US chipmaker to be deemed monopoly
Last Updated: 2014-07-25 07:14 | China Daily
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A Qualcomm sign is seen at one of Qualcomm's numerous buildings located on its San Diego Campus, in this February 7, 2011 file picture. [Photo/Agencies]

Qualcomm could face penalties of up to 10% of its mainland revenues

China's antitrust regulator will soon announce that Qualcomm has monopoly status in the mobile chip market, an official from the National Development and Reform Commission said on Thursday.

Xu Kunlin, director of the price supervision and antimonopoly bureau under the NDRC, told China Daily that its investigation regarding the US chipmaker is near an end and will be made public "very soon".

Xu did not disclose what kind of penalties may await Qualcomm.

Steve Mollenkopf, chief executive of Qualcomm, was on his third trip to China on Thursday since taking over as CEO in March.

He declined to comment on the matter because the decision has not been officially announced.

Wang Xiang, Qualcomm's China head, said, "We have nothing to say at this point."

Bryan Wang, principal analyst at Forrester Research, said a cash penalty is the mostly likely option for the NDRC.

"The nation cannot fully abandon Qualcomm's highend chips as yet, which makes other sanctions such as sales bans less likely," he said.

The anti-monopoly law allows industry regulators to impose fines up to 10 percent of a company's revenues in the previous year. Qualcomm earned $12.3 billion in China in its last fiscal year, which ended in September.

The sum represents nearly half of the company's global revenue.

Bryan Wang estimated the company could face the maximum fine this time, which could exceed $1.2 billion because of Sino-US security fights.

"Government agencies would not easily raise a charge against an overseas giant and then subsequently drop the case without announcing a punishment," Wang said.

On the same day the NDRC official said Qualcomm would be deemed a monopoly, the company announced a $150 million investment project aimed at Chinese startups.

"China has become a significant portion in hands et manufacturing and development. That's a major reason for us to announce a new venture investment," Mollenkopf said.

But Wang said the venture investment could be a gesture from Qualcomm to please the government.

Mollenkopf underlined the company's decadelong relationship with the Chinese government at the fundlaunching event in Beijing .

Qualcomm has a long list of local buyers in China: Xiaomi , Lenovo Group and Huawei Technologies are among the top Qualcomm chip users.

The incident is set to give Qualcomm's competito rs a chance to take some market share from lower-end market.

Intel Corp, Huawei and Taiwan-based MediaTek are all eyeing Qualcomm's share in China.

Beijing has decided to gradually shake dependence on overseas made electronics.

The State Council introduced a fund last month in a bid to boost local chip innovation and manufacturing.

Legal and regulatory barriers may lead the US chip giant to lose ground in China where demand for chips supporting 4G telecom technologies is surging.

A total of 120 million 4G-enabled smartphones will be shipped in China, and overall smartphone shipments are on track to break 450 million, research firm IDC estimated.

Chinese vendors have about 70 percent of the domestic cellphone market.

Qualcomm's value takes $13b hit amid China probe

One of the biggest mobile chipmakers in the world lost $13 billion in market value due to negative impact created by an anti-monopoly investigation in China.

Qualcomm Inc's president Derek Aberle has admitted that the probe has had a negative impact on the company, according to 21st Century Business Herald on Saturday.

The report said the Wall Street darling's stock price closed at $73.72 on Thursday, falling more than 10 percent from the previous $81.6 - a loss of $13.2 billion by market value.

Meanwhile, Qualcomm's rating has been downgraded, the newspaper cited a recent report released by Stacy Rasgon, an analyst at the US-based investment management firm Sanford C Bernstein. Rasgon has been maintaining Qualcomm's buy ratings since 2009.

The growing cloud over the question of royalties from Chinese equipment manufacturers brings "reasonable doubt" to the long-term health of Qualcomm's licensing business, Rasgon was quoted as saying.

On July 24, it was confirmed that the chipmaker was facing accusations of overcharging license fees and abusing its market position in China amid an anti-monopoly investigation launched by the country's National Development and Reform Commission last November.

Qualcomm has allegedly been refusing to authorize big chipmakers in China like MediaTek Inc and Spreadtrum Communications, and was instead charging exorbitant patent fees from manufacturers using Qualcomm chips, Wang Yanhui, secretary of Mobile China Alliance, told the newspaper on Friday.

Patent fees, which include license fees and royalties, could reach up to six percent of a phone price, over and above the cost on the chips themselves, which form lion's share of Qualcomm's revenues.

The company's licensing business contributed up to 87 percent of its total profits before tax, the newspaper said citing Qualcomm 2013 fiscal report.

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