Exhibit 21
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e)anybreachbytheParticipatingCompanyGroupofanymaterialagreementbetweenyouanda
ParticipatingCompanyconcerningyouremployment;or

f)anyfailurebytheCompanytoobtaintheassumptionofanymaterialagreementbetweenyouand
theCompanyconcerningyouremploymentbyasuccessororassigneeoftheCompany.

(iii)Normal
Retirement
Age
shallbethelaterof(1)thedatewhichissix(6)monthsaftertheGrant
Dateor(2)thedateonwhichyouhaveattainedagefifty-five(55)andcompletedatleastten(10)yearsof
consecutiveService.

(iv)Termination
After
Change
in
Control
shallmeaneitherofthefollowingeventsoccurringwithin
twenty-four(24)monthsafteraChangeinControl:

a)terminationbytheParticipatingCompanyGroupofyourServicewiththeParticipatingCompany
GroupforanyreasonotherthanforCause;or

b)yourresignationforGoodReasonfromallcapacitiesinwhichyouarethenrenderingServiceto
theParticipatingCompanyGroupwithinareasonableperiodoftimefollowingtheeventconstitutingGood
Reason.

Notwithstandinganyprovisionhereintothecontrary,TerminationAfterChangeinControlshallnotincludeanytermination
ofyourServicewiththeParticipatingCompanyGroupwhich(1)isforCause;(2)isaresultofyourdeathorDisability;
(3)isaresultofyourvoluntaryterminationofServiceotherthanforGoodReason;or(4)occurspriortotheeffectivenessof
aChangeinControl.

1.3 SUSPENSION OF VESTING. NotwithstandinganyotherprovisionofthePlanorthisAgreement,the


Companyreservestheright,initssolediscretion,tosuspendvestingofthisAwardintheeventofanyleaveofabsenceorpart-time
Service.

2. SETTLEMENT OF THE AWARD.

2.1 AMOUNT, FORM AND TIMING OF PAYMENT OF AWARD THAT VESTS ON VESTING DATE
SPECIFIED IN THE GRANT NOTICE. IfyourAwardvestsontheVestingDatespecifiedintheGrantNotice,youshallbepaid
inanumberofsharesofStockequaltothetotalnumberofSharesEarned(ifany)determinedpursuanttoAttachment1,whichis
attachedheretoandmadeaparthereof.SuchsharesofStockshallbepaidwithinthe30daysafterthelaterof(a)theVestingDate
specifiedintheGrantNoticeor(b)thedateonwhichtheCompensationCommittee(theCommittee
)determinesandcertifiesin
writingthenumberofshares(ifany)thatarepayable,whichdeterminationandcertificationshallbemade

Exhibit 21
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bytheCommitteenolaterthantheNovember30ththatnextfollowstheendofthePerformancePeriod.

2.2 AMOUNT, FORM AND TIMING OF PAYMENT OF AWARD THAT VESTS UPON ATTAINMENT
OF NORMAL RETIREMENT AGE. IfyourAwardvestsuponyourattainmentofNormalRetirementAge,youshallbepaidina
numberofsharesofStockequaltothetotalnumberofSharesEarned(ifany)determinedpursuanttoAttachment1,whichis
attachedheretoandmadeaparthereof.SuchsharesofStockshallbepaidwithinthe30daysafterthelaterof(a)theVestingDate
specifiedintheGrantNoticeor(b)thedateonwhichtheCommitteedeterminesandcertifiesinwritingthenumberofshares(if
any)thatarepayable,whichdeterminationandcertificationshallbemadebytheCommitteenolaterthantheNovember30ththat
nextfollowstheendofthePerformancePeriod;provided,however,thatpaymentshallbemadepursuanttothisSection2.2
followingyourterminationofemploymentwiththeParticipatingCompanyonlyifsuchterminationwasnotforCauseandyou(A)
executeageneralreleaseofclaimsinaformsatisfactorytotheCompanyandthatgeneralreleasebecomeirrevocablebeforethe
60thdayfollowingyourterminationofemployment,and(B)complywiththerequirementsoftheExclusiveConsultingAgreement
attachedheretoasAttachment2(theConsulting
Agreement
).Notwithstandingtheforegoing,intheeventyouviolateanyofthe
provisionscontainedintheConsultingAgreement,allrightstopaymentunderthisSection2.2.shallbeimmediatelyforfeited
withoutconsideration.IntheeventyouremploymentisterminatedforCause,youwillimmediatelyforfeityourrighttopayment
underthisSection2.2.

2.3 AMOUNT, FORM AND TIMING OF PAYMENT OF AWARD THAT VESTS UPON TERMINATION
OF SERVICE BEFORE THE VESTING DATE SPECIFIED IN THE GRANT NOTICE DUE TO DEATH, DISABILITY
OR TERMINATION AFTER CHANGE IN CONTROL. IfyourServiceterminatesbeforetheVestingDatespecifiedinthe
GrantNoticeduetodeath,DisabilityorTerminationAfteraChangeinControl,you(orintheeventofdeath,yourestate,personal
representative,orbeneficiarytowhomthisAwardmaybetransferredbywillorbythelawsofdescentanddistribution),willbepaid
anumberofsharesofStockequaltotheproductof(1)thesumof(a)theRTSRSharesEarnedand(b)theROICSharesEarned
determinedpursuanttothisAttachment1exceptthatthePerformancePeriodforthisdeterminationwillbetheperiodbeginningon
thedatespecifiedintheGrantNotice,andendingonthelastdayoftheCompanysfiscalyearinwhichyourServiceterminates,
multipliedby(2)afractionthenumeratorofwhichisthenumberofwholeandpartialmonths(roundeduptothenextwholemonth)
fromthebeginningofthePerformancePerioduntilthedateyourServiceterminates,andthedenominatorofwhichis36.Sharesof
StockpayablepursuanttothisSection2.3shallbepaidwithinthe30daysafterthedateonwhichtheCommitteedeterminesand
certifiesinwritingthenumberofsharesofStock(ifany)thatarepayablepursuanttothisSection2.3,whichdeterminationand
certificationshallbemadebytheCommitteenolaterthantheNovember30ththatnextfollowstheendoftheCompanysfiscalyear
inwhichsuchterminationofServiceoccurred.

2.4 AMOUNT, FORM AND TIMING OF PAYMENT UPON DEATH DURING THE PERFORMANCE
PERIOD FOLLOWING TERMINATION OF SERVICE DUE TO DISABILITY. IfyourServicewiththeEmployer
terminatesbecauseofyourDisabilityandyouareentitledtoreceiveorhavereceivedapaymentofStockpursuantto

Exhibit 21
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Section2.3,andyoulaterdieduringthePerformancePeriodspecifiedintheGrantAgreement,yourestate,personalrepresentative,
orbeneficiarytowhomthisAwardmaybetransferredbywillorbythelawsofdescentanddistributionwillbepaidanadditional
numberofsharesofStockequaltothedifference(ifany)between(1)thesharesofStockyouwouldhavereceivedunderSection2.3
hadyouremainedinServiceuntilthedateofyourdeath,reducedby(2)anysharesofStockyouareentitledtoreceiveorhave
receivedpursuanttoSection2.3asaresultofterminationofyourServiceduetoyourDisability.SharesofStockpayablepursuantto
thisSection2.4shallbepaidwithinthe30daysafterthedateonwhichtheCommitteedeterminesandcertifiesinwritingthe
numberofsharesofStock(ifany)thatarepayablepursuanttothisSection2.4,whichdeterminationandcertificationshallbemade
bytheCommitteenolaterthantheNovember30ththatnextfollowstheendoftheCompanysfiscalyearinwhichsuchtermination
ofServiceoccurred.

2.5 TAX WITHHOLDING. YouacknowledgethattheCompanyand/ortheParticipatingCompanythatemploys


you(theEmployer
)maybesubjecttowithholdingtaxobligationsarisingbyreasonofthevestingand/orpaymentofthisAward.
YouauthorizeyourEmployertosatisfythewithholdingtaxobligationsbyoneoracombinationofthefollowingmethods,as
selectedbytheCompanyinitssolediscretion:(a)withholdingfromyourpayandanyotheramountspayabletoyou;(b)withholding
ofStockand/orcashfromthepaymentofthisAward;(c)arrangingforthesaleofsharesofStockpayableinconnectionwiththis
Award(onyourbehalfandatyourdirectionwhichyouauthorizebyacceptingthisAward);or(d)anyothermethodallowedbythe
Planorapplicablelaw.IfyourEmployersatisfiesthewithholdingobligationsbywithholdinganumberofwholesharesofStockas
describedinsubsection(b)herein,youwillbedeemedtohavebeenissuedthefullnumberofsharesofStocksubjecttothisAward,
notwithstandingthatanumberofsharesisheldbackinordertosatisfythewithholdingobligations.TheFair
Market
Value
of
anyStockwithheldpursuanttothisSection2.5shallbeequaltotheclosingpriceofashareofStockasquotedonanynationalor
regionalsecuritiesexchangeormarketsystemconstitutingtheprimarymarketfortheStockonthedateofdetermination(or,ifthere
isnoclosingpriceonthatday,thelasttradingdaypriortothatday)or,iftheStockisnotlistedonanationalorregionalsecurities
exchangeormarketsystem,thevalueofashareofStockasdeterminedbytheCommitteeingoodfaithwithoutregardtoany
restrictionotherthanarestrictionwhich,byitsterms,willneverlapse.TheCompanyshallnotberequiredtoissueanysharesof
StockpursuanttothisAgreementunlessanduntilthewithholdingobligationsaresatisfied.

3. TAX ADVICE. Yourepresent,warrantandacknowledgethattheCompanyand,ifdifferent,yourEmployer,hasmade


nowarrantiesorrepresentationstoyouwithrespecttotheincometaxconsequencesofthetransactionscontemplatedbythisAward,
andyouareinnomannerrelyingontheCompany,yourEmployerortheirrepresentativesforanassessmentofsuchtax
consequences.YOUUNDERSTANDTHATTHETAXLAWSANDREGULATIONSARESUBJECTTOCHANGE.YOU
SHOULDCONSULTYOUROWNTAXADVISORREGARDINGTHETAXTREATMENTOFTHISORANYOTHER
AWARD.NOTHINGSTATEDHEREINISINTENDEDORWRITTENTOBEUSED,ANDCANNOTBEUSED,FORTHE
PURPOSEOFAVOIDINGTAXPAYERPENALTIES.

Exhibit 21
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4. DIVIDEND EQUIVALENTS. IftheBoarddeclaresacashdividendontheCompanysStock,youwillbeentitledto
DividendEquivalentsintheform,payableonthetermsandatsuchtimesasprovidedinSection10.3ofthePlan.

5. SECURITIES LAW COMPLIANCE. Notwithstandinganythingtothecontrarycontainedherein,nosharesofStock


willbeissuedtoyouuponvestingofthisAwardunlesstheStockisthenregisteredundertheSecuritiesActor,ifsuchStockisnot
thensoregistered,theCompanyhasdeterminedthatsuchvestingandissuancewouldbeexemptfromtheregistrationrequirements
oftheSecuritiesAct.ByacceptingthisAward,youagreenottosellanyofthesharesofStockreceivedunderthisAwardatatime
whenapplicablelawsorCompanypoliciesprohibitasale.

6. CHANGE IN CONTROL. IntheeventofaChangeinControl,thesurviving,continuing,successor,orpurchasing


corporationorotherbusinessentityorparentthereof,asthecasemaybe(theAcquiring
Corporation
),may,withoutyour
consent,eitherassumetheCompanysrightsandobligationsunderthisAwardorsubstituteforthisAwardasubstantiallyequivalent
awardfortheAcquiringCorporationsstock.

