Qualcomm's China growth threatened
Qualcomm's growth prospects in the world's largest mobile-phone market may be under threat after the National Development and Reform Commission began an investigation related to an anti-monopoly law.
Qualcomm's growth prospects in the world's largest mobile-phone market may be under threat after the National Development and Reform Commission began an investigation related to an anti-monopoly law.
Qualcomm disclosed the probe on Monday, saying the NDRC advised that specific details were confidential. The San Diego-based company said it knew of no charge by the agency that it violated the law.
The firm gets revenue from sales of smartphone chips and collects licence fees from wireless providers for the shipment of most internet-capable handsets.
Beijing has been stepping up corporate scrutiny as new leadership expands an anti-corruption drive and cracks down on business practices that lead to increases in consumer prices.
It might also be trying to help local competitors such as Spreadtrum Communications by slowing Qualcomm's push to broaden the reach of its chips and technology in the country, said Cody Acree, an analyst at Williams Financial Group in Dallas.
"There's a lot more to this than any kind of antitrust investigation," said Acree. "To the extent that you can stymie Qualcomm's efforts, all the better."
Qualcomm, the world's largest maker of chips for smartphones, got 49 per cent of its US$24.9 billion in sales from China in the financial year to September, with some of that coming from devices that were assembled in China and sold in other countries.
The company said on Monday that it would co-operate with the NDRC probe. It was invited to a meeting about antitrust regulations in July by the country's commerce ministry, a spokeswoman said at the time.
Qualcomm gets the majority of its revenue from chips, while the bulk of its profit comes from licensing technology that is central to modern mobile-phone networks and handsets. That means even phone service providers that do not use Qualcomm chips pay royalties for use of its patents.
The company collected technology licence fees on more than a billion phones in financial 2013 and sold more than 700 million chips.
China Mobile, the world's largest wireless carrier, has not paid Qualcomm licensing fees after opting to use an alternative technology for its current data network that the mainland said was not covered by the United States company's patents.
Qualcomm said it expected that to change next year, as the mainland shifts to a new higher-speed technology for mobile networks called Long-Term Evolution.
Underscoring the importance of the market, company executives said at an analyst day in New York last week that the network shift meant Qualcomm would be able to supply chips and get licensing fees from China Mobile. Now, the NDRC probe raised doubts about that potential licensing revenue, said Gus Richard, an analyst at Piper Jaffray.
