Qualcomm may face huge fine in China

Regulators investigating company's 'monopolistic behavior'

US mobile phone chipmaker Qualcomm Inc may face a fine of up to around 7 billion yuan ($1.13 billion) in China if it is found guilty of monopolistic business practices, State-owned news portal people.cn reported Thursday.

Qualcomm is currently undergoing an anti-monopoly investigation launched by China's National Development and Reform Commission (NDRC) in November 2013.

NDRC official Xu Kunlin said in February that the commission's investigation into Qualcomm is based on feedback from mobile phone makers and industry associations that Qualcomm may have abused its market power and overcharged in China.

The NDRC has confirmed Qualcomm's monopolistic practices and is now investigating its sales data, Shenzhen-based newspaper Securities Times reported on July 25.

Under China's anti-monopoly law, the NDRC can impose fines of between 1 and 10 percent of a company's revenues for the previous year if any monopolistic behavior is proved.

Qualcomm reported $12.3 billion in revenue from China in the financial year ended September 2013, accounting for some 49 percent of its total revenue, according to its financial report released in November.

In the quarter ended June 30, the company reported net profits of $2.24 billion, up 42 percent year-on-year, according to a financial report on July 23.

"China continues to present significant opportunities for us, particularly with the rollout of 4G LTE, but also presents significant challenges, as our business practices continue to be the subject of an investigation by the NDRC," Qualcomm said in a press release on July 23.

Qualcomm's China revenue comes from both smartphone chipset manufacturing and patent licensing. Major mobile phone producers like Lenovo Group Co, Huawei Technologies Co and ZTE Corp are Qualcomm's clients in China.

About 5 percent of the sales of mobile phones that run on WCDMA technology goes to Qualcomm as a licensing fee, people.cn report said.

Qualcomm has faced similar probes before.

In July 2009, South Korea's anti-trust agency the Korean Fair Trade Commission imposed a $208 million fine on Qualcomm for abuse of market power and ordered the US company to stop discriminating against companies using its competitor's products.

Japan also launched similar probe of the company in 2006, and found that Qualcomm had breached antitrust rules.

Chinese authorities have stepped up efforts to look into possible irregularities among foreign companies in China. On Tuesday, the State Administration for Industry and Commerce confirmed that it has launched an antitrust probe of Microsoft Corp.