6.1 Payout Pursuant to a Change in Control. IntheeventtheAcquiringCorporationelectsnottoassumeor


substituteforthisAwardinconnectionwithaChangeinControl,thevestingofthisAward,solongasyourServicehasnot
terminatedpriortothedateoftheChangeinControl,shallbeaccelerated,effectiveasofthedateten(10)dayspriortothedateof
theChangeinControl,andimmediatelypriortotheclosingoftheChangeinControl,youwillbepaidanumberofsharesofStock
equaltothesumof(a)theRTSRSharesEarneddeterminedpursuanttoAttachment1basedonaPerformancePeriodendingten
(10)daysbeforetheChangeinControl,plus(b)theTargetROICSharesspecifiedintheGrantNotice.

6.2 Vesting Contingent Upon Consummation. ThevestingofthisAwardandpaymentofanysharesofStockby


reasonofthisSection6shallbeconditionedupontheconsummationoftheChangeinControl.

6.3 Applicability of Agreement. Notwithstandingtheforegoing,sharesofStockacquireduponsettlementofthis


AwardpriortotheChangeinControlandanyconsiderationreceivedpursuanttotheChangeinControlwithrespecttosuchshares
shallcontinuetobesubjecttoallapplicableprovisionsofthisAgreementexceptasotherwiseprovidedinthisAgreement.

6.4 Continuation of Award. Notwithstandingtheforegoing,ifthecorporationthestockofwhichissubjecttothis


AwardimmediatelypriortoanOwnershipChangeEventconstitutingaChangeinControlisthesurvivingorcontinuingcorporation
andimmediatelyaftersuchOwnershipChangeEvent,lessthanfiftypercent(50%)ofthetotalcombinedvotingpowerofitsvoting
stockisheldbyanothercorporationorbyothercorporationsthataremembersofanaffiliatedgroupwithinthemeaningof
Section1504(a)oftheCode,withoutregardtotheprovisionsofSection1504(b)oftheCode,thisAwardshallnotterminateunless
theCommitteeotherwiseprovidesinitsdiscretion.

7. TRANSFERABILITY. PriortotheissuanceofsharesofStockinsettlementofthisAward,theAwardshallnotbe
subjectinanymannertoanticipation,alienation,sale,

Exhibit 21
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exchange,transfer,assignment,pledge,encumbrance,orgarnishmentbyyourcreditorsorbyyourbeneficiary(ifany),except(i)
transferbywillorbythelawsofdescentanddistributionor(ii)totheextentpermittedbytheCompany,transferbywritten
designationofabeneficiary,inaformacceptabletotheCompany,withsuchdesignationtakingeffectuponyourdeath.Allrights
withrespecttothePerformanceStockUnitsshallbeexercisableduringyourlifetimeonlybyyouoryourguardianorlegal
representative.PriortoactualpaymentofanysharesofStockpursuanttothisAward,thisAwardwillrepresentanunsecured
obligationoftheCompany,payable(ifatall)onlyfromthegeneralassetsoftheCompany.

8. AWARD NOT A SERVICE CONTRACT. ThisAwardisnotanemploymentorservicecontractandnothinginthis


Agreement,theGrantNoticeorthePlanshallbedeemedtocreateinanywaywhatsoeveranyobligationonyourparttocontinuein
theServiceofaParticipatingCompany,orofaParticipatingCompanytocontinueyourServicewiththeParticipatingCompany.In
addition,nothinginyourAwardshallobligatetheCompany,itsstockholders,Board,OfficersorEmployeestocontinueany
relationshipwhichyoumighthaveasaDirectororConsultantfortheCompany.

9. RESTRICTIVE LEGEND. StockissuedpursuanttothevestingandpaymentofthisAwardmaybesubjecttosuch


restrictionsuponthesale,pledgeorothertransferoftheStockastheCompanyandtheCompanyscounseldeemnecessaryunder
applicablelaworpursuanttothisAgreement.

10. REPRESENTATIONS, WARRANTIES, COVENANTS, AND ACKNOWLEDGMENTS. Youherebyagreethat


intheeventtheCompanyandtheCompanyscounseldeemitnecessaryoradvisableintheexerciseoftheirdiscretion,thetransfer
orissuanceofthesharesofStockissuedpursuanttothevestingandpaymentofthisAwardmaybeconditioneduponyoumaking
certainrepresentations,warranties,andacknowledgmentsrelatingtocompliancewithapplicablesecuritieslaws.

11. VOTING AND OTHER RIGHTS. SubjecttothetermsofthisAgreement,youshallnothaveanyvotingrightsor


anyotherrightsandprivilegesofashareholderoftheCompanyunlessanduntilsharesofStockareissueduponpaymentofthis
Award.

12. CODE SECTION 409A. ItistheintentthatthetermsrelatingtothevestingandthepaymentoftheAwardassetforth


inthisAgreementshallqualifyforexemptionfromorcomplywiththerequirementsofSection409AoftheCode,andany
ambiguitieshereinwillbeinterpretedtosoqualifyorcomply.Notwithstandingtheforegoingoranythinghereintothecontrary,ifit
isdeterminedthatthisAwardfailstosatisfytherequirementsoftheshort-termdeferralexemptionandisotherwisedeferred
compensationsubjecttoSection409AoftheCode,andifyouareaspecifiedemployee(asdefinedunderSection409A(a)(2)(B)
(i)oftheCode)asofthedateofyourseparationfromservice(asdefinedunderTreasuryRegulationSection1.409A-1(h)),then
theissuanceofanysharesofStockthatwouldotherwisebemadeuponthedateoftheseparationfromserviceorwithinthefirstsix
(6)monthsthereafterwillnotbemadeontheoriginallyscheduleddateandwillinsteadbeissuedinalumpsumonthedatethatis
six(6)monthsandonedayafterthedateoftheseparationfromservice,butonlyifsuchdelayintheissuanceofthesharesis
necessarytoavoidtheimpositionofadditionaltaxationonyouinrespectofthesharesunderSection409AoftheCode.The
Companyreservestheright,totheextenttheCompanydeemsappropriateoradvisableinitssolediscretion,tounilaterally

Exhibit 21
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amendormodifythisAgreementasmaybenecessarytoensurethatallvestingorpaymentsprovidedforunderthisAgreementare
madeinamannerthatqualifiesforexemptionfromorcomplieswiththerequirementsofSection409AoftheCode;provided,
however,thattheCompanymakesnorepresentationthatthevestingorpaymentspursuanttothisAwardwillbeexemptfromor
complywiththerequirementsofSection409AoftheCodeandmakesnoundertakingtoprecludeSection409AoftheCodefrom
applyingtothevestingorpaymentsofthisAwardorrequirethatanyvestingorpaymentspursuanttothisAwardcomplywiththe
requirementsofSection409AoftheCode.TheCompanywillhavenoliabilitytoyouoranyotherpartyiftheAward,thedelivery
ofsharesofStockuponpaymentoftheAwardorotherpaymenthereunderthatisintendedtobeexemptfrom,orcompliantwith,
Section409AoftheCode,isnotsoexemptorcompliantorforanyactiontakenbytheCompanywithrespectthereto.

13. NOTICES. AnynoticesprovidedforinthisAgreement,theGrantNoticeorthePlanshallbegiveninwritingand


shallbedeemedeffectivelygivenuponreceiptor,inthecaseofnoticesdeliveredbytheCompanytoyou,five(5)daysafterdeposit
intheUnitedStatesmail,postageprepaid,addressedtoyouatthelastaddressyouprovidedtotheCompany.

14. NATURE OF GRANT. InacceptingtheAward,youacknowledgeandagreethat:

(a)thePlanisestablishedvoluntarilybytheCompany,itisdiscretionaryinnatureanditmaybemodified,
amended,suspendedorterminatedbytheCompanyatanytime,(subjecttoanylimitationssetforthinthePlan);

(b)theAwardisvoluntaryandoccasionalanddoesnotcreateanycontractualorotherrighttoreceivefutureawards
orbenefitsinlieuofawards,evenifotherawardshavebeenawardedrepeatedlyinthepast;

(c)alldecisionswithrespecttofutureawards,ifany,willbeatthesolediscretionoftheCompany;

(d)yourparticipationinthePlanisvoluntary;

(e)theAwardandthesharesofStocksubjecttotheAwardareextraordinaryitemsthatdonotconstitute
compensationofanykindforServicesofanykindrenderedtotheCompanyortheEmployer,andwhichareoutsidethescopeof
youremploymentorservicecontract,ifany;

(f)theAwardandthesharesofStocksubjecttotheAwardarenotintendedtoreplaceanypensionrightsor
compensation;

(g)theAwardandthesharesofStocksubjecttotheAwardarenotpartofnormalorexpectedcompensationor
salaryforanypurposes,including,butnotlimitedto,calculatinganyseverance,resignation,termination,redundancy,dismissal,end
ofservicepayments,bonuses,long-serviceawards,pensionorretirementorwelfarebenefitsorsimilarpaymentsandinnoevent
shouldbeconsideredascompensationfor,orrelatinginanywayto,pastservicesfortheCompany,theEmployerorany
ParticipatingCompany;

Exhibit 21
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(h)thefuturevalueoftheunderlyingsharesofStockisunknownandcannotbepredictedwithanycertainty;

(i)noclaimorentitlementtocompensationordamagesshallarisefromforfeitureofyourAwardresultingfrom
terminationofyouremploymentorServiceoryourbreachofanytermshereof(foranyreasonwhatsoeverandwhetherornotin
breachoflocallaborlawsorlaterfoundinvalid),andinconsiderationofthegrantoftheAwardtowhichyouareotherwisenot
entitled,youirrevocablyagreenevertoinstituteanyclaimagainsttheCompany,waiveyourability,ifany,tobringanysuchclaim,
andreleasetheCompanyfromanysuchclaim;if,notwithstandingtheforegoing,anysuchclaimisallowedbyacourtofcompetent
jurisdiction,then,byparticipatinginthePlan,youshallbedeemedirrevocablytohaveagreednottopursuesuchclaimandagreeto
executeanyandalldocumentsnecessarytorequestdismissalorwithdrawalofsuchclaim;

(j)theAwardandthebenefitsevidencedbythisAgreementdonotcreateanyentitlement,nototherwisespecifically
providedforinthePlanorprovidedbytheCompanyinitsdiscretion,tohavetheAwardoranysuchbenefitstransferredto,or
assumedby,anothercompany,nortobeexchanged,cashedoutorsubstitutedfor,inconnectionwithanycorporatetransaction
affectingtheCompanysStock;

(k)theAwardisaPerformanceAwardgrantedpursuanttothePlanprovidingforanumberofPerformanceUnits
equaltotheTargetRTSRSharesandTargetROICSharesspecifiedintheGrantAgreement,whichshallbepayableinanumberof
sharesofStock(ifany)basedontheRTSRandROICforthePerformancePeriod,asprovidedherein.ThisPerformanceAward
shallbeinterpretedandadministeredtosatisfytherequirementsofsection162(m)(4)(C)oftheCodeandtheregulationsthereunder;
and

(l)theCompanyisnotprovidinganytax,legalorfinancialadvice,noristheCompanymakingany
recommendationsregardingyourparticipationinthePlan,oryouracquisitionorsaleoftheunderlyingsharesofStock;youare
herebyadvisedtoconsultwithyourownpersonaltax,legalandfinancialadvisorsregardingyourparticipationinthePlanbefore
takinganyactionrelatedtothePlan.

15. APPLICABLE LAW. ThisAgreementshallbegovernedbythelawsoftheStateofCaliforniaasiftheAgreement


werebetweenCaliforniaresidentsandasifitwereenteredintoandtobeperformedentirelywithintheStateofCalifornia.

16. ARBITRATION. AnydisputeorclaimconcerninganyPerformanceStockUnitsgranted(ornotgranted)pursuantto


thePlanandanyotherdisputesorclaimsrelatingtoorarisingoutofthisAgreementorthePlanshallbefully,finallyand
exclusivelyresolvedbybindingarbitrationconductedbytheAmericanArbitrationAssociationpursuanttothecommercial
arbitrationrulesinSanDiego,California.ByacceptingthisAward,youandtheCompanywaiveyourrespectiverightstohaveany
suchdisputesorclaimstriedbyajudgeorjury.

