Qualcomm Updates: Taiwan Antitrust Fine, Lawsuit Against Apple In China

by Trefis Team
-8.66%
Downside
66.72
Market
60.94
Trefis
QCOM
Qualcomm
Rate   |   votes   |   Share

Qualcomm (NYSE:QCOM) had a busy week on the legal front after it was fined about $773 million by the Taiwanese government, which accused it of licensing its standard-essential patents in an unfair manner. Separately, the company also expanded its legal spat with Apple, filing lawsuits in China that seek to ban the production and sales of the iPhone in the country. In this note, we take a look at how the recent developments could impact the company’s patent-licensing operations, which accounted for about 80% of its pretax profits last year.

Trefis has a $64 price estimate for Qualcomm, which is about 20% ahead of the current market price.

See our complete analysis for Qualcomm

Taiwanese Fine Adds To Qualcomm’s Global Regulatory Woes

Qualcomm was fined about $773 million by the Taiwanese fair trade commission, which ruled that the company broke the country’s antitrust laws by unfairly licensing out its patents. The core of the accusation is that the company used its dominant position in the modem chip market to charge unfair royalty rates and commercial terms for its patents, violating Taiwanese competition law. Qualcomm typically sells its modems and also requires customers to license a set of related patents that relate to the operation of the modem. While Qualcomm is appealing against the ruling, it has faced similar regulatory challenges across the globe, and it’s unclear whether it will be successful. Last year, the company was fined over $850 million for antitrust violations in South Korea. It also paid a fine of close to $1 billion in China in 2015. The U.S. Federal Trade Commission also sued Qualcomm in January, taking issue with its licensing practices.

 

Qualcomm Seeks To Ban iPhone Sales In China

Last week, Qualcomm filed a new lawsuit against Apple in China, accusing the smartphone behemoth of patent violations, while seeking a ban on iPhone sales and production in the country. The complaint relates to three non-standard essential patents, which encompasses power management and pressure-sensitive touchscreen technology that Apple deploys on its iPhones. While we view it as fairly unlikely that Qualcomm will get its way, it is possible that the company is using the lawsuit as a tactic to get some bargaining leverage in its other cases with Apple. Earlier this year, Apple had filed an antitrust suit against Qualcomm, accusing the company of unfair licensing practices, targeting the company’s practice of charging licensing fees based on handset selling prices among other issues (related: What’s At Stake For Qualcomm As Apple Expands Its Lawsuit?). Apple has suspended its licensing payments to Qualcomm, noting that it would resume them only after all legal issues were sorted out. The dispute has taken on toll on Qualcomm, with revenues of its technology licensing unit declining by about 42% year-over-year to $1.172 billion during Q3 FY’17.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!