EU launches antitrust probe into Qualcomm 5G modem chipset business

If regulators find a violation, Qualcomm could face a fine of up to ten percent of annual revenue.

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Qualcomm is being investigated by the European Commission (EC) over potential antitrust practices relating to the firm's 5G chipset business. 

The US chip giant confirmed the investigation in a regulatory filing (.PDF). According to Qualcomm, the EC requested information on December 3, 2019, in regards to Qualcomm's Radio Frequency Front End (RFFE) designs, used in 5G devices. 

At the same time, European regulators informed Qualcomm that they are "investigating whether [Qualcomm] engaged in anti-competitive behavior" within the European economic area. 

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In particular, as reported by Reuters, the EC wants to know whether the San Diego-based chipmaker leveraged its market position in 5G baseband processors & modems in the RFFE space to disadvantage competitors. 

Qualcomm says it is in the "process of responding."

The company has warned investors that if European regulators find that there has been a violation of competition rules in the region, a fine of up to 10 percent of annual revenue can be imposed -- alongside injunctions and the restriction of business practices deemed inappropriate, all of which could hit the bottom line. 

"It is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the EC," Qualcomm added. "We believe that our business practices do not violate EU competition rules."

In July 2019, the EC fined Qualcomm €242 million for anti-competitive, "predatory pricing" practices in the 3G baseband chipset market. The watchdog said that Qualcomm sold products to Huawei and ZTE at below-cost levels in order to force Icera, a rival British semiconductor firm, out of the market. 

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The tech giant is also in an appeal stage relating to a lawsuit brought forward by the US Federal Trade Commission (FTC). The FTC alleges that Qualcomm violates FRAND licensing commitments, imposes royalties that are too high, and deals made between Qualcomm and some vendors ignore antitrust laws. 

The court ordered Qualcomm to provide patent licenses on "fair, reasonable, and non-discriminatory terms" to other companies and to provide reports to the FTC for the next seven years to show compliance. These orders, among others, will have to be adhered to if Qualcomm loses its appeal.  

This week, Qualcomm posted strong first-quarter financial results that beat analyst expectations. The tech giant declared Q1 2020 revenue of $5.05 billion with earnings per share of $0.99. Analysts predicted revenue of $4.83 billion and $0.85 EPS. 

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Qualcomm owes its successful quarter to the early adoption and development of 5G technologies. Qualcomm CEO Steven Mollenkopf says that the business is gearing toward new RF front-end content and core chipsets with higher performance levels. 

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