17. AMENDMENT. YourAwardmaybeamendedasprovidedinthePlanatanytime,providednosuchamendmentmay


adverselyaffectthisAwardwithoutyourconsentunlesssuchamendmentisnecessarytocomplywithanyapplicablelawor
governmentregulation,oris

Exhibit 21
Page 271
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232
contemplatedinSection12hereof.NoamendmentoradditiontothisAgreementshallbeeffectiveunlessinwritingorinsuch
electronicformasmaybedesignatedbytheCompany.

18. GOVERNING PLAN DOCUMENT. YourAwardissubjecttothisAgreement,theGrantNoticeandallthe


provisionsofthePlan,theprovisionsofwhichareherebymadeapartofthisAgreement,andisfurthersubjecttoallinterpretations,
amendments,rulesandregulationswhichmayfromtimetotimebepromulgatedandadoptedpursuanttothePlan.Intheeventof
anyconflictbetweentheprovisionsofthisAgreement,theGrantNoticeandthoseofthePlan,theprovisionsofthePlanshall
control.

19. SEVERABILITY. IfanyprovisionofthisAgreementisheldtobeunenforceableforanyreason,itshallbeadjusted


ratherthanvoided,ifpossible,inordertoachievetheintentofthepartiestotheextentpossible.Inanyevent,allotherprovisionsof
thisAgreementshallbedeemedvalidandenforceabletothefullextentpossible.

20. DESCRIPTION OF ELECTRONIC DELIVERY .


ThePlandocuments,whichmayincludebutdonotnecessarily
include:thePlan,theGrantNotice,thisAgreement,andanyreportsoftheCompanyprovidedgenerallytotheCompanys
stockholders,maybedeliveredtoyouelectronically.Inaddition,ifpermittedbytheCompany,youmayelectronicallyacceptand
acknowledgetheGrantNoticeand/orthisAgreementand/ordeliversuchdocumentstotheCompanyortosuchthirdpartyinvolved
inadministeringthePlanastheCompanymaydesignatefromtimetotime.Suchmeansofelectronicacknowledgement,acceptance
and/ordeliverymayincludebutdonotnecessarilyincludeuseofalinktoaCompanyintranetortheinternetsiteofathirdparty
involvedinadministeringthePlan,thedeliveryofthedocumentviaelectronicmail(e-mail)orsuchothermeansspecifiedbythe
Company.Youherebyconsenttoreceivetheabove-listeddocumentsbyelectronicdeliveryand,ifpermittedbytheCompany,agree
toparticipateinthePlanthroughanon-lineorelectronicsystemestablishedandmaintainedbytheCompanyorathirdparty
designatedbytheCompany,assetforthherein.

21. WAIVER. ThewaiverbytheCompanywithrespecttoyour(oranyotherParticipants)complianceofanyprovision


ofthisAgreementshallnotoperateorbeconstruedasawaiverofanyotherprovisionofthisAgreement,orofanysubsequent
breachofsuchpartyofaprovisionofthisAgreement.

22. REPAYMENT/FORFEITURE. Anybenefitsyoumayreceivehereundershallbesubjecttorepaymentorforfeiture


asmayberequiredtocomplywith(a)anyapplicablelistingstandardsofanationalsecuritiesexchangeadoptedinaccordancewith
Section954oftheDodd-FrankWallStreetReformandConsumerProtectionAct(regardingrecoveryoferroneouslyawarded
compensation)andanyimplementingrulesandregulationsoftheU.S.SecuritiesandExchangeCommissionadoptedthereunder,(b)
similarrulesunderthelawsofanyotherjurisdictionand(c)anypoliciesadoptedbytheCompany,includingbutnotlimitedtoany
policiesthatmaybeadoptedtoimplementtheforegoingstandardsorrules,alltotheextentdeterminedbytheCompanyinits
discretion.

Exhibit 21
Page 272
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232
ATTACHMENT 1

ForpurposesofSection2.1ofthisAgreement,SharesEarnedmeansthesumof(1)theRTSRSharesEarnedand(2)theROIC
SharesEarned,asdeterminedpursuanttothisAttachment1.

RTSR
Shares
Earned
meansthenumberofSharesdeterminedbymultiplyingtheTargetRTSRSharesspecifiedintheGrant
NoticebytheTSRPayoutPercentage,roundinguptothenearestwholeshare.ForpurposesofdeterminingtheRTSRShares
Earned:

Beginning
Period
Average
Price
meanstheaverageofficialclosingpricepershareoftheissueroverthe20-consecutive-
tradingdaysendingwithandincludingthefirstdayofthePerformancePeriod(iftheapplicabledayisnotatradingday,the
immediatelyprecedingtradingday).

Ending
Period
Average
Price
meanstheaverageofficialclosingpricepershareoftheissueroverthe20-consecutive-
tradingdaysendingwithandincludingthelastdayofthePerformancePeriod(iftheapplicabledayisnotatradingday,the
immediatelyprecedingtradingday).

Nasdaq-100
Companies
meansthecompaniesthatareincludedintheNASDAQ-100Index(publishedbyTheNASDAQ
StockMarket,oritssuccessor)continuouslyfromthebeginningthroughtheendofthePerformancePeriod.TheCommittee
shallhavetheauthoritytomakeappropriateadjustmentstotheextentnecessarytoaccountforextraordinary,unusualand
infrequentlyoccurringeventsandtransactionsinvolvingthatcompanytotheextentsuchadjustmentsawouldnotpreclude
thepaymentofTSRSharesEarnedfromsatisfyingtherequirementsofSection162(m)(4)(C)oftheInternalRevenueCode
of1986,asamended(theCode
)andtheregulationsthereunder.

Performance
Period
meanstheperiodspecifiedintheGrantNotice.

TSR
meanstotalshareholderreturnasdeterminedbydividing(i)thesumof(A)theEndingPeriodAveragePriceminus
theBeginningPeriodAveragePriceplus(B)alldividendsandotherdistributionspaidontheissuerssharesduringthe
PerformancePeriodby(ii)theBeginningPeriodAveragePrice.IncalculatingTSR,alldividendsareassumedtohavebeen
reinvestedinshareswhenpaid.TheCommitteeshallhavetheauthoritytomakeappropriateequitableadjustmentstoaccount
forextraordinaryitemsaffectingacompanysTSRforthePerformancePeriodtotheextentsuchadjustmentswouldnot
precludethepaymentofTSRSharesEarnedfromsatisfyingtherequirementsofSection162(m)(4)(C)oftheCodeandthe
regulationsthereunder.

TSR
Payout
Percentage
meansthepercentagethatcorrespondstotheTSRPercentileRankspecifiedbelow:

Exhibit 21
Page 273
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2223 Page 209 of
232

TSR Percentile Payout Percentage


Rank
90thpercentile 200 %
andabove
75thpercentile 150 %
60thpercentile 100%(Target)
50thpercentile 75 %
33rdpercentile 33 %
Below33rd 0 %
percentile

Betweenthelevelsspecifiedabove,thePayoutPercentageisinterpolatedlinearlyataratioofthree-and-one-third(3-1/3)
percentagepointsforeachpercentilethattheTSRPercentileRankisgreaterthanthe60thpercentile,andtwo-and-one-half
(2-1/2)percentagepointsforeachpercentilethattheTSRPercentileRankislessthanthe60thpercentile,ineachcase
roundeduptothenearestdecimalpoint.

TSR
Percentile
Rank
meanstheCompanyspercentilerankingrelativetotheNasdaq-100Companies,basedonTSR.
TSRPercentileRankisdeterminedbyorderingtheNasdaq-100Companies(plustheCompanyiftheCompanyisnotoneof
theNasdaq100Companies)fromhighesttolowestbasedonTSRforthePerformancePeriodandcountingdownfromthe
companywiththehighestTSR(rankedfirst)totheCompanyspositiononthelist.Iftwocompaniesarerankedequally,the
rankingofthenextcompanyshallaccountforthetie,sothatifonecompanyisrankedfirst,andtwocompaniesaretiedfor
second,thenextcompanyisrankedfourth.Afterthisranking,theTSRPercentileRankwillbecalculatedusingthefollowing
formula,roundedtothenearestwholepercentilebyapplicationofregularrounding:

(N
R
)
TSRPercentileRank= *100
N
N
representsthenumberofNasdaq-100CompaniesforthePerformancePeriod(plustheCompanyiftheCompanyisnot
oneoftheNasdaq-100CompaniesforthePerformancePeriod).

Exhibit 21
Page 274
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2224 Page 210 of
232
R
representstheCompanysrankingamongtheNasdaq-100Companies(plustheCompanyiftheCompanyisnotoneof
theNasdaq-100CompaniesforthePerformancePeriod).

Forexample,ifthereare100Nasdaq-100Companies(includingtheCompany),andtheCompanyranked40th,theTSR
PercentileRankwouldbeatthe60thpercentile:
60=(10040)/100*100.

LIMITATION ON AMOUNT OF PAYMENT. NotwithstandinganythinginthisAgreementtothecontrary,iftheCompanys


TSRisnegativeforthePerformancePeriod,thentheRTSRSharesEarnedwillbeequaltothelesserof(a)thenumberofRTSR
Shares(ifany)determinedwithoutregardtothisLimitationonAmountofPayment,or(b)theTargetRTSRSharesspecifiedinthe
GrantNotice.

Exhibit 21
Page 275
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2225 Page 211 of
232

ROIC
Shares
Earned
meansthenumberofsharesdeterminedbymultiplyingtheTargetROICSharesspecifiedintheGrant
NoticebytheROICPayoutPercentage,roundinguptothenearestwholeshare.ForpurposesofdeterminingtheROICShares
Earned:

Average
meansthesumofthebalanceatthebeginningoftheCompanysfiscalyearplusthebalanceattheendofthat
fiscalyeardividedbytwo(2).

Adjusted
Debt
meansdebtissuedbyQualcommIncorporated,providedthatintheeventofanacquisitionwithapurchase
pricethatisgreaterthan$5billion,solelyforpurposesofcalculatingAdjustedDebtforthefiscalyearinwhichsuch
acquisitioncloses(butfornootheryear),theimpactofdebtincurred(andrelatedexpenses)tofundsuchacquisitionshallbe
excluded.

Adjusted
GAAP
Equity
meansthetotalstockholdersequityattributabletoQualcommasreportedintheconsolidated
balancesheetpreparedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStates(GAAP),provided
thatintheeventofanacquisitionwithapurchasepricethatisgreaterthan$5billion,solelyforpurposesofcalculating
AdjustedGAAPEquityforthefiscalyearinwhichsuchacquisitioncloses(butfornootheryear),theimpactofequityissued
byQualcommIncorporatedtofundsuchacquisitionandtheoperatingresultsfromsuchacquisitionshallbeexcluded.

