Qualcomm under FTC probe

By Kim Yoo-chul, Bahk Eun-ji

The Fair Trade Commission (FTC) has started investigating Qualcomm to check whether it abused its position as a dominant chip supplier in the process of signing licensing agreements with Korean companies.

“We are in the process of collecting relevant data and evidence for a thorough review of Qualcomm's licensing practices. We will ask Samsung and LG Electronics to submit relevant documents,” an official at the nation's anti-trust regulator said Thursday.

He said the investigation will focus on whether Qualcomm violated fair trade rules in receiving licensing fees from smartphone makers.

“We plan to ask antitrust regulators in China, if necessary, the terms of Qualcomm’s latest settlement with its National Development and Reform Commission (NDRC),” he said.

The NDRC ended its probe into Qualcomm after the latter agreed to pay a $975 million fine and slightly modify its technology licensing practices in China.

Qualcomm also plans to cut the amount of royalties required from China's smartphone vendors by almost half, according to sources.

Samsung Electronics declined to comment on Qualcomm licensing-related issues.

But industry sources told The Korea Times that Samsung's top management reached a broad consensus to cut royalties also known as the “Qualcomm tax.”

“Samsung can't completely drop Qualcomm. The main issue is that Samsung wants to modify its licensing agreements to buy Qualcomm chipsets at lower prices,” a source familiar with the issue said.

Samsung has developed its own mobile chipset technology, relying less on Qualcomm.

The company pays about 5 trillion won in licensing fees to the San Diego-based outfit. Qualcomm gets Samsung Electronics to pay between 4 and 5 percent of the price of every single Samsung mobile device in patent fees. Samsung, the world’s No. 1 smartphone maker, generates more than 100 trillion won in its mobile business.

“FTC intends to change Qualcomm’s licensing practices that forced customers into cross-licensing deals,” said the official.

Samsung is seeking to update its licensing agreements with Qualcomm as it has its own technology to manufacture processor chips. It will put its latest Exynos chipsets in the first batch of upcoming Galaxy S6 smartphones.

“We may supply Exynos processors to new customers and we are in talks with several potential ones,” a Samsung official said.

But LG Electronics has to use Qualcomm processors for its flagship mobile devices.

LG has other processors fabricated by Taiwan’s TSMC. But those processors are currently being put in budget and less-pricey models, meaning that LG Electronics’ product release schedule is entirely dependent upon Qualcomm.

“If Qualcomm renews its contracts with Korean handset vendors, Samsung will benefit the most,” said an official at LG.

Qualcomm is the dominant supplier of LTE radio chips used to connect smartphones to LTE networks.

Qualcomm said in a statement Monday it would not contest the NDRC finding that it violated an antitrust law.

Asked whether the resolution in China could affect the outcome of ongoing antitrust probes into Qualcomm in Europe and the United States, President Derek Aberle said. “We fully respect their authority, but we don't believe it's likely that other agencies will necessarily reach similar conclusions.”