Exclusive: Qualcomm nears $1 billion deal resolving China antitrust dispute

Mon Feb 9, 2015 10:15am EST
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By Matthew Miller and Michael Martina

BEIJING (Reuters) - Qualcomm Inc is likely to pay China a record fine of around $1 billion, ending a 14-month government investigation into anti-competitive practices, after the U.S. chipmaker and the regulator made significant progress during talks last week.

The deal, which may also see Qualcomm lower its royalty rates by around a third on patents used in China, could be announced as soon as Monday, a source said.

Discussions in Beijing over one of the most contentious cases under China's 2008 anti-monopoly law have intensified in recent weeks, culminating in meetings between Qualcomm senior executives and National Development and Reform Commission (NDRC) officials on Friday.

Qualcomm's fine would be the largest paid by any company in China. The company would also agree to make changes to its licensing practices, though those are not expected to alter its business model.

"The NDRC will soon release a new antitrust settlement," Xu Kunlin, the head of the agency's antitrust division, said at a law conference on Monday, according to an article posted on the website of the official Securities Times. "Qualcomm will be fined several times the total amount the NDRC fined last year."

For the fiscal year ended Sept. 28, Qualcomm earned about half its global revenue of $26.5 billion in China, with a large chunk of profit coming from higher-margin royalties earned from the company's licensing arm.

The NDRC probe disrupted that business, fostering disputes with existing licensees and causing other firms to delay signing new licenses, though Qualcomm reached a settlement with one "major Chinese licensee" even as the investigation continued, Qualcomm President Derek Aberle told analysts last month.

San Diego-based Qualcomm has also been seeking to deepen its presence in the Chinese market by transferring technology and investing in next-generation chip users. In July, it said it would partner Semiconductor Manufacturing International Corp, a major Chinese chipset maker, to manufacture Qualcomm's Snapdragon processors. It also plans to invest up to $150 million in Chinese start-ups to help develop mobile technologies for Internet, e-commerce, semiconductors, education and health.   Continued...

A Qualcomm sign is pictured in front of one of its many buildings in San Diego, California November 5, 2014. REUTERS/Mike Blake