Adjusted
GAAP
Operating
Income
isdeterminedinaccordancewithGAAPandshallbeadjustedtoexcludetheaftertax
impactofthefollowingitems:

(1)TheQualcommStrategicInitiative(QSI)segmentasdefinedintheCompanysfiscal2015Form10-K;

(2)Acquisition-relateditems,whichconsistof:
(a)Acquiredin-processresearchanddevelopment,
(b)Recognitionofthestep-upofinventoriestofairvalue,
(c)Amortizationofintangibleassets,
(d)Expensesrelatedtotheterminationofcontractsthatlimittheuseoftheacquiredintellectualproperty,and
(e)Third-partyacquisitionandintegrationservicescosts;
Theaboveadjustmentsshallapplyonlywithrespecttoapplicableitemsacquiredintransactionsthatqualifyasbusiness
combinationspursuanttoGAAP;

(3)Thefollowingitemsforwhicheacheventindividuallyequalsorexceeds$25milliononapre-taxbasis,exceptas
expresslyprovidedin(f)below:

(a)Restructuringandrestructuring-relatedcosts(intheaggregatebyrestructuringevent),whichconsistofthe
followingcosts:
severanceandbenefits(includingCOBRAandoutplacementexpenses);

Exhibit 21
Page 276
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232
consultingcosts;
increasedsecuritycosts;
accelerationofdepreciationand/oramortizationexpense;
facilitiesandleaseterminationorabandonmentcharges;
assetimpairmentchargesand/orcontractterminations;
third-partybusinessseparationcosts;and
relocationcostsasaresultofanofficeorfacilityclosure.
GAAPoperatingincomeshallnotbeadjustedforanyitemthatcannotspecificallybetiedtotherestructuring
event;

(b)Goodwillandindefinite-andlong-livedassetimpairments,butonlywithrespecttogoodwillandassets
acquiredbeforethefirstdayofthePerformancePeriod;
(c)Gain/lossesondivestituresornon-revenuegeneratingassetsales;
(d)Impactoflitigationsettlementand/orjudgment,butonlytotheextenttheprofitorlossarisingfromthe
settlementorjudgmentisclearlyattributabletooneormorefiscalyearsendingbeforethebeginningofthe
PerformancePeriod;
(e)Theeffectofchangesintaxlawandaccountingprinciples;and
(f)Taxitemsindividuallyexceeding$10millionthatareunrelatedtothefiscalyearinwhichtheyarerecorded,
butonlywithrespecttotaxitemsrelatingtooneormoretaxyearsendingbeforethebeginningofthe
PerformancePeriod.

(4)Intheeventofanacquisitionwithapurchasepricethatisgreaterthan$5billion,solelyforpurposesofcalculating
AdjustedGAAPOperatingIncomeforthefiscalyearinwhichsuchacquisitioncloses(butfornootheryear),
operatingresultsfromsuchacquisitionshallbeexcluded.

Adjusted
GAAP
Tax
Rate
meanstheapplicabletaxratesdeterminedinaccordancewithGAAP,adjustedforearningsand
therelatedtaxexpenseassociatedwiththeadjustmentsspecifiedinthedefinitionofAdjustedGAAPOperatingIncome.

Performance
Period
meanstheperiodspecifiedintheGrantNotice.

Return
on
Invested
Capital
or ROIC
meansthepercentagedeterminedbydividing

(1)thesumofthefollowingamountscalculatedseparatelyforeachoftheCompanyfiscalyearsinthePerformance
Period:theproductof(A)theAdjustedGAAPOperatingIncomeforthefiscalyearmultipliedby(B)thedifference
betweenone(1)andtheAdjustedGAAPTaxRateforsuchfiscalyear;by

(2)thesumofthefollowingamountscalculatedseparatelyforeachoftheCompanysfiscalyearsinthePerformance
Period:theAverageofthesumof(A)AdjustedGAAPEquityforthefiscalyearand(B)theAdjustedDebtforthe
fiscalyear.

Exhibit 21
Page 277
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2227 Page 213 of
232
ROIC
Payout
Percentage
meansthepercentagethatcorrespondstothespecifiedbelow:

ROIC Ratio ROIC Payout Percentage


120% 200%

100% 100%
80% 33%

Below80% 0%Payout

Betweenthelevelsspecifiedabove,theROICPayoutPercentageisinterpolatedlinearlyataratioof3.35percentagepoints
foreachonepercentimprovementintheROICRatiofrom80%to100%andfive(5)percentagepointsforeachonepercent
improvementintheROICRatiofrom100%upto120%,ineachcaseroundeduptothenearestdecimalpoint.

ROIC
Ratio
meanstheROICforthePerformancePerioddividedbytheROICTarget.

ROIC
Target
means14.9%percent.

LIMITATION ON ADJUSTMENTS. NoadjustmentsshallbemadeinthecalculationofAdjustedDebt,AdjustedGAAP


Equity,AdjustedGAAPOperatingIncomeorAdjustedGAAPTaxRatewhichwouldprecludethepaymentofROICShares
EarnedfromsatisfyingtherequirementsofCodeSection162(m)(4)(C)andtheregulationsthereunder.

Exhibit 21
Page 278
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2228 Page 214 of
232
ATTACHMENT 2

QUALCOMM INCORPORATED
EXCLUSIVE CONSULTING AGREEMENT

1. ConsultingServicesFollowingNormalRetirementAge.IntheeventyouterminateyouremploymentwiththeParticipating
Companiesandreceiveorareentitledtoreceiveadditionalvesting,paymentsorotherrightsorbenefitsundertheAwardtowhich
thisExclusiveConsultingAgreementisattachedasaresultofhavingpreviouslyattainedNormalRetirementAge,youwillprovide
the Company consulting services related to the subject matter of that employment as provided in this Exclusive Consulting
Agreement.Suchconsultingserviceswillnotexceedfive(5)hourspermonth,andtherewillbenoseparatecompensationforsuch
servicesbeyondthatprovidedintheAward.ShouldtheCompanyrequestservicesinexcessoffive(5)hourspermonth,youand
Companywillnegotiateappropriatecompensationforsuchadditionalservicesbeforetheyareundertaken.Yourepresent,warrant
and covenant that you will perform any services under this Exclusive Consulting Agreement in a timely, professional and
workmanlikemannerandthatallservices,materials,informationanddeliverablesprovidedbyyouhereunderwillcomplywith(i)
therequirementscommunicatedbyCompany,(ii)theCompanyspoliciesandprocedures;and(iii)anyotheragreementsbetween
youandtheCompany,includingbutnotlimitedtoanyseverance,confidentialityorproprietaryagreements.Allcapitalizedtermsin
thisExclusiveConsultingAgreementnototherwisedefinedhereinshallhavethemeaningprescribedbytheQualcommIncorporated
2016Long-TermIncentivePlan(thePlan
)ortheAwardthereundertowhichthisExclusiveConsultingAgreementisattached.

2. TheAward.Youareaformerhigh-level executivewithatleast10yearsservicewiththeCompanyandassuchyouare
entitledtoadditionalvesting,paymentsorotherrightsorbenefitsundertheAwardasaresultofhavingreachedNormalRetirement
Age.YouragreementtothetermsandconditionsofthisExclusiveConsultingAgreementisanexpressconditionoftheAwardand
theadditionalprovisionsoftheAwardapplicabletoyoufollowingattainmentofNormalRetirementAge.

3. IndependentContractorRelationship.YourrelationshipwithCompanyunderthisExclusiveConsultingAgreementisthatof
an independent contractor, and nothing herein is intended to, or shall be construed to, create a partnership, agency, joint venture,
employment, or similar relationship. You will not be entitled to any of the benefits that Company may make available to its
employees, including, but not limited to, group health or life insurance, profitsharing benefits, or retirement benefits, or awards
underthePlanunlessexpresslyprovidedinwritingotherwise.YouagreethatprovidingservicesunderthisExclusiveConsulting
AgreementshallnotbetreatedasServiceforpurposesofthePlanortheAward.Youarenotauthorizedtomakeanyrepresentation,
contract, or commitment on behalf of Company unless specifically requested or authorized in writing to do so by a Company
officer. Youaresolelyresponsible for,andwillfile,onatimelybasis,alltaxreturnsandpaymentsrequired tobefiledwith,or
madeto,anyfederal,state,orlocaltaxauthority.YouwillindemnifyandholdharmlessCompanyfromandagainstanyandalltax
liabilityrelatedtothisExclusiveConsultingAgreementaswellasanyclaims,actions,orchargesarisingoutoforcausedbyyour
classificationasanindependentcontractor.

Exhibit 21
Page 279
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2229 Page 215 of
232
4.Exclusivity.

4.1 TheconsultancyarrangementcontemplatedbythisExclusiveConsultingAgreementshallbeonanexclusivebasis.
Youshallnot,duringtheTerm,withoutthepriorwrittenconsentoftheCommittee,engageinanywork,services,orotheractivities
foranypersonorentitywhichdirectlyorindirectlycompeteswithCompanyinanyway.Thisincludes,butisnotlimitedtoacting
asanemployee,officer,director,contractor,owner,consultant,oragentofanysuchpersonorentity.Thedeterminationofwhether
apersonorentityiscompetitivewithCompanyshallbesubjecttothesoleandexclusivediscretionoftheCommittee.Youshallact
inthebestinterestofCompanywhileprovidingtheExclusiveConsultingServicestoCompany.

5.TermandTermination.

5.1 Term. This Exclusive Consulting Agreement is effective as of the date of your termination of employment with
CompanyfollowingNormalRetirementAgeandwillterminateonthetwoyearanniversarythereofunlessterminatedearlierasset
forthbelow(theTerm
).

5.2TerminationbyCompany.CompanymayterminatethisExclusiveConsultingAgreementbeforetheendoftheTerm
foranybreachofSection4hereofbyyouoranymaterialbreachbyyouofanyotherprovisionhereof.ShouldCompanybelievethat
youbreachedthisExclusiveConsultingAgreementinamannerthatallowsaterminationpursuanttothisSection5.2,Companywill
notifyyouinwritingandallowyoutocureanybreach(ifsuchbreachiscurable)withinten(10)daysafterthedateofCompanys
writtennoticeofbreach.YouunderstandthatifCompanyterminatesthisExclusiveConsultingAgreementpursuanttothisSection
5.2,youwillforfeitalladditionalvesting,paymentsorotherrightsorbenefitsundertheAwardasaresultofhavingattainedNormal
RetirementAgeandyouwillbesubjecttotheEquityClawbackprovisionsofSection6,below.

5.3 TerminationbyYou.YoumaynotterminatethisExclusiveConsultingAgreementduringtheTermexceptorunless
Company materially breaches this Consulting Agreement. Should you believe that Company materially breached this Exclusive
ConsultingAgreement,youwillnotifytheCompanyinwritingandallowCompanytocureanybreach(ifsuchbreachiscurable)
withinten(10)daysafterthedateofyourwrittennoticeofbreach.

6. EquityClawback.IntheeventofanybreachbyyouofSection4hereoforanymaterialbreachbyyouofanyotherprovision
hereof, then any additional vesting, payments or other rights or benefits you may have as a result of having attained Normal
Retirement Age shall automatically and immediately terminate and be forfeited. In addition, you shall, within 30 days following
noticefromCompany, paytotheCompanyanamountequaltotheaggregatebenefit,valueorgainyourealizedorobtainedasa
result of anyadditional vesting, payments orother rights orbenefits youreceived under theAward asaresult of having attained
NormalRetirementAge.

Exhibit 21
Page 280
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2230 Page 216 of
232
EXHIBIT 10.38

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETED ASTERISKS [***], HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

QUALCOMM INCORPORATED
2016 LONG-TERM INCENTIVE PLAN
EXECUTIVE PERFORMANCE UNIT AWARD
GRANT NOTICE

Qualcomm Incorporated (theCompany


),pursuanttoits2016Long-TermIncentivePlan(thePlan
),herebygrantstoyou,the
Executivenamedbelow,aPerformanceUnitAward(theAward
)subjecttoallofthetermsandconditionsassetforthinthisExecutive
PerformanceUnitAwardGrantNotice(Grant
Notice
),theExecutivePerformanceUnitAwardAgreement(theAgreement
),whichis
attachedhereto,andthePlan,1whichareincorporatedhereinintheirentirety.

Executive
:DerekK.AberleGrant
No
.:n/a

Date
of
Grant
:July
10,2016

Vesting
Date
:October1,2017

Performance
Award
Formula:
Attachment1

Qualcomm Incorporated:
By:/s/StevenM.Mollenkopf
StevenM.Mollenkopf
ChiefExecutiveOfficer

IherebyacknowledgethatIhaveread,understand,andacceptthetermsofthisAwardAgreementandthePlan.

