Qualcomm is likely to pay China a record fine of around $1 billion, ending a 14-month government investigation into anticompetitive practices, after the U.S. chipmaker and the regulator made significant progress during talks last week.
Qualcomm Nears $1 Billion Deal to Resolve China Antitrust Dispute
The deal may also require Qualcomm to lower its royalty rates by around a third on patents used in China.
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 startups to help develop mobile technologies for Internet, e-commerce, semiconductors, education and health.
The NDRC didn’t immediately respond to a request for comment. Christine Trimble, a Qualcomm spokeswoman, declined to comment.
A settlement would be a milestone in Xu’s controversial tenure at the NDRC’s antitrust division. He was promoted late last year to concurrently head the agency’s powerful pricing bureau.
Attorneys, executives and experts who have been drawn into NDRC’s antitrust investigations have complained of a culture of intimidation under Xu.
Underscoring how the issue became a focus of commercial friction between the world’s two largest economies, U.S. President Barack Obama pressed his Chinese counterpart Xi Jinping during November talks on the use of antitrust policy to limit royalty fees.
The NDRC has defended its antitrust work as fair and transparent. Xu told a news conference in September that foreign businesses were not being targeted.
In recent months, four international business lobbies have raised concerns about how China’s antitrust regulators carried out investigations. At least 30 overseas firms, including U.S. software giant Microsoft and South Korea’s Samsung, have come under scrutiny.
(Editing by Ian Geoghegan)
This article originally appeared on Recode.net.
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