Chip maker Qualcomm has been fined close to one billion dollars by the Chinese government after it was decided the company had violated anti-monopoly laws.
It looks like Qualcomm has more troubles than just possibly losing Samsung as a customer: the company, the world’s largest supplier of chips for mobile phones, agreed to pay a 6.088 billion yuan (approximately $975 million) penalty and said it has agreed to split its 3G/4G essential patents separately to other licenses in China. Existing licensees will be able to choose new terms as of January 1 2015.
Qualcomm did not contest the fine but it did express “disappointment” with the result of the investigation, which had been ongoing for more than a year and cast significant doubts over its business in China — although the company continued to make investments there. Possible outcomes of the probe had affected Qualcomm’s most recent financial performance and its stock price, which suffered its highest drop in over three years after its Q3 2014 earnings last year. Customers had delayed royalty payments, or underpaid Qualcomm, as they waited for clarity on the firm’s legal status in the country.
QUALCOMM DRAWS HALF OF ITS REVENUE FROM THE CHINESE MARKET
Yet, despite the large fine, a resolution with regulators and an end to the uncertainty is a positive outcome, particularly when considering the size of the Chinese market — a government report this month claimed China now has 557 million mobile internet users. Analyst Mike Walkley of Canaccord Genuity said that the result is “a net positive when it’s all shook out,” and Qualcomm CEO Steve Mollenkopf chose to focus on the future.
“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,” he said in a statement. This case could be a litmus test for future crackdowns on Western companies. Microsoft and Symantec are among other overseas companies that have been targeted by government investigations, as media reports continue to speculate that China is keen to cut its dependence on overseas software and hardware companies.