SEOUL—A South Korean regulator said it could fine Qualcomm Inc. about $ 853 million for alleged antitrust violations, the absolute best such penalty handed to an individual company right here, as the U.S. chip maker faces international scrutiny over its patent-licensing industry.
After a 3-12 months investigation, the Korea truthful exchange commission mentioned on Wednesday that Qualcomm breached antitrust legislation through limiting competing chip makers’ access to its patents. the company also pressured cell-telephone manufacturers into unfair license agreements by using refusing to supply a very powerful cellphone chips to those that disagreed with its terms, the regulator mentioned.
The chip supplier used its market position as a leveraging device in its negotiations with cell-phone makers to power them to accept unfair stipulations, said Shin younger-son, the fee’s secretary-basic.
San Diego-primarily based Qualcomm mentioned it will contest the choice, rejecting the advice that it had hindered different chip suppliers’ skill to sell. It stated its licensing practices have existed in Korea and world-vast for many years, and that the regulator hadn’t puzzled them up to now. The observe of licensing on the software level is an industrywide norm, mentioned Don Rosenberg, the agency’s basic advice.
“It’s a false truth they’ve created of what this business looks like, what its historical past has been, what our position has been,” Mr. Rosenberg said.
Qualcomm’s industry is largely divided into its chip-making unit and patent-licensing unit. the corporate garnered greater than $ 23 billion in revenue in its 2016 fiscal yr, of which 34% stemmed from its patent-licensing business.
Qualcomm expenses handset makers up to a 5% royalty in accordance with the wholesale price of their units. the company doesn’t most often problem licenses for its wi-fi know-how to other chip makers. less than 3% of its licensing revenue came from royalties from Korean handset makers in its 2016 fiscal 12 months ended Sept. 25, it said.
South Korea’s Samsung Electronics Co. and LG Electronics Inc., which both use the U.S. firm’s processor chips in their smartphones, declined to remark Wednesday.
In its choice, the South Korean regulator mentioned Qualcomm’s royalty adaptation is unfair for handset makers because it requires them to purchase complete wireless-know-how licenses, including ones they don’t use. furthermore, it requires handset makers to supply their patents to Qualcomm totally free, the commission mentioned, calling on the company to change its trade edition.
It isn’t the primary time Qualcomm has run foul of regulators in Asia.
ultimate 12 months, Qualcomm agreed to a agreement with chinese language antitrust authorities that incorporated a $ 975 million positive and required the company to alter its trade practices. chinese language regulators, then again, didn’t problem Qualcomm’s variation of charging royalties to handset makers.
And in 2009, the South Korean fee fined Qualcomm 273.1 billion gained ($ 225.6 million) for exploiting its dominant patent place by using charging lower royalties for handset makers that bought Qualcomm chips, discouraging them from buying chips from rivals. the company appealed that ruling; a last decision is pending.
Wednesday’s ruling won’t take effect unless the commission considerations a proper written order, which will take a couple of weeks or months. Qualcomm can provoke its attraction process to Seoul’s excessive court as soon as that happens, but is required to pay the tremendous inside 60 days as soon as the order is issued. The fantastic may be adjusted or refunded later depending on the end result of the attraction.
If fully carried out, the fee’s ruling would probably dent Qualcomm’s earnings in the end, stated Lee Seung-woo, an analyst with IBK Securities in Seoul.
Stacy Rasgon, an analyst with Sanford C. Bernstein, said any requirement that Qualcomm trade its licensing practices may affect its strategy to trade in different nations. “the fear isn’t the high quality—Qualcomm has deep pockets. the worry is about doable modifications to the business model, if any,” he stated.
Write to Eun-younger Jeong at [email protected]
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