Qualcomm fined 1.03t won by South Korean antitrust agency

[SEOUL] South Korea's antitrust regulator slapped a record 1.03 trillion won (S$1.23 billion) fine on Qualcomm Inc. for violating antitrust laws, the latest in a string of government actions that threaten the U.S. chipmaker's most profitable business.

The South Korean Fair Trade Commission said Wednesday that the company licensed its key patents only to mobile-phone makers and didn't properly negotiate the terms of its licenses. The agency also said Qualcomm coerced its customers into signing patent license contracts when selling its chips used in mobile phones in the country, and it didn't fairly pay for the use of patents held by other phone makers.

The decision from the home country of Samsung Electronics Co adds to investor concern that the San Diego-based chipmaker, which is also the subject of investigations in the US and Europe, may struggle to defend its lucrative licensing business. Qualcomm gets the majority of profit - US$6.5 billion in its most recent financial year - from selling the right to use technology that's fundamental to all modern phone systems.

Qualcomm, calling the decision "unprecedented and insupportable," said it will appeal the decision in Seoul's High Court. The KFTC ruling doesn't go into effect immediately and Qualcomm will seek a stay from the courts while it appeals, said Don Rosenberg, the company's general counsel.

"The KFTC ruling will not just benefit local handset makers but other global chipset makers too, so today's ruling from the commission seems a bit broader and stronger than that of the China's last year," said Jung Dong-joon, a patent lawyer at SU Intellectual Property. "Qualcomm sales accounts for about 20 per cent in the Korean market and that's a significant market for Qualcomm." For Samsung, the world's biggest phone maker, and LG Electronics Inc, the ruling opens up the possibility they may be able to pay lower rates to Qualcomm. When Qualcomm settled an investigation by Chinese regulators last year, it accepted a lower rate charged on phones sold in that country. Samsung is Qualcomm's second-largest customer, accounting for about 11 per cent of its sales, according Bloomberg's supply chain analysis. The US company also designs and sells chips that are the main component in smartphones.

BLOOMBERG