Qualcomm's crime and punishment expired patent still charges manufacturers "tax" heavy.




Release time:2016-05-09

Qualcomm is on the verge of "crime and punishment.

According to the information disclosed on the website of the National Development and Reform Commission, Qualcomm President Derek Aberle has recently led a delegation to the National Development and Reform Commission for the third time to exchange views and accept investigations on anti-monopoly issues. The investigation was launched at the end of November last year, and it has been eight months so far. Qualcomm will be convicted and may face the largest penalty since 2009.

At the beginning of 2013, Samsung, LG and other panel manufacturers were fined 0.35 billion yuan for the first time in China because of price monopoly. Qualcomm, the leader of mobile phone chips, can it escape this time?


Qualcomm is the world's largest mobile phone chip company. However, because its business is mainly aimed at the B end (enterprise), it has not attracted much attention on the mobile phone consumer end. However, the anti-monopoly case launched at the end of last year pushed Qualcomm to the front desk.

On February 19, NDRC officials confirmed for the first time that they were conducting an antitrust investigation into Qualcomm, saying that the investigation began in November last year because the NDRC received "reports from relevant enterprises and associations".

According to the latest information disclosed by the National Development and Reform Commission, on July 11, the president of Qualcomm led a delegation to the National Development and Reform Commission for the third time to exchange views on issues related to anti-monopoly investigations and accept investigations. Since the investigation was launched last year, Derek Aberle has visited the NDRC twice, on April 3 and May 8.

Regarding the first two investigations, the National Development and Reform Commission has been secretive and did not disclose more details. It simply stated that the two sides "exchanged views" on anti-monopoly investigations and other related issues. In the investigation on May 8, "Qualcomm explained. And expressed that he actively cooperated with the investigation and worked hard to find ways to solve the problem."

However, the latest announcement of the NDRC discloses for the first time some problems of Qualcomm suspected of violating the Anti-Monopoly Law in detail, including taking the whole machine as the basis for calculating the license fee, bundling the standard essential patent with the non-standard essential patent, requiring the licensee to carry out free anti-license, continuing to charge for the expired patent, bundling the patent license with the sale of chips, and refusing to license the chip manufacturing enterprises, as well as in the patent licensing and chip sales to attach unreasonable trading conditions and other suspected illegal acts.

The announcement also shows that the NDRC conducted an on-site investigation of the relevant Qualcomm authorized personnel and made a transcript of the inquiry.

However, the NDRC has not yet disclosed relevant information on the issue of "confirming monopoly facts" rumored by the outside world. At the same time, Qualcomm China related people also said in an interview with reporters that antitrust information needs to be passed through the United States, and there is no official response.

Coincidentally, Qualcomm CEO Molenkov also visited China recently. This is also his third visit to China since he took office in March. Molenkov did not respond to antitrust concerns during the trip, but announced that he would launch the Supreme 0.15 billion.USDFunds to support the development of Chinese startups, he also said, "The Chinese government is actively promoting the development of the local semiconductor industry, and Qualcomm is willing to support the Chinese government in this move."

But in the latest quarter conference, Qualcomm released another signal.

The company claimed that it encountered obstacles in collecting patent license fees in China, which affected its third-quarter results and may also be affected in the next few quarters. Qualcomm also specifically mentioned that many Chinese manufacturers omitted to report mobile phone sales, and some manufacturers failed to reach a licensing agreement with Qualcomm.

Derek Aberle said Qualcomm's third-quarter revenue was $6.81 billion, up 9% from $6.24 billion in the same period last year. Net profit was $2.24 billion, up 42% from $1.58 billion in the same period last year. Although the quarter's performance exceeded Wall Street's expectations, Qualcomm's share price fell 5% at the close of July 24 due to pessimistic expectations.

Prior to this, Qualcomm executives have repeatedly said that with the arrival of 4G, China's chip and licensing business will face a new round of growth opportunities. However, with the anti-monopoly case gradually unclear, Qualcomm's wish may be delayed.

The Death of Patent Fees

"For domestic enterprises, discrimination cannot be said, but there are still differences." Wang Yang, research director of iSuppli China, told reporters that compared with companies such as Nokia and Apple, the patent fees handed by Chinese companies to Qualcomm are slightly higher.

Wang Yang introduced that Qualcomm's business model is mainly based on three parts: first, Licence license fees, similar to joining fees. Manufacturers develop mobile phones on Qualcomm platform, Qualcomm provides corresponding software development platform and technical service support, and charges a one-time fee, with a cost ranging from hundreds of thousands of US dollars to millions of US dollars; Then there is Qualcomm's chip fee, which uses Qualcomm chips with prices ranging from US $10 to US $20; finally, manufacturers need to pay Qualcomm patent fees after making mobile phones for market sales, "the proportion of this is generally 5%."

It is worth noting that because Qualcomm has a large number of core patents, many manufacturers are difficult to bypass. Even if you don't use Qualcomm platform to develop mobile phones, such as using Broadcom, Marvell, MediaTek and other chip manufacturers, you will have to pay patent fees, even if these third-party chip solution providers have licensing agreements with Qualcomm.

However, Wang Yang stressed that how much patent fees manufacturers ultimately need to pay depends on the right to speak in the core patent field. "Take Nokia as an example. Due to its core patents, the proportion of patent fees paid to Qualcomm is about 3%. Domestic enterprises such as Huawei have core patents, and the patent fees are relatively low. However, brands such as OPPO and Vivo do not have core patents, so the proportion of patent fees paid to Qualcomm is 5%."

"This 5% is similar to the factory price of mobile phone manufacturers, that is, the price before entering the retail channel." Wang Yang said that in addition to the patent ratio, domestic manufacturers also have disadvantages in terms of charging base. Whether Huawei or other mobile phone manufacturers, the base is based on the ex-factory price of the whole machine. In contrast, some big-name manufacturers, such as Apple, are relatively reasonable and charge a cost price based on the base.

Wang Yang, for example, the iPhone, if inFoxconnThe cost price link is $300, Apple sells for $600, and the royalty is based on $300. "This is much lower than the domestic."


In response to this anti-monopoly, Wang Yang believes that a legal definition is still needed. However, Qualcomm may face two choices, one is to make some adjustments in the proportion and base of patent licensing, or accept a certain fine. "The final market situation still requires all parties to negotiate with Qualcomm."

However, some market participants are not optimistic about the anti-monopoly.

Sun Qi, deputy general manager of Sano, a market research company, believes that this so-called antitrust investigation "will not have any special results." Qualcomm has a large number of core patents, which are also implemented in China. If the Chinese market is not opened up, "only a few domestic mobile phone manufacturers can make mobile phones in China." Instead, the survey highlights the importance of intellectual property rights.

He also said that since chip-related businesses are only a small part of mobile phones, "it is expected that no matter what the final result of this investigation is, it will not have any impact on consumers."