Qualcomm is under investigation in China for allegedly overcharging and exploiting its market position, which may see the U.S. chipmaker facing fines of over US$1 billion.
China's National Development and Reform Commission (NDRC) said it had received complaints from organizations that Qualcomm was quoting higher prices for the Chinese market compared to other markets, according to a Reuters report Wednesday. The complaints prompted an investigation into the San Diego-based company, which generates revenues from both its chipset sales and use of its technology in smartphones. These include royalties it gets from network service providers for using its patents, even if they do not use Qualcomm chips.
"We received reports from relevant associations and companies that Qualcomm abuses its dominant position in the market and charges discriminatory fees," Xu Kunlin, head of NDRC's anti-monopoly and price supervision bureau, told reporters in Beijing.
The market watchdog said it raided Qualcomm's Beijing headquarters and Shanghai offices in November, and was in touch with the company's relevant officials. Qualcomm spokesperson Christine Trimble told Reuters it was cooperating with authorities in China, which contributes almost half of the company's overall sales.
According to the report, China Mobile Communications Industry Association had filed a complaint against the chipmaker for overcharging businesses for the use of its patents.
The Chinese government had initiated anti-monopoly probes against the chipmaker last November, and NDRC in December claimed it had gathered "substantial evidence" against Qualcomm. The regulator, however, did not provide details on what these were.
Under China's anti-monopoly laws, if found guilty, Qualcomm faces fines of 1 to 10 percent of its revenues in the previous year. The chipmaker had clocked US$12.3 billion revenues in China for its recent fiscal year, ended September. For its fiscal first-quarter 2014, Qualcomm reported net income of US$1.88 billion with earnings of US$1.09 per share.
NDRC said it was also in discussions with another U.S. tech vendor, InterDigital, in a separate anti-monopoly investigation about a potential settlement. The company holds patents for wireless devices and networks.
According to Reuters, any settlement would likely include fines as well as agreements to reduce patent licensing fees for consumers in China.