Qualcomm fined record $975 mn in China anti-trust probe

Chinese anti-trust regulators have imposed a hefty fine of 6.088 billion Chinese yuan (approximately $975-million) on US chipmaking giant Qualcomm Inc, the largest fine Chinese corporate history, for the company's patent licensing violations.

Under the deal, Qualcomm will have to lower its royalty rates on patents which will now be based on 65-per cent of the net selling price of the mobile device from the earlier 100 per cent. Qualcomm will charge royalties of 5 per cent for 3G devices and 3.5 per cent for 4G devices.

The government decision brought to an end a 14-month investigation led by the country's National Development and Reform Commission (NDRC) on the violation of China's anti-monopoly law by Qualcomm.

Qualcomm makes about half of its global revenue of $26.5 billion in China, the world's leading smartphone market. The company is a key player in China's expanding high-speed 4G network and derives a major chunk of its profit there from its high-margin royalties. The business was affected by the investigation due to disputes with existing licencees and delay in signing new deals.

''Although Qualcomm is disappointed with the results of the investigation, it is pleased that the NDRC has reviewed and approved the Company's rectification plan,'' Qualcomm said in a statement.

Qualcomm said that it will not pursue legal proceedings against NDRC's findings that it violated the Chinese law.

San Diego-based Qualcomm is a global leader in 3G, 4G and next-generation wireless technologies. The businesses include Qualcomm's licensing business, QTL, and the vast majority of its patent portfolio.

Expressing his relief over the closing of the case, Qualcomm president Derek Aberle said, ''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,''

 ''We appreciate the NDRC's acknowledgment of the value and importance of Qualcomm's technology and many contributions to China, and look forward to its future support of our business in China,'' he added.

The company has agreed to implement a rectification plan that modifies certain of its business practices in China.

Qualcomm will invest up to $150 million in Chinese start-ups for further development of mobile and semiconductor technologies.

 ''We are pleased that the resolution has removed the uncertainty surrounding our business in China, and we will now focus our full attention and resources on supporting our customers and partners in China and pursuing the many opportunities ahead,'' said Steve Mollenkopf, CEO of Qualcomm.

Qualcomm has also revised its guidance for fiscal 2015 with revenue target in the range of 26.3 billion to $28 billion. Considering an impact of the fine, Qualcomm's GAAP diluted earnings will be lower at $3.56 to $3.76 from earlier forecast of $4.04-$4.34.

Further to the news of the deal, Qualcomm stock moved up 2.8 per cent in after-hours trading yesterday in New York.