EXECUTIVE

/s/DerekK.Aberle
DerekK.Aberle
Date:7/18/16

Attachment:ExecutivePerformanceUnitAwardAgreement
1AcopyofthePlancanbeobtainedfromtheStockAdministrationwebsite,locatedontheCompanysinternalwebpage,oryoumayrequestahardcopyfromtheStock

AdministrationDepartment.

Exhibit 21
Page 281
Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2231 Page 217 of
232

QUALCOMM INCORPORATED
2016 LONG-TERM INCENTIVE PLAN
EXECUTIVE PERFORMANCE UNIT AWARD
AGREEMENT

QualcommIncorporated(theCompany
)hasgrantedthisPerformanceUnitAward(thisAward
)toyou,theExecutive
namedintheExecutivePerformanceUnitAwardGrantNotice(theGrant
Notice
)pursuanttothetermsandconditionssetforth
intheGrantNotice,thisExecutivePerformanceUnitAwardAgreement(theAgreement
)andthe2016Long-TermIncentive
Plan(thePlan
).CapitalizedtermsthatarenotexplicitlydefinedintheGrantNoticeorthisAgreementbutaredefinedinthePlan
shallhavethesamedefinitionsasinthePlan.

ThedetailsofthisAwardareasfollows:

1. SERVICE AND VESTING.

1.1 SERVICE. TheCompanyshallreasonablydeterminewhenyourServicehasterminatedassetforthinthe


Plan.

1.2 VESTING. YouwillbefullyvestedinthisAwardontheVestingDatespecifiedintheGrantNotice(the


Vesting
Date
)ifandtotheextentthatyoucontinueinServicethroughthatVestingDate.IfyourServiceterminatesbeforethe
VestingDateforanyreasonotherthanasspecifiedinSection1.3,youwillforfeitandnotbeentitledtoreceiveanyamountswhich
havenotbecomepayableasprovidedinSection2.1onorbeforethedateyourServiceterminates.

1.3 VESTING UPON TERMINATION OF SERVICE DUE TO DEATH, DISABILITY OR


TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. YouwillbevestedonthedateyourServiceterminates
beforetheVestingDateintheAmountPayabledeterminedpursuanttoAttachment1foranyPerformanceGoalthatissatisfiedon
orbeforetheterminationofyourService(theEarned
Amount
)ifthatterminationisduetoyourdeathorDisability,termination
ofyourServicebytheCompanywithoutCause,oryourvoluntaryterminationofServiceforGoodReason.

(a)Certain Definitions.

(i)Cause
shallmeananyofthefollowing:(1)yourtheftof,dishonestywithrespectto,orfalsification
ofanyParticipatingCompanydocumentsorrecords;(2)yourimproperuseordisclosureofaParticipating
Companysconfidentialorproprietaryinformation;(3)yourengaginginanyactoromissioninvolvingdishonesty,
breachoftrust,unethicalbusinessconductormoralturpitude,ineachcasewhichhasadetrimentaleffectona
ParticipatingCompanysreputationorbusiness;(4)yourfailureorinabilitytoperformanyreasonableassigned
dutiesafterwrittennoticefromaParticipatingCompanyof,andareasonableopportunitytocure,suchfailureor
inability;(5)anymaterialbreachbyyouofanyemploymentorserviceagreementbetweenyouandaParticipating
Company,whichbreachisnotcuredpursuanttothetermsofsuch

Exhibit 21
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Case 3:17-cv-01010-GPC-MDD Document 80-2 Filed 07/18/17 PageID.2232 Page 218 of
232
agreement;(6)yourconviction(includinganypleaofguiltyornolo
contendere
)ofanycriminalactwhichimpairs
yourabilitytoperformyourdutieswithaParticipatingCompany;or(7)violationofamaterialCompanyor
ParticipatingCompanypolicyafterawrittennoticefromtheCompanyorParticipatingCompanyandareasonable
opportunitytocuresuchviolationiftheCompanyorParticipatingCompanyreasonablydeterminesthatsuch
violationmaybecuredwithoutdetrimenttotheCompanyoraParticipatingCompany.

(ii)Good
Reason
shallmeananyoneormoreofthefollowing:

a)withoutyourexpresswrittenconsent,achangeofyourtitlewiththeParticipatingCompany
GroupontheGrantDate;

b)withoutyourexpresswrittenconsent,therelocationoftheprincipalplaceofyouremploymentor
servicetoalocationthatismorethanfifty(50)milesfromyourprincipalplaceofemploymentorserviceon
theGrantDate,ortheimpositionoftravelrequirementssubstantiallymoredemandingofyouthansuchtravel
requirementsexistingontheGrantDate;

c)anyfailurebytheParticipatingCompanyGrouptopay,oranymaterialreductionbythe
ParticipatingCompanyGroupof,(A)yourbasesalaryineffectontheGrantDate(unlessreductions
comparableinamountanddurationareconcurrentlymadeforallotheremployeesoftheParticipating
CompanyGroupwithresponsibilities,organizationallevelandtitlecomparabletoyours),or(B)yourbonus
compensation,ifany,ineffectontheGrantDate(subjecttoapplicableperformancerequirementswithrespect
totheactualamountofbonuscompensationearnedbyyou);

d)anyfailurebytheParticipatingCompanyGroupto(A)continuetoprovideyouwiththe
opportunitytoparticipate,ontermsnolessfavorablethanthoseineffectforthebenefitofanyemployeeor
serviceprovidergroupwhichcustomarilyincludesapersonholdingtheemploymentorserviceprovider
positionoracomparablepositionwiththeParticipatingCompanyGroupthenheldbyyou,inanybenefitor
compensationplansandprograms,including,butnotlimitedto,theParticipatingCompanyGroupslife,
disability,health,dental,medical,savings,profitsharing,stockpurchaseandretirementplans,ifany,inwhich
youwereparticipatingontheGrantDate,ortheirequivalent,or(B)provideyouwithallotherfringebenefits
(ortheirequivalent)fromtimetotimeineffectforthebenefitofanyemployeegroupwhichcustomarily
includesapersonholdingtheemploymentorserviceproviderpositionoracomparablepositionwiththe
ParticipatingCompanyGroupthenheldbyyou;

Exhibit 21
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232
e)anybreachbytheParticipatingCompanyGroupofanymaterialagreementbetweenyouanda
ParticipatingCompanyconcerningyouremployment;or

f)anyfailurebytheCompanytoobtaintheassumptionofanymaterialagreementbetweenyouand
theCompanyconcerningyouremploymentbyasuccessororassignoftheCompany.

2. PAYMENT OF THE AWARD.

2.1 AMOUNT AND TIMING OF PAYMENT OF AWARD. Fiftypercent(50%)ofanyEarnedAmountshall


becomepayableonthedatethecorrespondingPerformanceGoalissatisfiedandshallbepaidwithinninety(90)daysafterthatdate,
andtheremainingfiftypercent(50%)shallbecomepayableontheVestingDateifandtotheextentthatyoucontinueinService
throughtheVestingDateandshallbepaidwithinninety(90)daysaftertheVestingDate;provided,however,thatintheevent
PerformanceGoal6or7specifiedonAttachment1issatisfiedaftertheVestingDate,onehundredpercent(100%)oftheEarned
AmountwithrespecttosuchPerformanceGoalshallbecomepayableonthedatethePerformanceGoalissatisfiedandshallbepaid
withinninety(90)daysafterthatdate;andprovided,further,thatintheeventofvestingpursuanttoSection1.3uponterminationof
yourServicepriortotheVestingDateduetodeath,Disability,terminationofyourServicebytheCompanywithoutCauseoryour
voluntaryterminationofServiceforGoodReason,youwillreceiveapaymentwithinninety(90)daysafterthedateofsuch
terminationequaltotheamount(ifany)bywhichthetotalEarnedAmountexceedsthesumofallamountspreviouslypaidtoyou
pursuanttothisAgreement.

2.2 TAX WITHHOLDING. YouacknowledgethattheCompanyand/ortheParticipatingCompanythatemploys


you(theEmployer
)maybesubjecttowithholdingtaxobligationsarisingbyreasonofthevestingand/orpaymentofthisAward.
YouauthorizeyourEmployertosatisfythewithholdingtaxobligationsbyoneoracombinationofthefollowingmethods,as
selectedbytheCompanyinitssolediscretion:(a)withholdingfromyourpayandanyotheramountspayabletoyou;or(b)
withholdingcashfromthepaymentofthisAward.

3. TAX ADVICE. Yourepresent,warrantandacknowledgethattheCompanyand,ifdifferent,yourEmployer,hasmade


nowarrantiesorrepresentationstoyouwithrespecttotheincometaxconsequencesofthetransactionscontemplatedbythisAward,
andyouareinnomannerrelyingontheCompany,yourEmployerortheirrepresentativesforanassessmentofsuchtax
consequences.YOUUNDERSTANDTHATTHETAXLAWSANDREGULATIONSARESUBJECTTOCHANGE.YOU
SHOULDCONSULTYOUROWNTAXADVISORREGARDINGTHETAXTREATMENTOFTHISORANYOTHER
AWARD.NOTHINGSTATEDHEREINISINTENDEDORWRITTENTOBEUSED,ANDCANNOTBEUSED,FORTHE
PURPOSEOFAVOIDINGTAXPAYERPENALTIES.

4. TRANSFERABILITY. PriortoreceivingpaymentinsettlementofthisAward,theAwardshallnotbesubjectinany
mannertoanticipation,alienation,sale,exchange,transfer,assignment,pledge,encumbrance,orgarnishmentbyyourcreditorsorby
yourbeneficiary(ifany).PriortoactualpaymentofthisAward,thisAwardwillrepresentanunsecuredobligationoftheCompany,
payable(ifatall)onlyfromthegeneralassetsoftheCompany.

Exhibit 21
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5. AWARD NOT A SERVICE CONTRACT. ThisAwardisnotanemploymentorservicecontractandnothinginthis
Agreement,theGrantNoticeorthePlanshallbedeemedtocreateinanywaywhatsoeveranyobligationonyourparttocontinuein
theServiceofaParticipatingCompany,orofaParticipatingCompanytocontinueyourServicewiththeParticipatingCompany.In
addition,nothinginyourAwardshallobligatetheCompany,itsstockholders,Board,OfficersorEmployeestocontinueany
relationshipwhichyoumighthaveasaDirectororConsultantfortheCompany.

6. CODE SECTION 409A. ItistheintentthatthetermsrelatingtothevestingandthepaymentoftheAwardassetforth


inthisAgreementshallqualifyforexemptionfromorcomplywiththerequirementsofSection409AoftheCode,andany
ambiguitieshereinwillbeinterpretedtosoqualifyorcomply.Notwithstandingtheforegoingoranythinghereintothecontrary,ifit
isdeterminedthatthisAwardfailstosatisfytherequirementsoftheshort-termdeferralexemptionandisotherwisedeferred
compensationsubjecttoSection409AoftheCode,andifyouareaspecifiedemployee(asdefinedunderSection409A(a)(2)(B)
(i)oftheCode)asofthedateofyourseparationfromservice(asdefinedunderTreasuryRegulationSection1.409A-1(h)),then
anypaymentthatwouldotherwisebemadeuponthedateoftheseparationfromserviceorwithinthefirstsix(6)monthsthereafter
willnotbemadeontheoriginallyscheduleddateandwillinsteadbeissuedinalumpsumonthedatethatissix(6)monthsandone
dayafterthedateoftheseparationfromservice,butonlyifsuchdelayinthepaymentisnecessarytoavoidtheimpositionof
additionaltaxationonyouinrespectofthepaymentunderSection409AoftheCode.TheCompanyreservestheright,totheextent
theCompanydeemsappropriateoradvisableinitssolediscretion,tounilaterallyamendormodifythisAgreementasmaybe
necessarytoensurethatallvestingorpaymentsprovidedforunderthisAgreementaremadeinamannerthatqualifiesfor
exemptionfromorcomplieswiththerequirementsofSection409AoftheCode;provided,however,thattheCompanymakesno
representationthatthevestingorpaymentspursuanttothisAwardwillbeexemptfromorcomplywiththerequirementsof
Section409AoftheCodeandmakesnoundertakingtoprecludeSection409AoftheCodefromapplyingtothevestingorpayments
ofthisAwardorrequirethatanyvestingorpaymentspursuanttothisAwardcomplywiththerequirementsofSection409Aofthe
Code.TheCompanywillhavenoliabilitytoyouoranyotherpartyiftheAwardorthepaymenthereunderthatisintendedtobe
exemptfrom,orcompliantwith,Section409AoftheCode,isnotsoexemptorcompliantorforanyactiontakenbytheCompany
withrespectthereto.

