Qualcomm faces antitrust probe in China

Mon Nov 25, 2013 5:33pm EST
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By Supantha Mukherjee and Neha Alawadhi

(Reuters) - Chinese regulators have launched an anti-trust investigation into Qualcomm, the U.S. mobile chipmaker said on Monday, and some experts suggested China's government may be seeking leverage in royalty negotiations.

China's largest cellphone carrier is preparing a major move to 4G wireless technology next year, and Qualcomm has been hoping that will provide it with a major new source of royalty revenue. The company said it was not aware of any antitrust violations but would cooperate with the probe by China's National Development and Reform Commission (NDRC).

The NDRC did not say why the company was being investigated, according to Qualcomm. China's state media on Sunday quoted an NDRC official saying regulators would focus antitrust investigations on six industries, ranging from technology to medicine.

Qualcomm, the world's biggest maker of cellphone chips, sees China as a key market as growth in smartphones shifts away from the United States to developing countries. China Mobile has been preparing to upgrade to high-speed networks using technology developed by Qualcomm.

The U.S. company reported $12.3 billion in revenue from China in the 12 months through September, equal to 49 percent of its total revenue.

But many of the smartphones made in China are exported, so the Chinese market actually accounts for about a fifth of Qualcomm's chip shipments and licensing revenue, according to Raymond James analyst Tavis McCourt.

Some analysts speculate China's antitrust investigation may be an attempt to gain leverage in royalty negotiations with Qualcomm ahead of the expected rollout of new 4G wireless infrastructure in 2014. Analysts also theorized that Beijing may be moving to support local suppliers trying to compete with Qualcomm, the global leader in 4G technology, also known as Long-Term Evolution (LTE).

In February, the NDRC attracted attention when it fined six Korean and Taiwanese makers of liquid crystal displays about $57 million for price fixing.   Continued...

A Qualcomm sign is seen at one of Qualcomm's numerous buildings located on its San Diego Campus February 7, 2011. REUTERS/Mike Blake