Qualcomm under anti-monopoly probe in China

Ahead of the country's 4G rollout, the investigation is speculated to be related to the chip maker's license fee structure, and part of a move to give domestic chip makers an edge.
Written by Ryan Huang, Contributor

Qualcomm's growth plans in China could be under threat as it undergoes an anti-monopoly probe ahead of the country's 4G rollout.

Qualcomm is under an anti-monopoly probe in China.

China's National Development and Reform Commission (NDRC) have begun investigations, and has advised that "the substance of the investigation is confidential", according to its statement on Monday.

"The company is not aware of any charge by the NDRC that Qualcomm has violated the [anti-monopoly law] AML. We will continue to cooperate with the NDRC as it conducts its confidential investigation," Qualcomm said in the statement.

Qualcomm draws revenue from both its chipset sales and use of its technology in smartphones. This includes royalties it gets from network service providers for using its patents, even if they do not use Qualcomm chips.

The country's largest telco, China Mobile, has not had to pay Qualcomm any royalties since opting for an alternative technology for its current data network that apparently does not use its patents, according to Bloomberg. That's been expected to change as early as December 18 when China shifts to new higher-speed 4G technology, with Qualcomm highlight it as a potential growth driver. Nearly half of Qualcomm's US$24.9 billion in sales came from China in the fiscal year ended September, which included assembly of products for other markets.

The investigation is seen as a move by the government to nuture its own domestic chip industry to compete with overseas suppliers amid the growing dominance of Qualcomm.

"China wants to give as much advantage to their indigenous chipmakers as they can," said Gus Richard, analyst at Piper Jaffray & Co., in the Bloomberg report. He added it was unlikely China would relent to paying any royalties.

The probe is also the latest example of challenges faced by foreign companies expanding in China. Last month Samsung last month apologized to the Chinese market after being accused by state media of selling shoddy devices, following a similar case in March involving Apple.

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