Qualcomm to pay record fine to China after probe

Qualcomm Inc is likely to pay China a record fine of around US$1 billion, ending a 14-month government investigation into anti-competitive practices, after the U.S. chipmaker and the regulator made significant progress during talks last week.

The deal may also see Qualcomm lower its royalty rates by around a third on patents used in China, a source said.

Discussions in Beijing over one of the most contentious cases under China's 2008 anti-monopoly law have intensified in recent weeks, culminating in meetings between Qualcomm senior executives and National Development and Reform Commission officials on Friday.

Qualcomm's fine would be the largest paid by any company in China. The company would also agree to make changes to its licensing practices, though those are not expected to alter its business model.

"The NDRC will soon release a new anti-trust settlement," Xu Kunlin, the head of the agency's antitrust division, said at a law conference yesterday, according to an article posted on the website of the Securities Times. "Qualcomm will be fined several times the total amount the NDRC fined last year."

For the fiscal year ended on September 28, Qualcomm earned about half its global revenue of US$26.5 billion in China, with a large chunk of profit coming from higher-margin royalties earned from the company's licensing arm.

The NDRC probe disrupted that business, fostering disputes with existing licensees and causing other firms to delay signing new licenses, though Qualcomm reached a settlement with one "major Chinese licensee" even as the investigation continued, Qualcomm President Derek Aberle told analysts last month.

San Diego-based Qualcomm has also been seeking to deepen its presence in the Chinese market by transferring technology and investing in next-generation chip users. In July, it said it would partner Semiconductor Manufacturing International Corp, a major Chinese chipset maker, to manufacture Qualcomm's Snapdragon processors. It also plans to invest up to US$150 million in Chinese startups to help develop mobile technologies for Internet, e-commerce, semiconductors, education and health.

The NDRC didn't immediately respond to a request for comment. Christine Trimble, a Qualcomm spokeswoman, declined to comment.

Shanghai Daily contributed to the story.

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