US chipmaker Qualcomm is about to be bitten in the rump with a record $1 billion fine by the Chinese antitrust watchdogs.
China’s National Development and Reform Commission (NDRC) investigated Qualcomm last year and according to Reuters is having a quiet word with the US outfit.
Qualcomm has said it was still in the dark about the basis of the scrutiny, but it seems the NDRC is targeting IT providers which license patent technology for mobile devices and networks.
Cynics claim that the Chinese are using the NDRC to force foreign IT companies to lower domestic costs as it rolls out its faster 4G mobile networks this year.
What the NDRC is doing is trying to force Qualcomm to make all sorts of commitments regarding its technology and the licensing of it.
Qualcomm will make a bomb in licensing fees for the chip sets used by handsets in China, the world’s biggest smartphone market as Chinese telecom firms invest $16.4 billion in equipment for 4G networks.
Under China’s anti-monopoly law, the NDRC can impose fines of between 1 and 10 percent of a company’s revenues for the previous year. Since Qualcomm earned $12.3 billion in China for its fiscal year ended September 29 that could be a serious amount of dosh.
The fine could be even higher if Qualcomm fails to make concessions in its talks with the NDRC.
In December, the head of the NDRC’s anti-price-fixing bureau told state media there was “substantial evidence” against Qualcomm in the antitrust probe. Details, however, remain sketchy.
But there could be a lot more foreign outfits in a little trouble in big China. China’s regulators are trying to target key industries to shield consumers from practices that could lead to what they call “unreasonably” high prices.
In 2011, the agency imposed one of its first major penalties against a foreign company, a $300,000 fine on Unilever Plc for violations of the pricing law.
The NDRC has also slapped Chinese and foreign companies with investigations and fines in the past year.