Qualcomm faces massive fine in China

Qualcomm (QCOM) is facing a penalty of over $1B in China as it continues talks with the country's National Development and Reform Commission (NDRC) over an antitrust probe.

Earlier this month, Qualcomm said it was uncertain what the investigation was about.

The NDRC can fine a company 1-10% of a company's revenues for the previous year - in FY 2013, Qualcomm earned $12.3B in China.

Qualcomm could get away with a lower penalty if it makes licensing and commitments of its technology.

Qualcomm is due to report FQ1 earnings after the bell, with analysts expecting that EPS dropped to $1.18 from $1.26 but that revenue rose 10.8% to $6.67B.

This was corrected on 01/29/2014 at 10:21 AM.
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Comments (11)
  • Philip Marlowe
    , contributor
    Comments (1582) | Send Message
    I hope they do not start a trade war. It is well known by now that the Chinese government wants to start a major mobile processor IC firm like Qualcomm or Mediatek. That is why they purchased Spreadtrum and RDA microelectronics.


    But if they try to force qualcomm to license technology to them, Qualcomm will complain to the dept of state, the dept of state will ask for sanctions and there will be a trade war.
    29 Jan 2014, 04:11 AM Reply Like
  • hko2012
    , contributor
    Comments (752) | Send Message
    Much like Obama pardoned Apple so that the iPhone 4 could stay on sale. Much to the disadvantage of South Korean company Samsung.
    29 Jan 2014, 04:47 AM Reply Like
  • Chubby Lipshitz
    , contributor
    Comments (342) | Send Message
    China's business practices are a disgrace, it is licensed extortion. QCOM should not provide any licensing or technologies to China. They should take their case to the WTO.
    29 Jan 2014, 04:47 AM Reply Like
  • Terry1
    , contributor
    Comments (334) | Send Message
    China steals information every year - through internet based attacks and other means they take what they want & if they can. Doing business in/with China has its risks and a company has to be willing to give them a piece of the action (be extorted). That's comes with the territory.
    29 Jan 2014, 08:48 AM Reply Like
  • samuel_liu
    , contributor
    Comments (2753) | Send Message
    The Chinese go not need to steal Qualcomm or most technology.


    It's called technology transfer. If a corporation brings technology to a non-native country.


    Admittedly China as well as most other countries are involved in industrial espionage ...
    29 Jan 2014, 09:18 AM Reply Like
  • vector_us
    , contributor
    Comments (591) | Send Message
    They cannot innovate so they call it technology transfer, wow! Why not shut and pay to get what you want. If you want to license than pay for it.


    Qcom has a much bigger muscle here. They have already made chinese companies sign licensing agreement. And that is the way it should be. And that is the reason all this nonsense has started. It will only hurt China in long run if they keep on doing this practice. Already manufacturing is heading back to US and countries like India are also becoming more and more attractive to manufacturing.


    So we'll see. In short run China will get its way but In long run this is going to be very bad for chinese companies to do business overseas and Chinese Economy overall.
    29 Jan 2014, 02:47 PM Reply Like
  • Oczssd
    , contributor
    Comments (84) | Send Message
    Its been two months since the investigation was announced and this article gets released on the day of earnings, peculiar.
    29 Jan 2014, 10:25 AM Reply Like
  • billsonoma
    , contributor
    Comment (1) | Send Message
    every foreigner pays in China. From John Deere to Qualcomm...To play, you must give up your trade secrets , your expensively gained private intellectual property to China so they can reverse engineer the technology into products that they can sell cheaper than you can.. What a nice situation . The game is: how little can you tell without telling them anything important so you don't get fined/ Or how much old generation IP can you give that you no longer need. Become better gamesman than them. And delay, delay and delay some more so that when they finally think they are getting something good, it will be out of date and of little commercial use. And call them on the carpet at the WTO and expose this shakedown.
    29 Jan 2014, 10:31 AM Reply Like
  • mullenjl
    , contributor
    Comments (77) | Send Message
    Is Reuters / others planting spurious articles (hyping / misleading / selective “facts” / omission of facts) for price manipulation purposes just before earnings?


    Snips from Reuters article (which this "news" is based? ) >>>>>&a...


    + " Qualcomm Inc, the world's biggest cellphone chip maker, may be hit with a record fine exceeding $1 billion in a Chinese antitrust probe"


    >>>>>&a... **may**


    + "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.


    >>>>>&a... QCOM has negotiated / signed more than 55 LTE licenses with China companies.


    + "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 Sept. 29, or nearly half of its global sales."




    …A. @1% could be $123M , not $1.2B
    …B. The great bulk of those $12.3B sales are **not** sales to domestic china companies / consumers, but: 1) license / royalty fees paid by non-Chinese companies who’s subsidies invoice address is in China ; 2) the location where products (chipsets) are delivered (for assembly).


    + "In December, the head of the NDRC's anti-price-fixing bureau told state media there was "substantial evidence" against Qualcomm in the antitrust probe. Details, however, remain sketchy."


    >>>>>&a... is reducing / lowering one’s price to the absolute minimum to compete with domestic Chinese companies ….”price-fixing”?
    29 Jan 2014, 10:33 AM Reply Like
  • oilsands
    , contributor
    Comments (590) | Send Message
    Yes, jlmullen, there has been a steady stream of these releases aimed at lowering the price.
    america has always suffered from theft of intellectual property. The Soviets did it: France did it. Israel did it. That is why it is a farce to pin our economic hopes on advanced engineering.
    29 Jan 2014, 12:13 PM Reply Like
  • soanchang
    , contributor
    Comments (48) | Send Message
    They target Qualcomm first, next target can be Mediatek. Basically, Chinese government is behind to steal technologies from any high tech presence in China. This is a well known facts. Just Uncle Sam really needs to counter that even through WTO to protect our firms.
    29 Jan 2014, 09:53 PM Reply Like
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