Back in Nov of last year, Qualcomm, a major manufacturer of chipsets used on mobile devices, was under investigation over monopoly practices in China. This is in addition to the regulatory investigations the company was facing in US and European territories.
The company was being investigated by China’s National Development and Reform Commission (NDRC) over complaints that it overcharges on licensing and patent fees. China is home to many mobile device manufactures and some of Qualcomm’s clients accused it of charging high rates.
On top of that Qualcomm was struggling to collect royalties from Chinese companies that patent its technology and use them in their products. That was then. The investigation recently concluded that Qualcomm has to pay 6 billion yuan ($975 million) in fines, one of the biggest and stiffest penalties ever imposed on a foreign company in the mainland.
This may not be surprising as China has always complained of the high cost of technology licenses that foreign companies charge there. In fact, China has waged a concerted campaign against the issue in other sectors such as automobiles as well.
Business groups like Qualcomm have complained over the secretive nature of these probes. However, given China’s viability as a premier destination for manufacturing products, San Diego-based Qualcomm has promised to amend its business practices in licensing. They are not going to appeal the ruling, the amount of which was twice the size of the fine imposed on GlaxoSmithKline in Sep 2014 over bribery fears.
The NDRC believed that Qualcomm’s practices unnecessarily burdened the vendors and the consumers, restricting market competition and forcing Chinese customers to pay for licenses that they don’t need.
As a result of the concluded investigation, Qualcomm will now offer licenses for 3G and 4G technology separately, in addition to their existing licenses. China drives almost half the revenue for Qualcomm currently which is why the company will pay 8 percent of its 2013 revenue as fine. China believes that these measures will protect local interests.