Qualcomm to pay $975 mln antitrust fine

Record penalty not aimed at foreign firms: NDRC

Giant US mobile chip maker Qualcomm has agreed to pay close to $1 billion - the largest in China's history - following a 14-month investigation into alleged antitrust practices.

A statement posted on the website of the National Development and Reform Commission (NDRC), China's anti-monopoly regulator, said the fine of 6.08 billion yuan ($975 million) was based on 8 percent of Qualcomm's sales in the country in 2013. The NDRC launched the investigation into Qualcomm in December 2013.

The final punishment was less than the maximum 10 percent of sales allowed under the country's law, as Qualcomm had fully cooperated with the regulator's probe, said Xu Kunlin, the head of the NDRC's price supervision and anti-monopoly bureau, on Tuesday.

Saying that the investigation began from complaints filed by two unidentified US companies back in 2009, Xu told reporters that the regulator's primary purpose is not to impose a fine, but to restore free-market competition.

The NDRC official also reiterated that the enforcement of China's anti-monopoly law is never aimed at cracking down on any foreign-invested business, but to provide a level playing field for all market participants.

The NDRC announced the record penalty as part of a long-anticipated resolution which also includes a reform plan that tweaks Qualcomm's business practices in China, a key market for the San Diego-based chip maker.

"Although Qualcomm is disappointed with the results of the investigation, it is pleased that the NDRC has reviewed and approved the company's reform plan," the company said in a press release e-mailed to the Global Times on Tuesday.

One of the key terms of the plan is to ban Qualcomm from bundling licenses to its other patents with licenses offered to its current 3G and 4G patents, and if it seeks to obtain cross-licenses for a Chinese customer's patents as part of such offers, "it will negotiate with the licensee in good faith and provide fair consideration for such rights."

The new agreement, which applies to mobile phones sold for use in China, also states that the amount of royalties will be based on 65 percent of the phone's "net selling price," instead of the previous practice of computing based on the full price.

Qualcomm profits most from patent royalties paid by phone manufacturers using its chip technologies. For its fiscal year ending September 28, 2014, the US chip maker made $26.49 billion in revenue globally, roughly half of which came from its sales in China.

The punishment, albeit the biggest paid by any company in China, serves to soothe investor concerns over the uncertainty that has weighed on Qualcomm, sending the company's shares up 1.15 percent to close Monday at $67.11 in NASDAQ trading.

"We are pleased that the resolution has removed the uncertainty surrounding our business in China, and we will now focus our full attention and resources on supporting our customers and partners in China and pursuing the many opportunities ahead," Steve Mollenkopf, Qualcomm's chief executive, was quoted as saying in the press release.

"It is actually an opportunity for Qualcomm," Bryan Wang, the vice president and principal analyst at Beijing-based Forrester Research, told the Global Times on Tuesday.

"Ending this investigation will open up opportunities for Qualcomm to encourage more new Chinese smartphone makers to use its chipsets when they expand to overseas markets," Wang said.

Factoring into the record penalty, Qualcomm said it now expects its earnings per share for the current fiscal year ending September 27, 2015 to hover between $3.56 and $3.76, from a prior estimate of $4.04 to $4.34.

But the company upped its revenue forecast for the current fiscal year to $26.3 billion to $28 billion, from its previous $26 billion to $28 billion target.

Chinese handset makers, those with abundant patent reserves in particular, have given the settlement an undisguised welcome.

Shenzhen-based Huawei Technologies said in a statement sent to the Global Times on Tuesday that "we believe domestic telecommunications product makers, vendors and mass consumers will all benefit from the resolution."

Huawei said the NDRC's final ruling will also be conducive to further protecting intellectual property rights (IPR) in the telecommunications industry, giving great impetus to domestic companies to focus on R&D and innovation.

Huawei sold more than 70 million smartphones worldwide last year, up 40 percent from the previous year.

In a statement sent to the Global Times on Tuesday, Huawei's cross-town rival ZTE Corporation also said "the decision will have a profound impact on the development of the global telecommunications market."

ZTE said it has continued spending above 10 percent of its annual sales on R&D, in a sign of the great attention it pays to protecting its IPR in innovative technologies.

A spokesman for Beijing-based smartphone maker Xiaomi, which has fewer patent reserves, declined to comment when contacted by the Global Times on Tuesday.