It hasn’t been a good start to 2015 for chip-maker Qualcomm, with Samsung pulling the plug on using its smartphone chips. Now the company has been fined a record US$975m by China over patent licensing.
After a 14-month battle with the Chinese legal system, the US company conceded defeat and came to an agreement that will see it lower its royalty rates on patents to be used in China’s ever-increasing mobile phone-production market.
Qualcomm released a statement following its settlement with Chinese authorities that offered no contest to the country’s laws regarding monopolies but from now on will only charge royalties on the use of its chips in Chinese smartphones based off a percentage of 65pc, rather than the entire phone as had existed previously.
While the reduction in its royalties will no doubt effect its revenues, the news Samsung was to stop using Qualcomm’s chips in its phones was a considerable blow in a market where Samsung, despite not showing significant profits, is still one of the largest smartphone providers in the world.
The Chinese market is crucial to Qualcomm given that, according to the BBC, half of the company’s revenues come from China, amounting to as much as US$26.5bn. Qualcomm’s CEO Steve Mollenkopf said he was “pleased that the resolution has removed the uncertainty surrounding our business in China”.
The company has since revised its fiscal-year predictions for this year, increasing its expected revenues marginally by US$300m.