The world’s largest maker of smarpthone chips has been having a hard time doing business in the world’s biggest smartphone market. But now Qualcomm is reportedly near a settlement with the Chinese government.
Qualcomm will face a fine of at least $1 billion, according to Reuters. The Chinese government has been investigating Qualcomm for alleged antitrust violations and as part of the settlement, Qualcomm also may agree to change its licensing practices in China, a move that could set a precedent for other countries.
Investors are apparently relieved that the bad news they’ve been expecting may finally be quantified. Qualcomm stock is actually higher today. At the end of last month the chipmaker’s shares were down 23% from their July high for the year.
Once the investigation is settled, it should be easier for Qualcomm to sign new licensing deals with its Chinese customers. The company has noted that some customers have been reluctant to sign during this time of uncertainty, and that some have underreported the number of devices shipped that could have generated licensing royalties.
Roughly half of Qualcomm’s revenue comes from China, and the company has been working hard to create chips for entry-level Chinese smartphones. In addition to selling chips outright, it licenses its intellectual property or “cores” to other manufacturers – actually the most profitable part of its business. It’s also the part that has come under the most scrutiny from regulators.
China is not the only government investigating Qualcomm. Both the Federal Trade Commission and the European Union said late last year that they are also investigating the chip giant.
