Word comes out of China this evening that an ongoing anti-trust investigation into Qualcomm has come to an end. Ruling against Qualcomm, China’s National Development and Reform Commission has found Qualcomm guilty of violating Chinese anti-trust laws, and has fined the company $975 million alongside imposing new licensing rules on the company.

At the crux of the matter has been Qualcomm’s patent licensing program in China, portions of which the NDRC has asserted violate Chinese law. As Qualcomm owns a number of standards-essential 3G and 4G patents, Chinese firms must in turn license these patents for their phones and cellular-enabled tablets. To that end, Qualcomm’s bundling of various patents has been under extreme scrutiny, particularly the bundling of other patents with the standards-essential 3G and 4G patents, a process that would force Chinese manufacturers into paying more to license additional patents they did not need.

As a result of the NDRC’s ruling, Qualcomm is being fined 6.088 billion yuan ($975 Million) and is having new royalty rules imposed. Resolving the immediate problems that lead to the ruling, Qualcomm will now be required to offer the standards-essential 3G and 4G patents separately, putting an end to the bundling practice. Meanwhile new royalty rates and procedures are also being set; Qualcomm’s rates in China will be similar to the rest of the world, and the rates will be calculated against 65% of the total value of the device.

Overall the $975 million fine is the largest in Chinese history, and while it will put a dent into the company’s pockets in the short-run, it is still less than half of the company’s $1.97B net income for their most recent quarter. More significant is the ongoing revenue impact from the reduced licensing revenue, which has already caused the company to reduce their 2015 earnings forecasts by $0.58 per share. More than half of Qualcomm’s net income comes from royalties from patent licensing, so anything that impacts their patent licensing business has a significant impact on their bottom line.

Finally, Qualcomm will not be appealing this fine, having entered into it as part of an agreement with the NDRC to end the anti-trust investigation.

Source: Bloomberg

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  • djscrew - Monday, February 9, 2015 - link

    Wow, China is punishing an American company for actually being anti-competitive rather than out-innovating it's Chinese counterparts. How refreshing. Reply
  • AnnonymousCoward - Monday, February 9, 2015 - link

    Yet another reason why China sucks. This looks like a BS money grab. Reply
  • hung2900 - Monday, February 9, 2015 - link

    Did you read or do you know how to read? It's clear Qualcomm's fault. Reply
  • Notmyusualid - Tuesday, February 10, 2015 - link

    That is exactly what it is. The whole country is full of commies & crooks.

    They should clean up their own back yard first...
    Reply
  • Alexey291 - Tuesday, February 10, 2015 - link

    Oh wow I don't even... Could this comment have been more murrican than this?

    Go start a war on them or something? Oh wait... they might actually fight back :)
    Reply
  • Notmyusualid - Tuesday, February 10, 2015 - link

    Which one of us, holds two passports, filled with Chinese visas and stamps.

    Oh, that'd be me then. Since 1999.

    I take my EXPERIENCE of business in China, over your flippant comment anyday.
    Reply
  • Pissedoffyouth - Tuesday, February 10, 2015 - link

    Hold on to your net son, we got a real live expect over here! Reply
  • Kvaern2 - Tuesday, February 10, 2015 - link

    Technically they are cleaning up their own backyard. Reply
  • boozed - Monday, February 9, 2015 - link

    Anti-trust in China, now I've seen it all!

    Still, the NDRC is to be applauded. If what they allege is true (and the fact Qualcomm effectively settled seems to confirm it) then they were clearly taking the piss and thoroughly deserved to have their arses kicked for it.
    Reply
  • auzn - Monday, February 9, 2015 - link

    Mind that Qualcomm is fined for its role on 3G and 4G standard, not for their cellphone processors. China is also not the first country to take on Qualcomm on this: http://en.wikipedia.org/wiki/Qualcomm#Legal_issues Reply

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