According to the news report by Bloomberg, Qualcomm Inc. has reached an agreement with Taiwan’s antitrust regulators, thanks to which most of the $773 million fine will be reversed.
The smartphone chip manufacturer has been embroiled in regulatory actions as well as lawsuits which are threatening Qualcomm’s most critical as well as profitable business.
In October last year, the Taiwanese antitrust agency had accused Qualcomm of having a monopoly over critical mobile phone standards. The agency also alleged that the chip maker was breaking local laws by refusing to provide customers with products if they refused to accede to Qualcomm’s conditions.
The company was therefore fined for this violation. Additionally, the Fair Trade Commission (FTC) told the chip maker to remove previously agreed upon deals where the company had forced its customers to share data such as price, customer names, model names, shipment details and other company specific sensitive information.
On Friday, however, the chip maker gained a reprieve when the Fair Trade Commission announced that Qualcomm would invest $700 million in Taiwan over a period of 5 years. This investment would also include increase research activities in the region, which is home to a large number of suppliers to multinational technology companies such as Apple Inc.
According to the agreement, in return for this investment, Qualcomm cease paying fines to the Taiwanese authorities and also retain the right to charge royalties on its technology. Taiwanese authorities stated that the fines that Qualcomm had already paid (NT$2.73 billion or about $89 million) would be retained by the state, but the rest of the fines would be waived.
According to Taiwan’s FTC Commissioner Hong Tsai-Lung, both sides felt that these fines imposed on Qualcomm were controversial, and that if they were to continue to with the lawsuit against the chipmaker, Taiwan’s progress could be hampered by a lengthy legal battle.
Qualcomm has also agreed to make sure that all negotiations will be fairly conducted with local licensees, and will collaborate with and support research as well as commercial projects in Taiwan. This would include research regarding the latest 5th generation 5G wireless technology.
This ruling reverses only one of the many actions against the chip maker in recent years. Investors are worried that these lawsuits against the company could destroy its patent-licensing business, which is the division that produces the greatest profits for the chip manufacturer.
While most of the chip maker’s revenue is generated from its core business of selling chips that help smartphones connect to cellular networks, the majority of the company’s profit comes from the royalties on patents that cover the basics of all modern hi-speed data phone networks and systems.
Qualcomm has been arguing that these actions are just part of Apple’s global push to gain governmental support in its legal fight against the chip maker. Apple filed a lawsuit against Qualcomm for antitrust violations. According to Apple, Qualcomm is unfairly leveraging its position of near monopoly in modem chips and the fact that the chip maker is facing regulatory actions from governments across the world is proof of its wrongdoing.
Qualcomm’s shares dipped less than 1% in early morning trading on Friday. The company has gained 1.7% on its stocks so far this year, closing at a share price of $64.82 on Friday.
The chip maker isn’t out of the woods yet, though. Qualcomm is still facing multiple lawsuits from Apple, regulatory investigations as well as actions by the EU as well as the US. Due to all of these legal battles, the company’s share price has plunged in the last one year, thereby making it a target for a hostile takeover by the smaller but more robust rival chipmaker, Broadcom Inc.