Qualcomm Inc, the world's biggest cellphone chip maker, may be hit with a record fine exceeding $1 billion in a Chinese antitrust probe, raising the specter of harsh penalties for foreign firms facing an increasingly aggressive regulator.

China's National Development and Reform Commission (NDRC) initiated an investigation into Qualcomm last year and is currently holding talks with the U.S. company, which this month said it was still in the dark about the basis of the scrutiny.

The probe and the potential fine - the amount of which could hinge on negotiations - come as the NDRC zooms in on information technology providers, especially companies that license patent technology for mobile devices and networks.

Industry experts say the NDRC, the government's main economic planning body, is trying to lower domestic costs as China rolls out its faster 4G mobile networks this year.

"It is, in some ways, a game of chicken," said Yee Wah Chin, a New York-based antitrust expert at law firm Ingram, Yuzek, Gainen, Carroll and Bertolotti.

"While the (fine) money may be very attractive to the NDRC, they would also be happy if Qualcomm were to make all sorts of commitments regarding its technology and the licensing of the technology," she told Reuters.

San Diego-based Qualcomm, which is scheduled to report quarterly results later on Wednesday, is positioned to reap the vast majority of licensing fees for the chip sets used by handsets in China, the world's biggest smartphone market. Chinese telecom firms may invest as much as 100 billion yuan ($16.4 billion) in equipment for 4G networks.

Under the anti-monopoly law, the NDRC can impose fines of between 1 and 10 percent of a company's revenues for the previous year. Qualcomm earned $12.3 billion in China for its fiscal year ended September 29, or nearly half of its global sales.

Lawyers say the fine is likely to be extremely high if Qualcomm fails to make concessions in its talks with the NDRC.

"We intend to continue cooperating fully with the NDRC," Qualcomm spokeswoman Christine Trimble said when asked about the probe.

By: DocMemory
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