The South Korea's antitrust regulator fined Qualcomm a sum of $854 million for violating the antitrust laws. In the latest audit by Korea Trade Commission (KTC), Qualcomm was scrutinized for encouraging the unfair trade practice in patent licensing and modem chip sales. The U.S. chip maker said it will challenge this allegation by KTC in the international court.
This fine is largest ever in South Korea to date. This is a major setback for Qualcomm's most profitable business of licensing wireless patents to the mobile industry. This decision has come when business is facing heat from a cooling Smartphone market.
The South Korean antitrust regulator said on Wednesday that the company licensed its key patents only to mobile phone makers and did not properly negotiate the terms of its licenses. The agency also said Qualcomm constrained its customers into signing patent license contracts when selling its chips used in mobile phones in the country, and it did not fairly pay for that.
Qualcomm gets the major part of profit at approximately $6.5 billion last financial year from selling the right to use technology that is used by all modern phone systems. Qualcomm sales account for about 20 percent in the Korean market that is why South Korea is an important market for them.
Samsung and LG Electronics would be profited by this because they might get lower rates on the chips sold by Qualcomm. Samsung is Qualcomm's second-largest customer accounting nearly 11 percent of its sales.. Meanwhile Qualcomm stock remains unchanged in after-hours trade. Samsung was down less than one percent at the close in Seoul, while LG was up 1.2 percent.
In 2009, KTC fined Qualcomm $213 million for impending competition through discriminatory charges. KTC ordered the chipmaker to stop charging higher royalties from customers who buy chipsets from other rivals. They also ordered to cease the rebates to handset makers who buy products from Qualcomm. That case is under appeal with the Korean Supreme Court. Qualcomm was also fined $975 million last year by China.