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China regulator determines Qualcomm has monopoly

2014-07-25 13:24 Global Times/Agencies Web Editor: Qin Dexing
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China's antitrust regulator has confirmed that Qualcomm Inc, one of the world's biggest mobile chip makers, has a monopoly, the Securities Times newspaper reported on Thursday, as Qualcomm's CEO held talks in China.

The regulator, the National Development and Reform Commission (NDRC), is investigating Qualcomm's local subsidiary after it said in February the US chip maker was suspected of overcharging and abusing its market position in wireless communication standards, allegations which could see it hit with record fines of more than $1 billion.

The Securities Times report, based on unidentified sources it said were close to the NDRC, did not say whether the regulator had determined that Qualcomm had abused its monopoly.

Angela Zhang, an antitrust expert at King's College London, said the report was a "loose expression that the NDRC has gathered facts that Qualcomm has abused its dominant position."

"It seems likely that the decision will be announced soon," she said, noting that having a monopoly alone is not a violation of China's anti-monopoly law.

Qualcomm CEO Steven Mollenkopf, who launched a $150 million "strategic venture fund" in China on Thursday, declined to take questions from reporters. A spokeswoman travelling with Mollenkopf also declined to comment on the newspaper report.

The NDRC declined to provide immediate comment.

China is a key market for Qualcomm, accounting for nearly half of its revenue. The country is the world's biggest market for smartphones and is preparing to roll out faster 4G mobile networks this year.

While most of Qualcomm's revenue comes from selling chips that enable phones to communicate with carrier networks, most of its profit comes from licensing patents for its widespread CDMA cellphone technology.

The Securities Times report said the NDRC was probing Qualcomm's local sales data and that Qualcomm's Aberle has been communicating with the NDRC over issues relating to the anti-monopoly investigation.

Analysts say that the process of confirming sales data is common in the late stage of an antitrust investigation, and that the NDRC is likely calculating the extent of fines.

Qualcomm President David Aberle, speaking as the company reported a lower-than-expected outlook for the September quarter on Wednesday, said "some loss would be probable" from the probe.

"We are really not in a position to be able to estimate what that might look like, we just believe whatever the resolution may be, will likely include some form of payment," he added.

Aberle said the investigation concerns Qualcomm's licensing business as well as interactions between its licensing business and its chipset business, and that the probe was making it harder to negotiate new 4G licenses with manufacturers in China.

Under China's six-year-old anti-monopoly law, the NDRC can impose fines of between 1 and 10 percent of a company's revenues for the previous year. Qualcomm earned $12.3 billion in China for its fiscal year ended September 29, nearly half of its global sales.

Qualcomm has previously said it is cooperating with the investigation.

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