Shares of Qualcomm (QCOM) were under pressure on Wednesday after South Korea's antitrust regulator slapped a $853 million fine on the US tech company for violating competition laws.
We reported about the possibility yesterday that Qualcomm could be fined more than 0 million in South Korea for antitrust violations. One of South Korea's biggest companies, Samsung Electronics Co., is also one of Qualcomm's largest customers.
Importantly, this decision does not take issue with the value of Qualcomm's patent portfolio. Qualcomm, which reported revenues of $23.6 billion for the fiscal year ended September 25, makes most of its profit from licensing semiconductor patents to handset and chip manufacturers. Although it has obligations to provide SEP without any discrimination according to expansion of FRAND (Fair, Reasonable, and NON-Discriminatory), QTL rejected and limited its supplies of licenses to its opposing chipset manufacturers such as Samsung and Intel. Revealing this, the authorities said the American semiconductor and telecommunications equipment maker was carrying out unfair business practices modem chip sales and patent licensing. The KFTC reportedly interviewed key clients from domestic companies as well as U.S. ones like Apple, Nvidia, and Intel and these companies sent their executives to testify aganst Qualcomm in Seoul.
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The South Korean antitrust regulator said on Wednesday that the company licensed its key patents only to mobile phone makers and did not properly negotiate the terms of its licenses. When this happens, the company will file for an immediate stay of the corrective order and will appeal the decision, as well as the method used to calculate the fine, in the Seoul High Court. In 2009, the KFTC had imposed a 273 billion won fine on Qualcomm, which was the highest at that time, for abusing its market power. It further said the fine is insupportable and not reasonably related to the size of the Korean market. In previous cases, Qualcomm has gone ahead and paid the fine so they could continue doing business in the country.
The chipmaker said its practices of licensing its patents have been in existence in Korea and across the globe for decades. Qualcomm also didn't pay fair amounts for using other wireless chip patents, the government said.