7. NOTICES. AnynoticesprovidedforinthisAgreement,theGrantNoticeorthePlanshallbegiveninwritingandshall
bedeemedeffectivelygivenuponreceiptor,inthecaseofnoticesdeliveredbytheCompanytoyou,five(5)daysafterdepositin
theUnitedStatesmail,postageprepaid,addressedtoyouatthelastaddressyouprovidedtotheCompany.

8. NATURE OF GRANT. InacceptingtheAward,youacknowledgeandagreethat:

(a)thePlanisestablishedvoluntarilybytheCompany,itisdiscretionaryinnatureanditmaybemodified,
amended,suspendedorterminatedbytheCompanyatanytime,(subjecttoanylimitationssetforthinthePlan);

Exhibit 21
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232
(b)theAwardisvoluntaryandoccasionalanddoesnotcreateanycontractualorotherrighttoreceivefutureawards
orbenefitsinlieuofawards,evenifotherawardshavebeenawardedrepeatedlyinthepast;

(c)alldecisionswithrespecttofutureawards,ifany,willbeatthesolediscretionoftheCommittee;

(d)yourparticipationinthePlanisvoluntary;

(e)theAwardisanextraordinaryitemsthatdonotconstitutecompensationofanykindforServicesofanykind
renderedtotheCompanyortheEmployer,andwhichareoutsidethescopeofyouremploymentorservicecontract,ifany;

(f)noclaimorentitlementtocompensationordamagesshallarisefromforfeitureofyourAwardresultingfrom
terminationofyourServiceforanyreasonwhatsoeverandwhetherornotinbreachoflocallaborlawsorlaterfoundtobeinvalid),
andinconsiderationofthegrantoftheAwardtowhichyouareotherwisenotentitled,youirrevocablyagreenevertoinstituteany
suchclaimagainsttheCompany,waiveyourability,ifany,tobringanysuchclaim,andreleasetheCompanyfromanysuchclaim;
if,notwithstandingtheforegoing,anysuchclaimisallowedbyacourtofcompetentjurisdiction,then,byparticipatinginthePlan,
youshallbedeemedirrevocablytohaveagreednottopursuesuchclaimandagreetoexecuteanyandalldocumentsnecessaryto
requestdismissalorwithdrawalofsuchclaim,itbeingunderstood,foravoidanceofdoubt,thatnothinginthissubsectionshall
constituteawaiverofanyclaimthatyoumayhaveinthefuturetoenforcethetermsofthisAward,subjecttotheprovisionsof
Section10,below;

(g)theAwardandthebenefitsevidencedbythisAgreementdonotcreateanyentitlement,nototherwise
specificallyprovidedforinthePlanorprovidedbytheCompanyinitsdiscretion,tohavetheAwardoranysuchbenefitstransferred
to,orassumedby,anothercompany,nortobeexchanged,cashedoutorsubstitutedfor,inconnectionwithanycorporatetransaction
affectingtheCompanysStock;

(h)theAwardisaPerformanceAwardgrantedpursuanttothePlanprovidingforPerformanceUnitsthatmayresult
inthepaymentofacashamountasspecifiedinAttachment1.ThisPerformanceAwardshallbeinterpretedandadministeredto
satisfytherequirementsofsection162(m)(4)(C)oftheCodeandtheregulationsthereundertothemaximumextentavailable;and

(i)theCompanyisnotprovidinganytax,legalorfinancialadvice,noristheCompanymakingany
recommendationsregardingyourparticipationinthePlan;youareherebyadvisedtoconsultwithyourownpersonaltax,legaland
financialadvisorsregardingyourparticipationinthePlanbeforetakinganyactionrelatedtothePlan.

9. APPLICABLE LAW. ThisAgreementshallbegovernedbythelawsoftheStateofCaliforniaasiftheAgreement


werebetweenCaliforniaresidentsandasifitwereenteredintoandtobeperformedentirelywithintheStateofCalifornia.

Exhibit 21
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10. ARBITRATION. AnydisputeorclaimconcerninganyPerformanceUnitsgranted(ornotgranted)pursuanttothe
PlanandanyotherdisputesorclaimsrelatingtoorarisingoutofthePlanshallbefully,finallyandexclusivelyresolvedbybinding
arbitrationconductedbytheAmericanArbitrationAssociationpursuanttothecommercialarbitrationrulesinSanDiego,California.
ByacceptingthisAward,youandtheCompanywaiveyourrespectiverightstohaveanysuchdisputesorclaimstriedbyajudgeor
jury.

11. AMENDMENT. YourAwardmaybeamendedasprovidedinthePlanatanytime,providednosuchamendmentmay


adverselyaffectthisAwardwithoutyourconsentunlesssuchamendmentisnecessarytocomplywithanyapplicablelawor
governmentregulation,oriscontemplatedinSection12hereof.NoamendmentoradditiontothisAgreementshallbeeffective
unlessinwritingorinsuchelectronicformasmaybedesignatedbytheCompany.

12. GOVERNING PLAN DOCUMENT. YourAwardissubjecttothisAgreement,theGrantNoticeandallthe


provisionsofthePlan,theprovisionsofwhichareherebymadeapartofthisAgreement,andisfurthersubjecttoallinterpretations,
amendments,rulesandregulationswhichmayfromtimetotimebepromulgatedandadoptedpursuanttothePlan.Intheeventof
anyconflictbetweentheprovisionsofthisAgreement,theGrantNoticeandthoseofthePlan,theprovisionsofthePlanshall
control.

13. SEVERABILITY. IfanyprovisionofthisAgreementisheldtobeunenforceableforanyreason,itshallbeadjusted


ratherthanvoided,ifpossible,inordertoachievetheintentofthepartiestotheextentpossible.Inanyevent,allotherprovisionsof
thisAgreementshallbedeemedvalidandenforceabletothefullextentpossible.

14. DESCRIPTION OF ELECTRONIC DELIVERY .


ThePlandocuments,whichmayincludebutdonotnecessarily
include:thePlan,theGrantNotice,thisAgreement,andanyreportsoftheCompanyprovidedgenerallytotheCompanys
shareholders,maybedeliveredtoyouelectronically.Inaddition,ifpermittedbytheCompany,youmaydeliverelectronicallythe
GrantNoticetotheCompanyortosuchthirdpartyinvolvedinadministeringthePlanastheCompanymaydesignatefromtimeto
time.SuchmeansofelectronicdeliverymayincludebutdonotnecessarilyincludethedeliveryofalinktoaCompanyintranetor
theinternetsiteofathirdpartyinvolvedinadministeringthePlan,thedeliveryofthedocumentviaelectronicmail(e-mail)or
suchothermeansofelectronicdeliveryspecifiedbytheCompany.

15. WAIVER. ThewaiverbytheCompanywithrespecttoyourcomplianceofanyprovisionofthisAgreementshallnot


operateorbeconstruedasawaiverofanyotherprovisionofthisAgreement,orofanysubsequentbreachofsuchpartyofa
provisionofthisAgreement.

16. REPAYMENT/FORFEITURE. Anybenefitsyoumayreceivehereundershallbesubjecttorepaymentorforfeiture


asmayberequiredtocomplywith(a)theQualcommCashIncentiveCompensationRepaymentPolicyasineffectfromtimeto
time,(b)anyapplicablelistingstandardsofanationalsecuritiesexchangeadoptedinaccordancewithSection954oftheDodd-
FrankWallStreetReformandConsumerProtectionAct(regardingrecoveryoferroneouslyawardedcompensation)andany
implementingrulesandregulationsoftheU.S.SecuritiesandExchangeCommissionadoptedthereunder,(c)similarrulesunderthe
lawsofanyotherjurisdictionand(d)anypoliciesadoptedbytheCompanytoimplementtheforegoingstandardsorrules,alltothe
extentdeterminedbytheCompanyinitsdiscretion.Exceptasset

Exhibit 21
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232
forthinthisSection16,thepaymentsmadepursuanttoSection2.1shallnotbesubjecttorepaymentorforfeitureifyourService
terminatesforanyreasonpriortotheVestingDate.

Exhibit 21
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232

ATTACHMENT 1

Executive
:DerekK.AberleGrant
No
.:n/a

Date
of
Grant
:July
10,2016

Amount
Number Performance Goals
Payable
1 LGE-PerformanceGoalsatisfiedasoftheGrantDate-Agreement
withLGEannouncedApril20,2016. $2,500,000
2 Yulong-PerformanceGoalsatisfiedasoftheGrantDate-Agreement
withYulongannouncedApril18,2016. $250,000
3 Oppo-PerformanceGoalsatisfieduponexecutionofafinal
agreementthatcomplieswiththetermsoftheNDRCrectificationplan $2,000,000
announcedonFebruary9,2015.
4 Vivo/BBK-PerformanceGoalsatisfieduponexecutionofafinal
agreementthatcomplieswiththetermsoftheNDRCrectificationplan $2,000,000
announcedonFebruary9,2015.
5 ***
$250,000
6 ***
$2,000,000

7 *** $1,000,000

Total (1-7) $10,000,000

[***]CertaininformationonthispagehasbeenomittedandfiledseparatelywiththeSecuritiesandExchangeCommission.Confidentialtreatmenthasbeen
requestedwithrespecttotheomittedportions.

Exhibit 21
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232
EXHIBIT 12.1

QUALCOMM Incorporated
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, except ratio data)
Year Ended
September 29, September 30,
September 25, 2016 September 27, 2015 September 28, 2014 2013 2012
Earnings:
Incomefromcontinuingoperationsbeforeincometaxesand
income(losses)fromequitymethodinvestments $ 6,917 $ 6,519 $ 8,788 $ 8,200 $ 6,571
Fixedcharges(1) 336 137 35 118 148
Cashdistributionsfromequitymethodinvestments 6 1 1
Less:Capitalizedinterest (65) (29)
Totalearnings $ 7,253 $ 6,662 $ 8,823 $ 8,254 $ 6,691

Fixed charges: (1)
Interest $ 297 $ 104 $ 5 $ 88 $ 119
Interestcomponentofrentalexpense 39 33 30 30 29
Totalfixedcharges $ 336 $ 137 $ 35 $ 118 $ 148
Ratioofearningstofixedcharges 22x 49x 252x 70x 45x

(1) Fixedchargesincludeinterestexpense(whichincludesamortizationofdebtissuancecosts),whetherexpensedorcapitalized,andtheportionofoperatingrentalexpense
thatmanagementbelievesisrepresentativeoftheinterestcomponentofrentexpense,whichisestimatedtobeone-thirdofrentalexpense.

Exhibit 21
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EXHIBIT 21

SUBSIDIARIES OF REGISTRANT

Subsidiaries of Qualcomm Incorporated State or Other Jurisdiction of Incorporation


QualcommTechnologies,Inc. Delaware
QualcommGlobalTradingPte.Ltd. Singapore
QualcommCDMATechnologiesAsia-PacificPte.Ltd. Singapore
QualcommAsiaPacificPte.Ltd. Singapore
QualcommAtherosTechnologyLtd. Bermuda
QualcommTechnologiesInternational,Ltd. UnitedKingdom

Thenamesofothersubsidiariesareomitted.Suchsubsidiarieswouldnot,ifconsideredintheaggregateasasinglesubsidiary,constituteasignificant
subsidiarywithinthemeaningofItem601(b)(21)(ii)ofRegulationS-K.

