Qualcomm’s (NASDAQ: QCOM) legal battle with China’s National Development and Reform Commission came to an end Monday with the US semiconductor giant being hit with a $975 million fine and having new patent licensing rules imposed upon it.
In addition to a $975 million fine, Qualcomm agreed to offer new terms for standards essential patents related to its 3G and 4G technology. Qualcomm also agreed to change its royalty schedule to only receive 65% of the net selling price rather than the full selling price. Qualcomm also agreed to remove elements in its licensing contracts that Chinese authorities
Chinese authorities began investigating Qualcomm over allegations that the company was using its library of patents in China in a monopolistic fashion, and refusing to come to fair licensing agreements with local companies. The investigation began in late November 2013 and heated up late 2014.
While Qualcomm executives said they were “disappointed” with the sheer size of the fine, they also said that they were glad to have put any uncertainties behind them with regards to the company’s ability to conduct business in China. Analysts quoted in media reports say this agreement opens doors for further and new cooperation between Qualcomm and major handset players in China.
All-in-all this move by Chinese authorities was merely a play to extract money from Qualcomm in order to make its position in the market slightly less competitive when compared to local companies in the same business. This has become a common tactic in China in order to give local firms an edge (read more about that here). But Qualcomm paid the price, and it appears to be smooth sailing for the company now.