Making China’s antitrust probe go away is going to cost Qualcom more in the long run.
Word on the street is that other countries are going to have a look at the firm’s highly profitable patent licensing business, and may even call into question its worldwide contracts with smartphone makers such as Apple and Samsung.
China’s National Development and Reform Commission (NDRC) is close to completing a 13-month investigation into the US chipmaker as soon as possible. It will almost certainly mean that Qualcomm will have to write a cheque for a record fine and change the way it licenses its technology to handset makers in China.
Qualcomm has tried to paint the situation as being part of the sort of problems western companies have working in China but it seems that the mess will not end behind the bamboo curtain. Anti-trust probes in Europe and by the US Federal Trade Commission (FTC) seem to be connected to China’s investigation, Qualcomm has admitted.
Qualcomm is the top patent holder for mobile phone technology, including many that form industry standards like CDMA and LTE. Charging royalties based on the mobile phone selling prices, even those made with competitors’ chips, provided more than half of its $8 billion net income in 2014.
The NDRC, one of China’s anti-trust regulators, has said it suspects Qualcomm of overcharging and abusing its market position in wireless communication standards.
Qualcomm is expected by industry sources to agree to changes in how it charges royalties on mobiles flogged in China, which will hurt its bottom line.
It could affect its contractual relationships not just with local manufacturers such as Huawei, Lenovo, ZTE and Xiaomi, but also with bigger global players that make and sell phones in China, such as Apple Inc. and Samsung Electronics.
