Qualcomm faces probes in US, Europe on top of China investigation
6 November 2014 | 0
Chipmaker Qualcomm is facing regulatory investigations in the US and Europe in addition to an ongoing anti-monopoly probe in China.
The company is struggling to collect royalties from its patent licensees in China, which accounts for half of its revenue. It hasn’t helped that
China’s National Development and Reform Commission (NDRC) has been investigating Qualcomm for the past year over complaints that it overcharges clients on patent fees.
“Our results were negatively impacted by the challenges we are facing in China,” Qualcomm said Wednesday in its fiscal fourth quarter earnings report. It added that certain unlicensed clients in China are delaying business with Qualcomm because of NDRC’s investigation.
Qualcomm and the Chinese government have not indicated when the anti-monopoly investigation might conclude. According to the rules, NDRC could end up imposing a fine up to 10% on the company’s prior year’s revenue. The company made $26.5 billion in revenue during fiscal 2014.
On Wednesday, Qualcomm also revealed that the US Federal Trade Commission started probing it in September over allegations that Qualcomm had breached its patent licensing agreements.
The European Commission began investigating the company in October over the use of rebates and financial incentives in the sales of its chips.
Both investigations could lead to fines on the company, or restrict its business, the company said.
As for China, Qualcomm said that certain clients continue to dispute or underreport the royalties owed to the company. The country is a major manufacturer of smartphones and tablets. Because of the conflicts with its Chinese customers, Qualcomm is forecasting that over 200 million device shipments won’t be reported to the company for the calendar year of 2014.
Qualcomm is perhaps best known for its Snapdragon chips found in many popular smartphones, but it has also a large business licensing its patents.
China’s anti-monopoly probe concerns how Qualcomm collects those royalties, and also its policy of only selling its chipsets to customers who pay the patent fees, the company said. In addition, Chinese authorities are also looking into allegations of whether the company refused to grant patent licenses to certain chip manufacturers.
Last month, another top Chinese regulator, the Ministry of Industry and Information Technology, said it welcomed a Qualcomm expansion in the country. But added that the US company should also lower its patent fees.
In the fiscal fourth quarter, Qualcomm’s revenue was up 3% year-over-year, reaching $6.7 billion. Net income also grew by 26% from last year, and reached $1.9 billion.
IDG News Service