Chipmaker Qualcomm, which provides the electronic brains for Android smartphones around the world, is ending 2016 with legal trouble in the Far East, but it doesn't have anything to do with processors.
South Korea on Dec. 27 slapped Qualcomm with a $852.9 million fine for alleged antitrust violations involving its patent licensing business.
The Korea Fair Trade Commission has charged that Qualcomm unfairly limited the access of competing chipset makers to its patents and used its position as a key supplier as leverage in its negotiations to make mobile-phone producers agree to unfair conditions.
South Korea may have felt emboldened to do this after the San Diego, Calif.-based chip maker agreed to a $975 million settlement in China last year for similar antitrust violations.
Qualcomm Dismisses Charges
Qualcomm has dismissed the commission's charges, saying its business practices haven't influenced the sales of other chip suppliers. An eWEEK query to a Qualcomm spokesman for comment was not returned Dec. 27.
Qualcomm manufactures LTE modems and ARM-based systems on a chip for various Android phones. Earlier this month, the company announced that it is moving into the server chip business with a new 10nm Centriq 2400 processor, which will compete directly for business with Intel's vast installed base.
What a lot of people don't know is that Qualcomm also makes a significant portion of its revenue from licensing deals based on a large portfolio of wireless IT patents. This patent licensing business makes up a non-trivial 32.8 percent of the company's total revenue according to the company's latest earnings report.
However, a three-year investigation in South Korea led to the announcement of the fine. According to the industry regulator, Qualcomm should have shared more patents with other chip makers, including Samsung, Intel and MediaTek.
Samsung a Major Plaintiff
Samsung, of course, is the main plaintiff here. Samsung the corporation comprises 17 percent of South Korea's entire gross national product and makes a high percentage of the world's Android phones.
South Korea also claimed Qualcomm put undue pressure on phone makers to license too many patents.
Even though it is being impacted by these legal difficulties, Qualcomm is not about to pare back its lucrative patent licensing business anytime soon. But other countries, including Taiwan, Japan and others—and even some EU nations—now may scrutinize Qualcomm's business practices as a result.
Qualcomm is expected to appeal the ruling. If the fine is adjusted or canceled later down the road, the South Korean administration will reimburse Qualcomm.