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11/02/2024 11:28:51 am

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Qualcomm To Pay Record US$975M Fine To China

Qualcomm

(Photo : Reuters)

Qualcomm Inc. announced on Monday that it agrees to pay a record US$975 million fine to China, to finally put a more than year long standoff it has had with the National Development and Reform Commission of China (NDRC), its anti-trust authority.

The NDRC had accused Qualcomm of violating China's anti-competitive laws. The company said that it would not contest the NDRC

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Qualcomm is known as one of the leading chip makers globally, selling the most smartphone chips in the world. A bulk of its profit stems from the handset manufactures paying patent royalties.

China's contribution to the company's revenue made up almost 50 percent of it at US$26.5 billion for the fiscal year 2014 which ended last September.

In that same period, royalties from licensing patents and other intellectual properties accounted for US$7.57 billion. This supported the company's market capitalization to expand to US$110 billion.

The settlement includes reforms to the company's patent licensing for mobile phones sold in the largest country in Asia, by lowering its royalty rates based on 65 percent of the selling price of phones, instead of the full price. Qualcomm will also offer its licenses to its 3G and 4G Chinese patents, separate from other patents.

However, analyst found that the changes were more lenient than expected, with Qualcomm even seeing higher revenues and profits in the current fiscal year due to the case.

"It removes a significant source of uncertainly from our business and really positions our licensing group to really participate in the full growth of the wireless market in China," noted Steve Mollenkopf, chief executive of Qualcomm.

The company expects full year earnings per share of between US$3.56-US$3.76 for the year versus the forecasted US$4.04-US$4.34, with revenues of US$26.3-US$28 billion.

 On current anti-trust probes in Europe and the United States, Derek Aberle, Qualcomm President says "We fully respect their authority, but we don't believe it's likely that other agencies will necessarily meet similar conclusions."

Roger Kay, an analyst from Endpoint Technologies Associates considered the close to US$1 billion dollar fine as "modest". Patrick Moorhead, analyst at Moor Insights & Strategy even said that the close can also be seen as "nothing but a win" for the company.

Qualcomm shares inched up in 1.6 percent to US$68.18 in after-hours trading.

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