Qualcomm settlement less than industry had expected
Print Edition
CHINA has fined Qualcomm Inc more than 6 billion yuan (US$975 million), ending a 14-month anti-monopoly investigation into the US-based chipmaker.
The fine, the biggest so far in China’s anti-monopoly campaign, was calculated on the basis of 8 percent of Qualcomm’s 2013 revenue in China, said the National Development and Reform Commission, its top economic planning agency.
Qualcomm abused its dominance in wireless technology to charge manufacturers “unfairly high” licensing fees, the NDRC said.
Domestic phone vendors using Qualcomm chips are expected to pay less than a third of current royalty costs under the new settlement. The royalty cost of a Qualcomm-equipped phone selling for 2,000 yuan would be about 35 yuan cheaper.
Qualcomm is to pay a fine of 6.09 billion yuan and charge royalties of 5 percent for 3G devices and 3.5 percent for 4G devices, using a royalty base of 65 percent of the net selling price. The company had been charging royalties based on 100 percent of the selling price.
The fine is under the penalty roof of 10 percent because of the company’s “good attitude” during negotiations with the regulator, said Xu Kunlin, head of the NDRC’s anti-monopoly bureau.
It was the first time Qualcomm has been issued with a fine though it faces similar investigations in overseas markets.
Chinese firms and industry insiders welcomed the regulator’s decision, though they had expected more from the investigation.
“China has the world’s biggest chip market but we used to have little rights of speech globally. It’s a good start,” said Gu Wenjun, a Shanghai-based semiconductor analyst at research firm IHS iSuppli.
Chinese handset makers, including ZTE and Huawei, said they welcomed the result and hoped it would result in fairer competition.
Xiaomi, Huawei and Lenovo all use Qualcomm chips in their high-end models.
Makers also use chips designed by Taiwan-based Mediatek and Huawei-owned Hisilicon, but Qualcomm’s Snapdragon product dominates the market, especially the high-end market.
The NDRC said Qualcomm improperly bundled unrelated licenses with mobile phone technology, forcing Chinese customers to pay for licenses they didn’t need.
“Qualcomm’s acts to eliminate or restrict market competition, hinder and inhibit technological innovation and development and harm the interests of consumers violate China’s anti-monopoly law,” the agency said in a statement.
Qualcomm is to offer licenses for its current 3G and 4G essential Chinese patents separately from licenses for its other patents, giving phone vendors more choice.
This will positively influence the Chinese phone market in three to five years because Qualcomm has a 70 percent market share, according to analysts.
“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,” Derek Aberle, Qualcomm’s president, said in a statement.
The company was also quoted as saying in the NDRC statement that it would continue to increase investment in China.
But the settlement was less than expected by the industry, which thought Qualcomm would be forced to abandon royalty fees based on the phone price in favor of the chip cost.
China has stepped up law enforcement against monopolies in recent years and a number of foreign and domestic companies have been fined for violating the anti-trust law.
Last year, market regulators fined 12 Japanese auto parts suppliers a total of US$202 million for colluding to raise prices. Audi and Chrysler were fined for enforcing minimum prices dealers could charge for vehicles and service.
At the World Economic Forum at Davos last month, Premier Li Keqiang said China is committed to creating a favorable “soft environment” that features better market regulation and a world-class business environment established on market principles and the rule of law.
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