Qualcomm hit with $853 million fine in South Korea for violating antitrust laws

Qualcomm has been fined a record 1.03 trillion won ($853 million) by South Korea's Fair Trade Commission (KFTC) over antitrust violations. The regulator said that Qualcomm's "unnecessarily broad patent licensing requirements" resulted in phone makers paying more royalties than required for its modem chips.

Qualcomm was also found to be in violation of competition law as it limited access to its standard essential patents to competing chip makers. In addition to the fine, the KFTC said that it will issue a corrective order specifying the business practices it took an issue with.

Calling the move "unprecedented and insupportable," Qualcomm said that it would file for an "immediate stay of the corrective order and appeal the KFTC's decision to the Seoul High Court." The company said that it will also appeal the amount of the fine and the method the KFTC used to calculate it.

Qualcomm's executive vice president and general counsel Don Rosenberg talked about the inherent value of Qualcomm's patents, and said that the current business practices are an industry norm:

Qualcomm strongly believes that the KFTC findings are inconsistent with the facts, disregard the economic realities of the marketplace, and misapply fundamental tenets of competition law.Importantly, this decision does not take issue with the value of Qualcomm's patent portfolio. Qualcomm's enormous R&D investments in fundamental mobile technologies and its broad-based licensing of those technologies to mobile phone suppliers and others have facilitated the explosive growth of the mobile communications industry in Korea and worldwide, brought immense benefits to consumers, and fostered competition at all levels of the mobile ecosystem.For decades, Qualcomm has worked hand in hand with Korean companies to foster the growth of the wireless Internet. Qualcomm's technology and its business model have helped those companies grow into global leaders in the wireless industry. This decision ignores that win-win relationship.

The regulator's decision doesn't go into effect until it issues a written order, which according to Qualcomm could take anywhere from four to six months. Should the decision be upheld, it could lead to Qualcomm changing its lucrative business model in the country.

Qualcomm earned more than $26 billion in revenue last year, of which 30% came from licensing its patents. The chip maker collects royalties based on the price of a handset, and with 11% of its sales coming from Samsung, the ruling could limit Qualcomm's earnings from South Korean manufacturers.

Qualcomm had to pay a $975 million fine in China last year after a 14-month investigation by the country's antitrust regulator. The company also agreed to lower its royalty rates for Chinese manufacturers.

Harish Jonnalagadda
Senior Editor - Asia

Harish Jonnalagadda is a Senior Editor overseeing Asia at Android Central. He leads the site's coverage of Chinese phone brands, contributing to reviews, features, and buying guides. He also writes about storage servers, audio products, and the semiconductor industry. Contact him on Twitter at @chunkynerd.

  • Damm! Was Qualcomm expecting this? It'll be interesting to find out how or if this will affect the development of the next generation of phones from Korea.
  • Guess Samsung's got to recover the money it lost on the Note 7's somehow.
  • still 6.2 billion to go lol
  • Yeah, I read this thinking Samsung had to lobby this, and probably used their own lawyers to get this done for the regulatory agency too. Got to keep Exynos chips a float, no where near as big as qualcomm with every other company quitting mobile chip development. No other company uses Exynos either. Plus doesn't samsung like support 40% of the Job market in S. Korea too
  • Samsung has supplied Exyonos for Meizu and Lenovo in the past.
  • Clearly Samsung is pulling the strings on this. Why don't they just use their own chips instead of Qualcomm's? Probably a lot less expensive to pay off the KFTC to force a royalty reduction on Qualcomm. Too bad we don't have regulators in the U.S. with the stones to protect American companies. Maybe they're getting paid off too.
  • Because it may be cheaper for Samsung to buy Qualcomm chipsets than it is to license the patents? Also, Samsung may not have the capacity to make their own chipsets in every market (they're still a major supplier for Apple), so they outsource to Qualcomm.
  • But Samsung makes Qualcomm's chips for them. So not using Qualcomm would free-up their capacity to make their own Exyonos chips.
  • Because Qualcomm holds all the patents needed to make a chip that can utilize technology Samsung currently has to license from Qualcomm. This is just the beginning of a long line of future fines and court rulings from foreign governments against US tech firms that hold exclusive patents and tech that they spent years of hard work, R&D, and money, or acquired fairly and should have the right to hold.
  • Qualcomm losing everywhere.
  • Calling the move "unprecedented and insupportable," Qualcomm said that it would file for an "immediate stay of the corrective order and appeal the KFTC's decision to the Seoul High Court." Yet a similar investigation and fine was levied last year in China. Qualcomm should have saw this coming a mile away.
  • You're referencing to China is laughable. Since when has China ever made a ruling on anything that didn't favor itself?
  • TF is everyone saying that Samsung is pulling strings? Did I miss somethin?
  • Given that they have a business relationship, I think it's highly unlikely. For example: http://www.androidcentral.com/qualcomm-snapdragon-835-official LG, on the other hand...
  • Because there are just samung haters without knowing anything about the situation. Maybe this had to do with Qualcomms positional monopoly on modems until recently. There is a reason they are getting fined in other countries also
  • There's not a lot of players in the phone chip market - that's why everyone is saying that. And since Intel has pulled out of phone chips more or less, I would agree that it is quite likely to be Samsung.
  • You have too much money , give me some says the courts.
  • Lol. Unprecedented? The exact same thing happened a year ago in China. This isn't the first or last fine they'll be facing.