This past July, we reported that the European Union had launched two investigations looking into Qualcomm’s competitive practices (Previous article). On Tuesday (12/08/15) the European Commission formally charged them with illegally paying a customer to use its chips exclusively, while selling chips below cost to force a specific competitor (Icera) out of the market.
Margrethe Vestager, the EU antitrust head said, “I am concerned that Qualcomm’s actions may have pushed out competitors or prevented them from competing.” If the allegations prove to be true, Qualcomm could face a fine of up to 10 percent of its profits globally. Don Rosenberg, Qualcomm’s general counsel and executive vice president stated, “We look forward to demonstrating that competition in the sale of wireless chips has been and remains strong and dynamic, and that Qualcomm’s sales practices have always complied with European competition law.” The California based chip behemoth does have three months to answer the illegal payments charge and four months to respond to the second charge of predatory pricing practices.
All of this at a time when the chip maker had signed a new licensing agreement with Xiaomi, the Chinese smartphone giant, just last week. And, having settled disputed royalty claims with Chinese authorities in February of this year. The Xiaomi deal had sent Qualcomm’s stock price up 7.4% the day it was announced, but the shares took a 5% hit on today’s news.
Let’s not forget that Intel has been making some inroads with Asus, Lenovo, Microsoft and others lately, getting manufacturers to use their chips in some phones and may be an up and coming threat.
Qualcomm is still the overwhelming leader in mobile chip manufacturing, but I’d be just starting to sweat a little if I were in their place. They may have nothing to worry about, but we’ll have to wait and see how all of the accusations and competition shakes out in the long term.
Source: The Wall Street Journal
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