China and South Korea are taking on Qualcomm — the chipmaker giant of the United States — as Asian companies heat up the global competition for cheap, but quality smartphones.
South Korea's Fair Trade Commission has begun investigating Qualcomm, shortly after the San Diego-based company agreed to pay a record fine of 975 million dollar in China for abusing its dominant position in wireless chips.
Qualcomm was also told to decrease the royalty rates for the company's patents used in China - a move that will help lower production costs of Chinese cell phone makers that use the chip. The Mobile China Alliance is estimating that NDRC’s decision will mean Qualcomm’s patent royalties will drop by 200-300 million dollar.
Besides, China has made it plain that the company must end its practice of "reverse patent licences." This was a practice carried out by Qualcomm of making sure that its clients do not claim any patent royalties of their own resulting from handset sales.
The reverse patent licence practice had affected Chinese smartphone manufacturers such as Huawei, which owns nearly 30,000 patents as of November 2014. ZTE, another major Chinese smartphone company holds more than 52,000 patents globally. Other manufactures such as Xiaomi has 10 patents and Oppo 103.
The Chinese and the South Koreans may have teamed up to confront Qualcomm. Reuters had reported in August that Chinese antitrust officials had met with their South Korean counterparts, in their probe of Qualcomm.
In 2009, South Korea's Fair Trade Commission had fined Qualcomm more than 200 million dollar for abusing its dominant market position.
Analysts say that Asian chipmakers are moving in aggressively to tap the smartphone market. Taiwan-based chipmaker, Mediatek, second only to Qualcomm in the 4G chip orders globally, hopes to further expand its footprint in the Asian market.
In South Korea, Samsung Electronics has now decided not to use Qualcomm’s Snapdragon 810 processor for its next flagship Galaxy S smartphone. Instead, it would use its own self-developed processor in the new device.
Analysts say that the settlement with Qualcomm is likely to add to trade tensions between China and the United States. Besides, its fallout may be felt during negotiations for the proposed Trans-Pacific Partnership (TPP) — a free trade between Washington and partnering countries, which excludes China but includes some other major countries in the Asia-Pacific, who may now focus on antitrust issues during talks.