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Friday, September 21, 2018
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Qualcomm found breach of antitrust regulations in Taiwan court

Thursday, October 12, 2017

An antitrust penalty of23.4 billion New Taiwan dollars ($773 million) levied Wednesday against Qualcomm byTaiwan's Free Trade Commissionshould benefit Applein its ongoing legal tussleover how the U.S. chipmaker charges licensing fees on chips used in iPhones and iPads.

Qualcomm breached Taiwan's antitrust regulations for seven consecutive years, the commission said in a statement. The fine was a record for an antitrust case on the island.

"During the period, Taiwanese companies were charged NT$400 billion in licensing fees by Qualcomm, and Taiwanese companies bought baseband chips totaling $30 billion from Qualcomm," the commission said.Baseband chips let smartphones and tablets connect to mobile networks.

This money went in part for components used in products that local contract manufacturers supplied to name-brand customers, commission spokesman Perng Shaw-jiin told the Nikkei Asian Review, though he did not name Apple specifically.

The trade commission also demands that Qualcomm renegotiate licensing fees with Taiwanese companies, he said, though the agency is not enforcing a strict ceiling.

Qualcomm's baseband chip costs $11.50 per unit for the iPhone 8 Plus, research firm IHS Markit says. Based on that figure, $30 billion worth of baseband chips over seven years translates into roughly 372 million units per year.

This large volume suggests that Taiwan's commission considered the shipments of local suppliers for California-based Apple when it determined the amount of the Qualcomm fine.

Taiwan now has only two major smartphone brands, HTC and Asus. Jeff Pu, an analyst at Taipei-based Yuanta Investment Consulting, estimates the two companies will ship only about 25 million smartphones combined this year. By contrast, Apple ships more than 200 million iPhones annually.

For many years, Qualcomm has generated revenue from selling chips to mobile device makers worldwide and charging these companies additional royalties for using its technologies. But the company's licensing practices have come under scrutiny in recent years.

The chip titan has been fined hundreds of millions of dollars by South Korean and Chinese authorities, and also faces investigations in the U.S. and European Union.Furthermore, Apple took Qualcomm to court at the beginning of this year over the amount of royalties the U.S. baseband chipmaker should charge.

Qualcomm has filed countersuits, reportedly sought to ban iPhone sales in the U.S. and also sued iPhone and iPad assemblers along the way as Apple has instructed those suppliers not to pay licensing fees to Qualcomm.

These Taiwanese assemblers include iPad assembler Compal Electronics and iPhone assemblers Hon Hai Precision Industry, Pegatron Corp.and Wistron.

Qualcomm does not charge Apple directly with licensing fees for components used in iPhones and iPads. Instead, Apple requires its contract manufacturers that produce devices to sign licensing agreements with Qualcomm first. These fees are then paid based on the terms with these assemblers.

Disputes with Apple have taken a toll on Qualcomm's earnings. For the quarter ended in June, Qualcomm's net profit fell 40% from a year earlier to $866 million on revenue of $5.37 billion, also down 11% year over year.

Qualcomm shares have shed more than 17% since the beginning of 2017. The Nasdaq-listed stock fell about 0.1% in pre-trading Wednesday.

Apple and Qualcomm did not immediately return an email sent after office hours seeking comments.

By: DocMemory
Copyright 2017 CST, Inc. All Rights Reserved

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