Technology

Qualcomm to pay $975M fine over Chinese anti-monopoly claim

By JOE McDONALD AP Business Writer BEIJING (AP) — China has fined chipmaker Qualcomm 6 billion yuan ($975 million) in the biggest of a wave of anti-monopo...

The Associated Press

February 10, 2015 2:04 am

3 min read

By JOE McDONALD
AP Business Writer

BEIJING (AP) — China has fined chipmaker Qualcomm 6 billion yuan ($975 million) in the biggest of a wave of anti-monopoly penalties that have rattled foreign companies.

Beijing is investigating foreign automakers, technology suppliers and other companies in what appears to be an effort to force down prices. Business groups say the secretive way the investigations are conducted is alienating companies but regulators deny they are treated unfairly.

China is the world’s biggest manufacturer of mobile phones and other wireless devices. Its government has complained about the high cost of licenses for foreign technology.

Qualcomm, one of the biggest makers of chips used in mobile phones, said Monday it also agreed to change some of its practices for licensing technology to Chinese companies.

Regulators said last year they were investigating whether Qualcomm and another company, InterDigital Inc., of Wilmington, Delaware, abused their dominant market position by charging excessive fees for technology.

San Diego-based Qualcomm said it is disappointed with the findings by the Chinese Cabinet’s National Development and Reform Commission, but will not contest the matter. The fine was the highest announced to date by Chinese authorities against a foreign company.

The Qualcomm penalty was twice the size of the 3 billion yuan ($492 million) fine imposed on GlaxoSmithKline, a British pharmaceutical company, in September in a bribery case.

Among changes agreed to by Qualcomm, it will offer licenses to its current 3G and 4G Chinese patents separately from licenses to its other patents. It also will give existing licensees in China an opportunity to adopt the new terms for sales of branded devices for use in China going back to Jan. 1.

“We are pleased that the investigation has concluded and believe that our licensing business is now well positioned to fully participate in China’s rapidly accelerating adoption of our 3G/4G technology,” said Derek Aberle, president of Qualcomm, in a statement.

Qualcomm makes most of its profit from licensing fees paid by companies that use its chips. China accounts for about half the company’s revenue.

Business groups welcomed the enactment of China’s anti-monopoly law in 2008 as a step toward clarifying operating conditions. Since then, they have said it is enforced more actively against foreign companies than against local rivals. That has fueled sentiment among foreign companies that they are less welcome in China.

Almost half of companies that responded to a survey by the American Chamber of Commerce in China in September said they believed they were targeted for “selective and subjective enforcement” of anti-monopoly, food safety and other rules. The chamber warned China risked damaging its status as an attractive place to invest.

Business groups complain Chinese regulators pressure foreign companies to attend regulatory proceedings without bringing lawyers and to refrain from challenging penalties.

Last year, 12 Japanese auto parts suppliers were fined a total of $202 million after regulators said they colluded to raise prices. Audi and Chrysler were fined for enforcing minimum prices dealers could charge for vehicles and service. A regulator cited by state media said Daimler AG’s Mercedes Benz unit violated the law but no penalty was announced.

Among technology companies, the government is looking into Microsoft Corp.’s Windows operating system and how it handles compatibility, bundling and publication of documentation.

In 2013, five foreign dairy companies and one from Hong Kong were fined for enforcing minimum prices for distributors.

Qualcomm said Monday the fine will reduce its earnings for the fiscal year ending Sept. 27.

Qualcomm Inc. now forecasts earnings per share between $3.56 and $3.76, down from its previous estimate of $4.04 to $4.34.

But its adjusted earnings, which exclude charges related to the settlement, are now expected to range from $4.85 to $5.05 per share, up from its prior range of $4.75 to $5.05 per share, partly due to higher revenue.

For investors, the Chinese ruling resolves significant uncertainty about the future of Qualcomm’s business in China. Its stock added $1.93, or almost 3 percent, to $69.04 in after-hours trading. It had ended regular trading up 76 cents to $67.11.