China fines Qualcomm $975 million

11 Feb

China fined the U.S. chipmaker Qualcomm $975 million – the highest monetary penalty that be levied against a single firm that violates Chinese antitrust laws – and curbed its ability to earn revenue from selling technology to Chinese companies according to a settlement announced on February 10.

The settlement may benefit Chinese tech giants like Huawei Technologies Co. and ZTE Corp because it requires Qualcomm to pay Chinese patent holders for the right to cross-license their technology. In the past, Chinese customers were required by Qualcomm to supply cross-licensing for those patents gratis. Huawei and ZTE aim to vie with Apple Inc. and Samsung Electronics Co. in the premium smartphone market, analysts say.

But Qualcomm was spared harsher punishment, according to a person close to the matter, the Wall Street Journal reported. Beijing could have scrapped a royalty payment system critical to Qualcomm’s revenue in China or made a legal ruling that could have adversely affected the US chipmaker’s reputation in other markets, the person said.

The reasons Beijing did not punish Qualcomm more severely were unclear. Officials at the National Development and Reform Commission, which advised on the case, had reservations about a harsher ruling, according to the person interviewed by the Wall Street Journal.

Xu Kunlin, the NDRC’s leading antitrust regulator, said Tuesday that Qualcomm’s senior executives “showed a willingness to change,” so the NDRC decided to penalize Qualcomm a sum equal to 8% of its yearly China sales rather than the maximum of 10% permitted by Chinese law.

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