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In a major settlement regarding fines on Qualcomm by China regulatory body in violation of anti-monopoly law, Qualcomm is expected to pay $1 Billion. Qualcomm has been accused of overcharging and abusing its market position in wireless communication standards.
NDRC (National Development and Reasearch Commission) is expected to soon release the antitrust settlement.
It's again high royalty on patent issue. For the year ended last september in China, Qualcomm earned ~$26.5B revenue from that land; a major portion of the revenue coming from patent licensing. According to the settlement deal, Qualcomm would need to also reduce the patent royalty rates by 1/3rd in China and make changes in licensing practices.
How do we see it now? If we look at from business perspective, Qualcomm would not like to miss China. The bigger question is, can the rules vary from country to country? My guess says you need to do what is required for business and where business is to give you some profit!
I think Ericsson has to think much more the consequence of the lawsuit they started against Xiaomi in India. They might have a chance to win in India, but they will expose themselves to greater risks in China.
Qualcomm (NASDAQ:QCOM) will pay RMB6.088B ($975M) to settle the Chinese government's antitrust probe, just a little less than the $1B reported by Reuters.
However, the company will get to charge a 5% royalty rate on 3G-capable devices (including multi-mode 3G/4G hardware, which account for a large % of Chinese 4G phones sold today) for access to "3G and 4G essential Chinese patents." 4G devices that don't support 3G CDMA or WCDMA networks will carry a 3.5% rate. The 5% 3G/4G rate is much better than what Canaccord was modeling.
Some fine print: Qualcomm will license its "essential Chinese patents" separately from other patents, and negotiate cross-licenses in "good faith." It also won't "condition the sale of baseband chips on the chip customer signing a license agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its license agreement." However, Qualcomm isn't obligated to sell chips to a non-licensee.
The company has also agreed to create "a China-specific investment fund of $150 million to further the development of mobile and semiconductor technologies." It already committed $40M to similar investments in December.
FY15 (ends Sep. '15) guidance has been hiked on the low end: Revenue guidance is now at $26.3B-$28B vs. $26B-$28B, and EPS guidance at $4.85-$5.05 vs. $4.75-$5.05.
I think Ericsson has to think much more the consequence of the lawsuit they started against Xiaomi in India. They might have a chance to win in India, but they will expose themselves to greater risks in China.
Now South Korea's Fair Trade Commission is probing into Qualcomm on abusing its dominant market position.
South Korea's antitrust agency had fined Qualcomm more than $200M in 2009 too.
On technology front, Qualcomm can have severe competition from MediaTek, Intel, Marvell and HiSilicon.
Are we going to see Qualcomm losing ground in coming years?
i dont understand what is the problem with the monopoly. if a lot of people like the qualcomm products then it clearly becomes the monopoly company, or qualcomm must not sell them their products?
That's where the problem is. Can Qualcomm afford coming out of Chinese market? It's big for Qualcomm. Even after paying penalty, it will be highly profitable in China.
So, in simple terms as you say, 'don't sell if they don't pay', China will say, 'we are collective buyers, if you want to sell at this price, then sell otherwise pack up'. So, there are many things which need to be considered other than a simple math
Qualcomm's antitrust woes are not over.
Now South Korea's Fair Trade commission (FTC) and European Commission (EC) are investigating into antitrust violations by Qualcomm. A report is here.
