Qualcomm is focus of antitrust investigation in China
Qualcomm Inc., the world’s largest maker of chips for smartphones, said the Chinese government was investigating the company related to an anti-monopoly law.
China’s National Development and Reform Commission has advised that specific details of the investigation are confidential, Qualcomm said Monday in a statement. The San Diego company said it wasn’t aware of any charge by the agency that it violated the anti-monopoly law. The Chinese government has been stepping up corporate scrutiny recently, as new leadership expands an anti-corruption drive and cracks down on business practices that lead to increases in consumer prices.
Qualcomm gets revenue from chip sales and collects license fees from wireless providers for the shipment of most Internet-capable phones. The company’s push to expand the reach of its technology and chips in China may be leading the government to examine its dominance, especially as the country tries to foster a local chip industry capable of competing with U.S. suppliers, said Gus Richard, an analyst at Piper Jaffray Cos.
“China wants to give as much advantage to their indigenous chip makers as they can,” said Richard, who rates Qualcomm’s stock as “hold.” “They care a lot about communications infrastructure and cellphones. I don’t think China’s going to pay them.”
Emily Kilpatrick, a spokeswoman at Qualcomm, said the company won’t comment beyond the statement. The shares fell 47 cents to $72.49. The stock had gained 18% this year through Nov. 22.
Qualcomm got 49% of its $24.9 billion in sales from China in the fiscal year that ended in September, with some of that coming from phones that were assembled in China and sold in other countries. The company said Monday that it would cooperate with the Chinese investigation. Qualcomm was invited to a meeting about antitrust regulations in July by the country’s commerce ministry, a spokeswoman said at the time.
The company gets most of its revenue from chips that run smartphones, and the bulk of its profit from licensing technology that is central to modern cellphone networks and handsets. That means even phone service providers that don’t use Qualcomm chips pay royalties for use of its patents. The company collected technology-license fees on more than a billion phones in fiscal 2013 and sold more than 700 million chips.
China Mobile Ltd., the world’s largest wireless carrier, hasn’t paid Qualcomm licensing fees after opting to use an alternative technology for its current data network that the Chinese government said wasn’t covered by the U.S. company’s patents.
