Qualcomm to pay record US$975m fine to settle China anti-monopoly probe

By Zhu Shenshen | February 10, 2015, Tuesday |

Online Edition

QUALCOMM Inc agreed to pay a fine of US$975 million to Chinese regulators and set new business terms in the world’s biggest mobile phone market, ending a 14-month anti-monopoly investigation toward the world’s biggest mobile chip designer.

Qualcomm’s fine has been the biggest paid by any foreign firm in China. Domestic phone vendors using Qualcomm chips are expected to pay less than one-third of the royalty fees after Qualcomm’s settlement.

According to the deal with the National Development and Reform Commission (NDRC), Qualcomm agreed to pay a fine of 6.09 billion yuan (US$9.75 billion) to the country’s top regulator. In the adapted term, Qualcomm will charge royalties of 5 percent for 3G devices and 3.5 percent for 4G devices (including three-mode TD-LTE devices), using a royalty base of 65 percent of the net selling price of the device.

Comparatively, Qualcomm previously charged royal based on the 100 percent price. It means the adoption makes royal cost reduced by one-third.

Meanwhile, Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents, which gives phone vendors more choice.

Chinese top phone makers, including Xiaomi, Huawei and Lenovo, all used Qualcomm chips in the high-end models.

Besides Qualcomm, firms also use chips designed by Taiwan-based Mediatek and Huawei-owned Hisilicon (only used in some Huawei models).

But Qualcomm’s Snapdragon product dominates the market, especially in the high-end market. That’s the reason why the NDRC trigged the anti-monopoly investigation against Qualcomm for unfairly high royalty fee and bundled services.

“We are pleased that the investigation has concluded and believe that our licensing business is now well positioned to fully participate in China’s rapidly accelerating adoption of our 3G/4G technology,” Qualcomm’s president Derek Aberle said in a statement.

The share price of Qualcomm surged because the fine relieved concerns that Qualcomm is forced to change its business model, analysts said.

Business Qualcomm

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Qualcomm to pay record US$975m fine to settle China anti-monopoly probe

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