US chip-maker Qualcomm has said it will pay a record US$975m to the Chinese authorities for violating the country’s anti-monopoly laws, ending a 14-month business investigation.
The near-billion dollar penalty – about eight per cent of Qualcomm’s 2013 Chinese sales – is, however, less than the maximum 10 per cent of sales that the Chinese government could have fined the company.
The outcome of the probe – billed as one of the most contentious under China’s 2008 anti-monopoly law – will see Qualcomm reduce royalty rates on patents in China, providing a boost to its domestic smartphone makers, Xiaomi and Huawei.
But at the same time, the deal will make it easier for the San Diego-based chip-maker to collect royalties from local manufacturers, who it says have been under-reporting their use of its patents, which allow phones in China to connect to data networks.
China’s National Development and Reform Commission (CNDR) initially saw Qualcomm fight back against its proposed fine, the largest in China’s corporate history, when it accused the US company of violating its antitrust laws over a year ago.
However, after agreeing to pay the fine, Qualcomm – whose chips are found in almost all global smartphones – raised its revenue forecasts for 2015 to $26.3bn, sending its share price up.
The company suffered a blow earlier this year when South Korean smartphone-maker Samsung rejected its flagship new Snapdragon processor for its forthcoming Galaxy S6 phone.
China represents a key market for Qualcomm, given its fast-growing electronic manufacturing sector and widening data coverage across the world’s biggest mobile market.
An NDRC spokesman said it hoped the Commission’s actions would restore orderly free-market competition.
Foreign businesses in China – particularly tech firms – continue to have major issues in the communist country, where state companies and government departments are expected to purchase domestically-developed solutions over outside offerings.
Qualcomm is the just latest in a series of overseas and cross border IT companies in China such as Microsoft and Symantec to be investigated for ‘anti-competitive practices’.
There are, however, other foreign and domestic antitrust probes into Qualcomm – which has collected over $30bn in royalties over the last five years – in Europe and the United States.
The US Federal Trade Commission is examining its licensing division, while the European Commission is investigating rebates and financial incentives tied to sales of their base-band chips.