Embattled Qualcomm Catches Antitrust Break in Taiwan

Taiwan sharply reduced a fine against Qualcomm Inc. for anti-competitive behavior in exchange for future investment, in a rare positive development for the embattled telecom chip giant in Asia.

Qualcomm has been under assault in Asia’s major chip-making markets of South Korea and Greater China for previous licensing practices that many of its customers complained were overly burdensome and anti-competitive. It also received a major setback last month when its plan for a major acquisition collapsed after Beijing failed to approve the deal nearly two years after it was first announced.

Under its newly reached settlement announced Friday by the Taiwan Fair Trade Commission, Qualcomm’s previously announced fine for anti-competitive behavior will be reduced to NT$2.73 billion ($89 million), according to an announcement on the agency’s website. The final figure was far less than the fine of NT$23.4 billion that was originally announced last October, a record at that time.

Qualcomm said the final NT$2.73 billion amount represented what it had already paid through the end of July and that no more money would need to be paid going forward. The company will also have to renegotiate contracts with its customers under conditions agreed to under the settlement, something it has been forced to do in similar cases in other markets.

In exchange for the big fine reduction, Qualcomm said it had agreed to a number of steps over the next five years to assist in the development of Taiwan’s important semiconductor chip market. Those include investment in next-generation 5G telecom technology, assistance to startup companies and collaboration with local universities. Qualcomm also agreed to open a Taiwan center for operations and manufacturing engineering.

The cost of these initiatives was not disclosed.

“This settlement directly addresses concerns raised by the (Taiwan Fair Trade Commission), regardless of disputed positions, and builds on our foundation of collaborative, long-term business relationships in Taiwan,” said Alex Rogers, president of Qualcomm Technology Licensing. “We are happy to reaffirm our commitment to license our valuable intellectual property under principles of fairness and good faith. With the uncertainty removed, we can now focus on expanding our relationships that support the Taiwanese wireless industry and rapid adoption of 5G technology.”

The Taiwan Fair Trade Commission said the settlement will require Qualcomm to submit a report on its progress every six months during the five-year period. It noted the settlement represented the first time in its history the agency had considered future public benefit in making such a settlement.

“We hope that this case will effectively help to form a good competitive environment for the communications industry and will have a positive impact on Taiwan’s semiconductor, mobile communications and 5G technology development,” it said in its own statement.

Qualcomm is the world’s leading maker of the chipsets that form the brains of the millions of smartphones now used throughout the world. But it has faced a number of probes and fines from various governments for anti-competitive behavior, especially in Asia where the semiconductor industry is a major economic engine.

One of the largest of those fines came in 2015, when the Chinese mainland fined Qualcomm a record 6.1 billion yuan ($891 million) for anticompetitive behavior. South Korea followed in 2016 with its own similar fine of about 1 trillion won ($890 million), and the European Union has also launched a probe.

Qualcomm also received another major setback from China last month, when its plan to purchase Dutch chipmaker NXP Semiconductors for $44 billion collapsed after Beijing failed to approve the deal in the midst of the escalating trade war with the United States. Since then Qualcomm has announced a plan to repurchase up to $10 billion worth of its shares.

Contact reporter Yang Ge (geyang@caixin.com)