The chipmaker needed to settle this fast with Chinese regulaltors because it gets half of its revenue in China and is facing increased competition there. Rhonda Schaffler reports.
It could be the largest corporate fine ever in China. Reuters has learned Qualcomm will likely pay around $1 billion to settle an antitrust probe. A source said the smartphone chip maker may also have to fork up another concession: lowering its royalty rates by a third on patents used in China. That hurts because charging licensing fees on phone chipsets is a highly profitable business for Qualcomm. Barclays analyst Blayne Curtis said, "Qualcomm believes it is a common practice to have licensing agreements with different rates in different countries, so a decrease in China would not bleed into other geographies as is feared. It is important to note that China is important to growth, but Qualcomm would rather walk away than risk its entire license business." The company needed to settle this fast because it gets about half of its global revenue in China and is facing increased competition there. Plus it comes just as China expands its high speed network that's driving smartphone demand. Qualcomm is one of among 30 foreign firms under scrutiny by Chinese antitrust regulators. Microsoft and Samsung are also on that list. The issue is so crucial that the White House got involved. President Obama admonished China last year against applying its anti-monopoly law to benefit Chinese companies that use foreign technology. Chinese regulators say their enforcement is fair and transparent. Qualcomm shares shot higher in early trading. But theyr'e down 9 percent over the last 12 months, vastly underperforming other chipmakers like Intel and Texas Instruments.