Qualcomm Faces Antitrust Scrutiny in China

by Matt Klassen on November 27, 2013

Perhaps as a little negative quid pro quo, perhaps some insidious tit-for-tat, but China has launched an antitrust probe into U.S. chipmaker Qualcomm a little over a year the U.S. launched its national security campaign against Chinese telecom companies Huawei and ZTE. The revelation from Qualcomm comes on the heels of an admission from company boss Paul Jacobs that the company was definitely feeling increased pressure from China following a long history of America handicapping Chinese companies and now, of course, the fallout from the ongoing NSA scandal.

While Qualcomm has said they are yet to receive any specifics from the National Development and Reform Commission, China’s regulatory body for antitrust issues, Reuters reports the investigation regarding potential market monopolization is an attempt to break Qualcomm’s hold on the Chinese mobile chip market, particularly as the country begins its multi-billion dollar 4G LTE network rollout.

But whatever the case, consider this some of the first shots fired back across the pond in what is quickly becoming the Telecom Wars, as China looks to break America’s hold over its wireless market while giving its own homegrown telcos a leg-up both at home and abroad.

There’s no question that Qualcomm has established a dominant mobile chip empire across the globe. The company generates revenue from chip sales and also collects licensing royalties from wireless providers who ship Internet-capable phones. Now that China is on the cusp of rolling out its own advanced fourth generation wireless network, such dominance in the chip sector could have Chinese regulators worried about monopolization that would almost completely exclude Chinese companies.

As the report from Reuters explains, “Qualcomm is positioned to reap the vast majority of licensing fees for the chip sets used by handsets in the world’s biggest smartphone market, providing the San Diego-based chipmaker with a fresh source of royalties.”

“This is a big deal for Qualcomm,” Alen Lin, a telecoms analyst at BNP Paribas in Hong Kong, told Reuters. “For the first 6-9 months Qualcomm will be the only chipset provider that can support a handset using both 3G and 4G in the China market.” [italics added]

While many consider this to be China’s response toAmerica’s national security concerns surrounding ZTE and Huawei, it should be noted that China has said nothing about security issues regarding Qualcomm; this has to do with growing American dominance in China’s wireless sector and nothing more.

Such action against Qualcomm is likely designed to bolster the market presence of its own chip companies, simply part of the country’s overall scheme to lessen dependence on foreign markets and develop itself as a global telecom, mobile, and software powerhouse. As Reuters notes, “Although Chinese smartphone makers such as Lenovo, ZTE Corp and Xiaomi Tech have emerged to help meet demand for low-end handsets,Chinahas struggled to develop a local mobile Internet standard.

In fact, “China’s domestic chipset manufacturers are in disarray,” said Duncan Clark, chairman of BDA, a Beijing-based technology consultancy. “They’re trying to re-boot their whole chipset industry.” If that is the case, trying to hamstring dominant foreign competition until domestic rivals can catch-up certainly wouldn’t surprise me.

That said, this is quickly turning into a mobile and telecom war between China and America, which each nation doing its best to remove the other from its home soil, while simultaneously trying to increase its presence in the other’s market, an interesting saga indeed.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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China Builds Case against Qualcomm — TheTelecomBlog.com
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