US chipmaker, Qualcomm Inc., has put an end to the 14-month anti-trust investigation by the Chinese Government by agreeing to pay a record fine of US$ 975 Mn. Qualcomm has also been asked to lower its royalty rates on patents used in China, thereby providing a boost to domestic handset manufacturers like Xiaomi and Huawei.
Qualcomm Inc. is facing similar charges in the US and Europe as well. South Korea has also started investigating similar monopolistic practices by Qualcomm. The judgment by the Chinese Government is likely to be only a small setback for Qualcomm Inc. as it is required to pay a fee it can easily afford – around 8% of its annual sales in China and in turn it gets to retain a majority of its patent licenses. After the judgment, Qualcomm Inc. shares soared 1.6 percent to US$ 68.12.
Commenting on whether the judgment in China would have an impact on the ongoing trials in the US and Europe, Derek Aberle, President of Qualcomm Inc. said, “We fully respect their authority, but we don’t believe it’s likely that other agencies will necessarily meet similar conclusions”.
China is a huge marketplace as its high speed 4G network is creating demand for cutting edge smartphones, but the anti-trust judgment is likely to affect Qualcomm Inc.’s opportunities. Qualcomm has decided not to contest the National Development and Reform Commission (NDRC)’s verdict that it dishonored the Chinese anti-trust law.
A few industry experts believe that the fresh Chinese patent rules might actually make it simpler for Qualcomm Inc. to collect royalties on device patents and sign contracts with new vendors. Qualcomm Inc. has however, reduced its 2015 share-price forecast by US$ 0.58 per share owing to patent issues. It will be interesting to see the way the trials in the US, Europe and South Korea shape up and the impact these judgments will have on Qualcomm
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