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Qualcomm for more than a year has been the target of investigations in several countries over its licensing practices, and now the chip maker reportedly is pushing back at some of the tech vendors officials believe helped spark a probe in South Korea.
The company is asking a federal court to force seven vendors to produce any documentation they may have provided to South Korean antitrust regulators in connection with the investigation. The request highlights the tangled relationships between some of the players. For example, both Samsung Electronics and manufacturers that make Apple products are rivals, but at the same time, they also are key customers of Qualcomm. According to the Wall Street Journal, Samsung and the Apple manufacturers accounted for more than 10 percent of Qualcomm’s revenues in the most recent fiscal year.
In all, Qualcomm—the world’s top mobile-chip vendor—is asking a U.S. District Court in California for the authority to get documents and other evidence that may have been supplied by the seven companies, which include not only Samsung and Apple, but also Intel, Broadcom, Texas Instruments, Via Technologies and MediaTek. Samsung and Apple also make their own ARM-based systems-on-a-chip (SoCs); the others make processors that are used in other mobile phones.
In papers filed with the court last week, Qualcomm officials said they want the information from the other vendors to help them prepare for hearings that will be used as part of the investigation by regulators at the Korea Fair Trade Commission. The officials reportedly said that the seven vendors named in the filings had given evidence to the South Korean regulatory body, which is keeping them confidential. So Qualcomm is hoping to get copies of the evidence by having a U.S. court order the vendors to hand them over.
Qualcomm officials announced in November that the company is being investigated by the Korea Fair Trade Commission, which is saying the company’s licensing practices violate competition laws in the country. The regulatory agency is arguing with Qualcomm’s practice of licensing patents to the value of the mobile device while requiring that chip customers be licensed to its intellectual property.
South Korean regulators want to change the chip maker’s business practices. However, Qualcomm officials in November 2015 disputed the claims made by the commission.
“The allegations and conclusions … are not supported by the facts and are a serious misapplication of law,” they said in a statement. “Our patent licensing practices, which we and other patent owners have maintained for almost two decades, and which have facilitated the growth of the mobile communications industry in Korea and elsewhere, are lawful and pro-competitive. Device level licensing is the worldwide industry norm, and Korean companies have long enjoyed the benefits and protections of access to our patents, which cover essentially the entire device.”
Qualcomm also is facing investigations in the United States and the European Union, and a year ago the company announced it was paying a $975 million fine as part of a settlement over an antitrust investigation in China.
Licensing is important to Qualcomm, which gets most of its revenues from the chip-making business, but most of the profits from licensing.
Qualcomm’s 2015 was difficult for a range of reasons, from the investigations to the rejection early on by Samsung of the company’s Snapdragon 810 for use in its Galaxy S6 smartphone, a move that shook Qualcomm given how important a customer Samsung is. Qualcomm later in the year unveiled its Snapdragon 820, and Samsung reportedly will use the chip in some of its upcoming Galaxy S7 devices.
In addition, after several months of consideration, Qualcomm officials in December rejected the idea of breaking the company in two—separating its chip-making and licensing businesses—arguing that the vendor was stronger by staying intact.
“The strategic benefits and synergies of our model are not replicable through alternative structures,” CEO Steve Mollenkopf said at the time. “We therefore believe the current structure is the best way to execute on our strategy to build on our position in the ecosystem and deliver enhanced performance and returns.”