Most likely they didn't yet plan to source the LTE chips from a second supplier at the time they signed the contract, so that limit didn't affect them. Nowadays they do have multiple sources, which is probably why they did not prolong the contract any further after 2016 - because having multiple sources was worth more to them than having this discount.
What does FRAND mean?
Rights holders generally have to agree to license their patents on FRAND terms to get their technology included in wireless standards, in this case CDMA and LTE.
Qualcomm’s license pricing is, unusually in the industry, a percentage of the final retail price of the final device.
Apple’s argument is that this is not, in fact, a reasonable and non-discriminatory price for a license to use Qualcomm’s patents.