Qualcomm royalties in China could be under fire

The company is the focus of an antitrust probe within the country. There may be politics at play here.

By InvestorPlace Nov 29, 2013 12:40PM
© Konrad Fiedler/Bloomberg via Getty Images
Qualcomm Inc. signage is displayed outside the company's offices in La Jolla, CaliforniaBy Christopher Freeburn

As Chinese wireless carriers prepare to launch new 4G networks, the worldwide leader in mobile device chips has been hit with an antitrust probe by China’s National Development and Reform Commission.

The regulatory investigation is seen as an effort by the government to bolster the position of Chinese companies in their licensing negotiations with Qualcomm (QCOM). Device-makers have to pay royalties to the chip-maker for the processors used in smartphones on the new 3G/4G networks, Reuters notes.

Chinese carriers -- including China Mobile (CHL), China Unicom (CHU) and China Telecom (CHA) -- are investing $16.4 billion in rolling out faster LTE networks across China. The new networks give Qualcomm, whose chips support both 3G and 4G Chinese networks, a six- to nine-month lead over other chip manufacturers in the rapidly expanding Chinese market.

In a research note, Raymond James analyst Tavis McCourt said the investigation was likely linked to the upcoming launch of China Mobile’s 4G network early next year and “the negotiations on chip pricing and license pricing between Qualcomm and Chinese-based handset (makers) that are likely occurring right now.”

China is already a significant revenue source for Qualcomm, generating $12.3 billion in revenue over the 12-month period that ended in September.

Qualcomm says it will cooperate with Chinese regulators.

More From InvestorPlace

Nov 29, 2013 7:34PM
The chines just want to steal Qualcomm Technology. if you cant do it your self, take me to court & steal my technology.
Dec 1, 2013 10:40PM
Whenever the US does something which riles the Chinese government there will be repercussions. We have not yet seen another display of bottle throwing outside our embassy building --- but we probably will soon.
Dec 1, 2013 10:41PM
Anyone who lives in the US and invests in China is behaving very foolishly.
Nov 29, 2013 8:13PM

The company is the focus of an antitrust probe within the country. There may be politics at play here?


Oh no. China wouldn't do to Apple and Qualcomm what the EU did to Microsoft and Intel. Why not?  Intellectual property law is pretty much a Western concept and how big where the royalties that the Chinese got for inventing gun powder?  China will not really need the West after they have all of our manufacturing processes and technology.  We screwed the American Indians out of their lands with white mans laws but China isn't going to let that happen to them.

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