China Targets Qualcomm in Anti-monopoly Probe

Qualcomm said that it faces an anti-trust probe in China from the country’s National Development and Reform Commission (NDRC). The world’s largest maker of chips for smartphones added that the NDRC has not specified the reasons for its investigation and it was not aware of having committed any violations, but would cooperate.

As China’s top economic planning body and price regulator, the NDRC has launched nearly 20 pricing-related probes of domestic and foreign firms in the past three years, according to reports. In February, the NDRC fined six Korean and Taiwanese makers of liquid crystal displays about US$57m for alleged price fixing.

In July, four senior executives of pharmaceuticals group GlaxoSmithKline were detained on suspicion of economic crimes. The following month, the commission levied a total fine of US$110m on six companies, including Mead Johnson Nutrition, Danone and New Zealand dairy group Fonterra after a four-month investigation into alleged price fixing and anti-competitive practices by foreign makers of baby formula.

More recently China’s state-controlled media has accused of fixing the price of its products too high. At the weekend media reports quoted an NDRC official, who said that antitrust investigations would focus on six industries ranging from technology to medicine.

Qualcomm reported total sales of US$24.9bn in sales for the fiscal year that ended in September, with China contributing nearly half at US$12.3bn. Part of that figure came from phones assembled in China and sold in other countries.

The group derives most of its total revenue from chips used in smartphones, and the majority of its profit from licensing technology that is central to modern cell-phone networks and handsets. As a result even phone service providers that don’t use Qualcomm chips pay royalties for use of its patents. The company collected technology-license fees on more than a billion phones in fiscal 2013 and sold more than 700m chips.

According to some analysts, China’s government may be attempting gain leverage in royalty negotiations with Qualcomm ahead of the expected rollout of new 4G wireless infrastructure in 2014. An alternative theory is that Beijing may be moving to support local suppliers trying to compete with the US group, the global leader in 4G technology, also known as Long-Term Evolution (LTE).

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