Exhibit 21
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232
EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


WeherebyconsenttotheincorporationbyreferenceintheRegistrationStatementsonFormS-3(No.333-203935)andFormS-8(No.333-131448,No.333-
137692,No.333-131157,No.333-150423,No.333-148177,No.333-148841,No.333-148556,No.333-166246,No.333-173184,No.333-174649,No.333-
188104,No.333-197445,No.333-210048andNo.333-203575)ofQUALCOMMIncorporatedofourreportdatedNovember2,2016relatingtotheconsolidated
financialstatements,thefinancialstatementscheduleandtheeffectivenessofinternalcontroloverfinancialreporting,whichappearsinthisForm10-K.
/s/PricewaterhouseCoopersLLP

SanDiego,California
November2,2016

Exhibit 21
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232
EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,SteveMollenkopf,certifythat:
1. IhavereviewedthisAnnualReportonForm10-KofQUALCOMMIncorporated;

2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethe
statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthe
financialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4. TheregistrantsothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchange
ActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))forthe
registrantandhave:

a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensure
thatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,
particularlyduringtheperiodinwhichthisreportisbeingprepared;

b) Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,
toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesin
accordancewithgenerallyacceptedaccountingprinciples;

c) Evaluatedtheeffectivenessoftheregistrantsdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectiveness
ofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

d) Disclosedinthisreportanychangeintheregistrantsinternalcontroloverfinancialreportingthatoccurredduringtheregistrantsmostrecentfiscal
quarter(theregistrantsfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,
theregistrantsinternalcontroloverfinancialreporting;and

5. TheregistrantsothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
registrantsauditorsandtheauditcommitteeoftheregistrantsboardofdirectors(orpersonsperformingtheequivalentfunctions):

a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikely
toadverselyaffecttheregistrantsabilitytorecord,process,summarizeandreportfinancialinformation;and

b) Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrantsinternalcontrolover
financialreporting.

Dated:November2,2016

/s/SteveMollenkopf
SteveMollenkopf
ChiefExecutiveOfficer

Exhibit 21
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232
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,GeorgeS.Davis,certifythat:
1. IhavereviewedthisAnnualReportonForm10-KofQUALCOMMIncorporated;
2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethe
statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;
3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthe
financialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;
4. TheregistrantsothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchange
ActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))forthe
registrantandhave:
a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensure
thatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,
particularlyduringtheperiodinwhichthisreportisbeingprepared;

b) Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,
toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesin
accordancewithgenerallyacceptedaccountingprinciples;

c) Evaluatedtheeffectivenessoftheregistrantsdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectiveness
ofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and
d) Disclosedinthisreportanychangeintheregistrantsinternalcontroloverfinancialreportingthatoccurredduringtheregistrantsmostrecentfiscal
quarter(theregistrantsfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,
theregistrantsinternalcontroloverfinancialreporting;and
5. TheregistrantsothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
registrantsauditorsandtheauditcommitteeoftheregistrantsboardofdirectors(orpersonsperformingtheequivalentfunctions):

a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikely
toadverselyaffecttheregistrantsabilitytorecord,process,summarizeandreportfinancialinformation;and

b) Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrantsinternalcontrolover
financialreporting.

Dated:November2,2016

/s/GeorgeS.Davis
GeorgeS.Davis
ExecutiveVicePresidentandChiefFinancialOfficer

Exhibit 21
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232
EXHIBIT 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

InconnectionwiththeaccompanyingAnnualReportofQUALCOMMIncorporated(theCompany)onForm10-KforthefiscalyearendedSeptember25,
2016(theReport),I,SteveMollenkopf,ChiefExecutiveOfficeroftheCompany,certify,pursuantto18U.S.C.1350,asadoptedpursuantto906ofthe
Sarbanes-OxleyActof2002,that:

1. TheReportfullycomplieswiththerequirementsofSection13(a)oftheSecuritiesExchangeActof1934;and

2. TheinformationcontainedintheReportfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsoftheCompany.

Dated:November2,2016

/s/SteveMollenkopf
SteveMollenkopf
ChiefExecutiveOfficer

Exhibit 21
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232
EXHIBIT 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

InconnectionwiththeaccompanyingAnnualReportofQUALCOMMIncorporated(theCompany)onForm10-KforthefiscalyearendedSeptember25,
2016(theReport),I,GeorgeS.Davis,ChiefFinancialOfficeroftheCompany,certify,pursuantto18U.S.C.1350,asadoptedpursuantto906ofthe
Sarbanes-OxleyActof2002,that:

1. TheReportfullycomplieswiththerequirementsofSection13(a)oftheSecuritiesExchangeActof1934;and

2. TheinformationcontainedintheReportfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsoftheCompany.

Dated:November2,2016

/s/GeorgeS.Davis
GeorgeS.Davis
ExecutiveVicePresidentandChiefFinancialOfficer

Exhibit 21
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232

EXHIBIT 22

ENTIRE EXHIBIT
SUBMITTED UNDER SEAL
Case 3:17-cv-01010-GPC-MDD Document 80-3 Filed 07/18/17 PageID.2247 Page 1 of 11

1 Juanita R. Brooks, SBN 75934, brooks@fr.com


Seth M. Sproul, SBN 217711, sproul@fr.com
2 FISH & RICHARDSON P.C.
12390 El Camino Real
3 San Diego, CA 92130
Phone: 619-678-5070 / Fax: 619-678-5099
4
Ruffin B. Cordell, DC Bar No. 445801,
5 Pro hac to be filed, cordell@fr.com
Lauren A. Degnan, DC Bar No. 452421,
6 Pro hac to be filed, degnan@fr.com
FISH & RICHARDSON P.C.
7 The McPherson Building
901 15th Street, N.W., 7th Floor
8 Washington, D.C. 20005
Phone: 202-783-5070 / Fax: 202-783-2331
9
William A. Isaacson, DC Bar No. 414788,
10 Pro hac to be filed, wisaacson@bsfllp.com
Karen L. Dunn, DC Bar No. 1002520,
11 Pro hac to be filed, kdunn@bsfllp.com
BOIES SCHILLER FLEXNER LLP
12 1401 New York Avenue, N.W.
Washington, DC 20005
13 Phone: 202-237-2727 / Fax: 202-237-6131
14 Gabriel R. Schlabach (SBN 304859)
gschlabach@bsfllp.com
15 BOIES SCHILLER FLEXNER LLP
1999 Harrison Street, Suite 900
16 Oakland, CA 94612
Phone: 510-874-1000 / Fax: 510-874-1460
17
18 Attorneys for Third-Party Defendant Apple Inc.
19
UNITED STATES DISTRICT COURT
20
SOUTHERN DISTRICT OF CALIFORNIA
21
22
QUALCOMM INCORPORATED, Case No. 3:17-CV-01010-GPC-MDD
23
Plaintiff,
24 REDACTED DECLARATION OF BJ
v. WATROUS IN SUPPORT OF APPLE
25 INC.S OPPOSITION TO QUALCOMM
COMPAL ELECTRONICS, INC., FIH INCORPORATEDS MOTION FOR
26 MOBILE LTD., HON HAI PRELIMINARY INJUNCTION
PRECISION INDUSTRY CO., LTD,
27 PEGATRON CORPORATION, and
WISTRON CORPORATION, Date: August 15, 2017
28 Time: 1:00 p.m.
Defendants. Courtroom: 2D
Judge: Hon. Gonzalo P. Curiel
DECLARATION OF BJ WATROUS CASE NO. 3:17-CV-01010-GPC-MDD
Case 3:17-cv-01010-GPC-MDD Document 80-3 Filed 07/18/17 PageID.2248 Page 2 of 11

1 COMPAL ELECTRONICS, INC.,


FIH MOBILE LTD., HON HAI
2 PRECISION INDUSTRY CO., LTD.,
3 PEGATRON CORPORATION, and
WISTRON CORPORATION,
4
Counterclaimants,
5
vs.
6 QUALCOMM INCORPORATED,
7 Counter Defendant.
COMPAL ELECTRONICS, INC.,
8
FIH MOBILE LTD., HON HAI
9 PRECISION INDUSTRY CO., LTD.,
PEGATRON CORPORATION, and
10
WISTRON CORPORATION,
11
Third-Party Plaintiffs,
12
v.
13
14 APPLE INC.,
15 Third-Party Defendant.
16
17
18
19
20
21
22
23
24
25
26
27
28

DECLARATION OF BJ WATROUS CASE NO. 3:17-CV-01010-GPC-MDD


Case 3:17-cv-01010-GPC-MDD Document 80-3 Filed 07/18/17 PageID.2249 Page 3 of 11

1 I, BJ Watrous, declare as follows:


2 1. I am Vice President and Chief IP Counsel at Apple Inc. (Apple). I
3 have personal knowledge of the matters set forth in this declaration, and if called
4 upon to do so, I would testify competently to them.
5 Standard Essential Patents and the FRAND Promise
6 2. Apple and Qualcomm Incorporated (Qualcomm) are both members
7 of the European Telecommunications Standards Institute (ETSI), a Standard-
8 Setting Organization (SSO) based in Sofia-Antipolis, France.
9 3. ETSI, which has over 800 members in five continents, produces
10 globally accepted standards in the telecommunications industry, including the
11 2G/GSM, 3G/UMTS, and 4G/LTE standards. Such standards allow different
12 network components to be delivered by multiple vendors, promote interoperability
13 of products, and incentivize investments in infrastructure, increasing competition,
14 innovation, product quality, and consumer choice.
15 4. During the standard-setting process, patent holders publically disclose
16 IP rights, including patents and applications that might be essential to implementing
17 a standard (Standard-Essential Patents or SEPs), to ETSI and other SSOs. ETSI
18 requests that its members promise to license essential patents on terms that are fair,
19 reasonable, and nondiscriminatory (FRAND). Patent holders who make this
20 contractual FRAND promise are required to license their essential patents to anyone
21 willing to accept a license and may not exclude willing licensees.
22 5. Qualcomm has declared over 30,000 patent and applications relating to
23 cellular technologies to ETSI, and has made FRAND commitments to ETSI with
24 respect to these patents.
25 6. To facilitate licensing negotiations with SEPs holders, Apple has
26 created a FRAND framework that includes important principles that Apple believes
27 are consistent with the FRAND promise.
28 7. For example, FRAND royalties must be levied against a proper,

1
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1 reasonable, and non-discriminatory royalty base. Cellular SEPs relating to mobile


2 devices are largely implemented or practiced in the baseband processor chipset, the
3 component that allows a cellular device to connect to cellular networks; therefore,
4 the baseband processor chipset (rather than a device incorporating it) will typically
5 be the smallest salable patent practicing unit. Apples framework therefore looks to
6 the profit margin of a baseband chipset as the proper common royalty base that will
7 be fair and reasonable for all licensees. Defining the proper royalty base is
8 particularly important for full-featured devices such as iPhones and cellular iPads,
9 which include hundreds of componentse.g., a multi-touch display, a sophisticated
10 Apple-designed application processor, storage, memory, and a Touch ID sensor
11 that are unrelated to cellular SEPs and are device-specific.
12 8. Another example is that FRAND royalties must be levied at a
13 reasonable rate that reflects the contribution of the specific patented technology to
14 the standard rather than the lock-in value that arises from standardization itself,
15 i.e., (a) the value gained simply because companies are forced to use the technology
16 mandated in the standard, (b) the value of all technologies incorporated in an entire
17 standard, (c) the value of many other standards and non-standardized technologies
18 that make up the actual device, or (d) the value of the next non-infringing
19 alternative.
20 Qualcomms Non-FRAND Licensing Structure
21 9. Qualcomm has consistently demanded royalties for the manufacture
22 and sale of iPhones and iPads that contain baseband processor chipsets.
23 10. Apple and Qualcomm have never been able to successfully negotiate a
24 direct license agreement for Qualcomms cellular patents. At various times, Apple
25 has sought a direct license to Qualcomms cellular SEPs on terms that comply with
26 Qualcomms FRAND obligations, but Qualcomm has refused to license its cellular
27 SEPs to Apple on terms that Apple believes to be FRAND, based on our experience
28 negotiating licenses with other SEP holders and our understanding of the law.

2
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1 11. Because Apple has refused to agree to Qualcomms non-FRAND


2 licensing terms, Apple was forced to rely on the licenses of its contract
3 manufacturers (CMs), who manufacture Apples products.
4 12. Under the CMs license agreements (from the limited information we
5 have), the CMs were obligated to pay Qualcomm of the price at which finished
6 iPhones were transferred to Apple. The CMs paid Qualcomm either or of the
7 transfer price for iPads, depending on the terms of their agreements. Apple
8 reimbursed these costs to the CMs before the CMs transferred the monies to
9 Qualcomm.
10 13. Qualcomm has always known from Apple that Apple ultimately paid
11 the royalties for Apple products under the CMs license agreements. Nevertheless,
12 Qualcomm has never allowed Apple to view the CMs license agreements. Apple
13 has been forced to rely on Qualcomms representations of the scope of the CMs
14 licenses. Until recently, Qualcomm provided repeated assurances to Apple that the
15 CMs licenses covered nearly all of Qualcomms patent portfolio, and Apple
16 believed that Qualcomm would not (and could not) file infringement actions as long
17 as the agreements were in place. In 2016, however, Qualcomm indicated that the
18 CMs licenses are more limited in scope than previously represented. Apple
19 requested that Qualcomm allow Apple to review the CMs license agreements so
20 that Apple could determine which portions of Qualcomms portfolio are not covered
21 by the CM agreements. Qualcomm has refused this request.
22 14. As the ultimate payer of the royalties, Apple was able to negotiate a
23 series of agreements with Qualcomm that reduced Apples effective royalty rate to
24 around per device, via rebates. These agreements existed in one form or
25 another from the launch of the original iPhone in 2007 until the end of 2016.
26 15. From 2007 to 2012, the primary rebate agreement between Apple and
27 Qualcomm was the Marketing Incentive Agreement (MIA), under which
28 Qualcomm provided Marketing Incentive payments to Apple that were equal to

3
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1 the difference between the per-unit royalty paid by Apples CMs for each non-
2 CDMA iPhone and . The MIA expired on December 31, 2012.
3 16. From 2013 to 2016, Qualcomms per-unit rebates were governed by
4 two separate agreements, the Business Cooperation and Patent Agreement
5 (BCPA) and the First Amendment to the Transition Agreement (FATA). The
6 BCPA and FATA expired on December 31, 2016 to the extent not terminated
7 earlier.
8 17. The BCPAs rebates, called BCP Payments, were equal to the
9 difference between the CMs per-unit royalties and the respective caps of per
10 iPhone and per iPad.
11 18. The FATA provided additional Marketing Fund payments of
12 per iPhone and per iPad.
13 19. When considered together, the BCP Payments and Marketing Funds
14 guaranteed that Apples effective royalty rate for both iPhones and iPads remained
15 no more than the same level set by the earlier MIA.
16 20. The FATA also included a Variable Incentive Fund amounting to
17 per year in further rebates. As applied to the royalty, they reduced
18 Apples total royalty burden to around per iPhone and cellular iPad.
19 21. Pursuant to the agreements, for calendar year 2015, Apple paid the
20 CMs (about per device) for Qualcomms per-unit royalty
21 payments, which the CMs then transferred to Qualcomm under their respective
22 license agreements. Qualcomm then rebated back to Apple (about
23 per device) in BCP Payments, and ( per iPhone and
24 per iPad) under the FATAs Marketing Fund provision. As a result of these two
25 rebate provisions, Apples effective net royalty burden was about
26 of the royalties Apple originally paid (via the CMs) to Qualcomm under the
27 CMs license agreements.
28 22. Apple reluctantly agreed to maintain this effective royalty rate of

4
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1 around through 2016, in large part because it could not afford to take actions
2 that could jeopardize its supply of Qualcomm chipsets, a sole-sourced component in
3 Apple iPhones and cellular iPads from 2011 until the fall of 2016. However, Apple
4 has never considered this rate to be compliant with Qualcomms FRAND
5 obligations.
6 23. First, even accounting for rebates, Apples royalty payments to
7 Qualcomm are grossly disproportionate to the amount Apple pays other cellular SEP
8 holders. For example, in 2016 Apple paid a combined total of per device to
9 four of the largest licensors of SEPs ,
10 who together have made approximately of all 4G/LTE SEP declarations to
11 ETSI. In 2015, the last year in which Qualcomm fully complied with its rebate
12 obligations under the BCPA and FATA, Apples net royalty rate of to
13 Qualcomm was more than this amount, even though Qualcomms
14 declarations made up a smaller share (23.5%) of total 4G/LTE declarations to ETSI.
15 24. Second, Qualcomm has demanded exclusivity or quasi-exclusivity in
16 exchange for many of its rebate payments to Apple. Between 2007 and 2012,
17 Qualcomms rebate payments to Apple were conditioned on Apples agreement to
18 use 2G/GSM- and 3G/UMTS-compliant baseband processor chipsets in its products
19 (which Qualcomm favored) instead of chipsets supporting the competing WiMAX
20 standard, for which Qualcomm holds few SEPs. Between 2011 and 2016,
21 Qualcomm also conditioned a significant portion of its rebate payments on Apples
22 exclusive use of Qualcomm chipsets in all new cellular products.
23 25. Third, Qualcomm foreclosed Apple from challenging Qualcomms
24 compliance with its FRAND obligations. The BCPA included a clause preventing
25 Apple from initiating (or actively inducing a third party to initiate) litigation against
26 Qualcomm bringing a claim for patent infringement, patent exhaustion, or non-
27 compliance with FRAND. Apples Complaint calls this the gag clause. Apple
28 objected to this provision during negotiations, but conceded because there were no

5
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1 suitable alterative chipset suppliers at the time.


2 Recent Direct Licensing Negotiations
3 26. Starting in late 2014, Apple initiated a new round of negotiations with
4 Qualcomm, in an attempt to obtain a direct, FRAND-compliant license to at least
5 Qualcomms cellular SEPs.
6 27. In July 2016, after several discussions with and requests from Apple,
7 Qualcomm sent a written offer for a direct license to its cellular SEPs.
8 28. Under the July 2016 proposal, Qualcomm demanded royalties based on
9 the price of Apples products, rather than on the cost of the baseband processor
10 chipset or the value of Qualcomms contributions to the cellular functionality.
11 Specifically, Qualcomm demanded royalties of of each iPhone and
12 iPads Net Selling Price (NSP) for a license to its 3G and 4G patents, and royalties
13 of % of the NSP for 4G patents only. (All current Apple products require
14 3G connectivity for carrier compatibility, so only the higher royalty rate is relevant
15 at this time.) Despite requests from Apple, Qualcomm has never satisfactorily
16 explained its decision to arbitrarily set the base at of NSP, or provided a
17 methodology that would support this base.
18 29. Current iPhone models have a Net Selling Price (as defined in
19 Qualcomms proposed license agreement) of between approximately and
20 , depending on the model and storage capacity. Therefore, under Qualcomms
21 July 2016 proposal, Qualcomm would obtain between and in
22 royalties per iPhone sold directly to consumers. This is about times the
23 combined amount Apple paid per device to
24 in 2016. It is also more than the net per-unit royalty that
25 Qualcomm historically received for each iPhone.
26 30. Moreover, the wide range of per-unit royalties that would be levied
27 under Qualcomms July 2016 licensing proposal reveal that the proposal is both
28 unreasonable and discriminatory. Qualcomm would unjustifiably receive an

6
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1 additional in royalties when a customer chooses to purchase an iPhone with


2 256GB in storage rather than 32GB, even though Qualcomms cellular SEPs have
3 nothing to do with the storage components in the iPhone. And if a customer chooses
4 to purchase a Plus model, which has a larger screen and improved camera
5 components but the same baseband processor chipset and cellular functionality,
6 Qualcomm would obtain an additional in royalties.
7 31. Apple rejected Qualcomms July 2016 proposal because we do not
8 believe it complies with Qualcomms FRAND obligations. However, Apple has
9 consistently indicated its willingness to take a license on FRAND terms to at least
10 Qualcomms cellular SEPs.
11 32. In September 2016 and February 2017, Apple proposed that the parties
12 enter into a reciprocal, seven-year license for cellular SEPs, under which Apple
13 would pay Qualcomm up to per year. This offer is comparable to
14 Apples payments to other SEP holders and consistent with Apples FRAND
15 framework. Qualcomm rejected Apples proposal on both occasions.
16 33. In March 2017, after Apple challenged Qualcomms non-FRAND
17 licensing practices in its Complaint in Apple Inc. v. Qualcomm Incorporated, No.
18 17-cv-0108 GPC NLS (S.D. Cal.), Qualcomm offered to cap the royalty base at
19 of Net Selling Price. Even with this concession, Apple would pay a per-unit
20 royalty of for all new iPhones sold directly to consumers, with the exception
21 of
22 . This royalty would be more than the effective net
23 royalty that Apple to paid Qualcomm between 2007 and 2016 and more than
24 times the combined per-unit royalties Apple paid to
25 in 2016.
26 Qualcomms Withholding of Rebate Funds
27 34. Apple did not receive all of its 2016 rebates from Qualcomm because
28 Qualcomm abruptly and wrongfully stopped paying rebates, starting with the

7
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1 BCP Payment for the second quarter of 2016, which was due and payable on
2 September 16, 2016. When Apple inquired about the withholding, Qualcomm cited
3 legal issues associated with Apples participation in the Korea Fair Trade
4 Commissions investigation of Qualcomms licensing practices.
5 35. On October 9, 2016, Qualcomm told Apple that it would pay no
6 further BCP Payments.
7 36. Qualcomm did not pay Apple the BCP Payment for the
8 third quarter of 2016, which was due and payable on December 14, 2016.
9 37. Qualcomm did not pay Apple the BCP Payment for the
10 fourth quarter of 2016, which was due and payable on March 16, 2016.
11 38. In total, Qualcomm withheld approximately $963 million in BCP
12 Payments due to Apple.
13 39. Qualcomm also did not pay Apple any rebates for 2016 under the
14 FATA.
15 Effect of Preliminary Injunction
16 40. Qualcomms requested preliminary injunction would reinstate only the
17 first part of the three-part payment structure described abovethe flow of funds to
18 Qualcommwithout reinstating Qualcomms historical and reciprocal rebate
19 obligations.
20 41. Such a one-sided injunction would not restore the parties to their
21 historical licensing relationship. Qualcomm has never retained the full royalty
22 on the transfer price of Apple products that it is now demanding from the CMs.
23 42. Qualcomms royalty demands for 2017 are expected to be almost
24 averaging around per device. This is more than double the net amount
25 Apple would have paid under Qualcomms historical practice of limiting Apples
26 net effective royalty exposure to roughly per unit, via the various rebates
27 described above, and more than times the combined per-unit royalties Apple
28 paid to in 2016.

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1 CERTIFICATE OF SERVICE
2 The undersigned hereby certifies that a true and correct copy of the above and
3 foregoing document has been served on July 18, 2017 to all counsel of record who
4 are deemed to have consented to electronic service via the Courts CM/ECF system
5 per Civil Local Rule 5.4.
6 Dated: July 18, 2017
7 /s/ Gabriel R. Schlabach
Gabriel R. Schlabach
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CERTIFICATE OF SERVICE CASE NO. 3:17-CV-01010-GPC-MDD

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