Qualcomm antitrust investigation ends, domestic mobile phone industry or waves

The high-pass antitrust investigation that stirred China's mobile-phone chip market finally ended.

February 9, 2015, US chip giant Qualcomm announced that it has agreed to the National Development and Reform Commission to pay 6.088 billion yuan (about 975 million U.S. dollars) fine. This is the biggest fine in China's antitrust history. In addition, Qualcomm will also make a number of licensing methods for mobile phones to adjust, including the Chinese manufacturers are no longer bundled patent licensing, not mandatory cross licensing, complete machine charges discount.

Since November 2014, the National Development and Reform Commission for Qualcomm China Beijing and Shanghai Two branches of the surprise investigation, has been the past 15 months, the NDRC director of the Antimonopoly Bureau Hucunlin and Qualcomm President Derrick Aboli, respectively, led a total of nine rounds of confrontation, many rounds of dark war.

After the ticket landed, Qualcomm said it would not seek any further legal proceedings to defend it. The industry is more concerned that Qualcomm has changed the original business model, will have a different impact on domestic handset manufacturers. The future patent will become the domestic handset manufacturer main competition point, the handset patent war becomes inevitable.

Core business model changed

In the past two years, the National Development and Reform Commission has intensified the investigation of antitrust cases, from foreign milk powder manufacturers to the car companies, and then to Microsoft, Qualcomm and other technology giants have been involved. The Qualcomm was fined 6.088 billion yuan for violating China's anti-monopoly law, which is the highest record of China's anti-monopoly fines.

"Qualcomm will not seek any further legal proceedings to defend it," Qualcomm said in a statement issued to the China Business newspaper February 10 after the result of the punishment. Qualcomm agreed to implement corrective action plans to revise some of its business practices in China to fully meet the requirements of the NDRC's decision. ”

It is widely seen in the industry that Qualcomm is not really afraid of fines. At the end of the fourth quarter of 2014, Qualcomm held a total of $32 billion in cash, cash equivalents and securities, according to the latest earnings reports. The near 1 billion dollar fine would not be too much pressure on Qualcomm.

However, in addition to fines, the national Development and Reform Commission also requires Qualcomm to make a number of changes to the licensing of mobile phones, including the Chinese manufacturers are no longer bundled patent licensing, not mandatory cross licensing, complete machine charges discounts.

As the chip giant, Qualcomm mastered the 2G, 3G and 4G format of the "standard necessary patent", up to more than 1400. In the past, Qualcomm did not authorize it alone. Domestic manufacturers in the purchase of Qualcomm 3G, 4G necessary patents, forced to buy a package of patent licensing, including manufacturers do not need a patent license, which is called "patent binding authorization." At the same time, Qualcomm has forced handset manufacturers to sign an "anti-licensing agreement", in which a handset maker must authorize a patent at the same time for Qualcomm to use a Qualcomm chip, and not to levy royalties on any of Qualcomm's clients.

The reporter learned from Qualcomm that Qualcomm's license for the necessary Chinese patents on its existing 3G and 4G would be separate from other patents, and Qualcomm would provide a list of patents during the consultation process. If, as part of an offer, Qualcomm seeks a reverse license from a Chinese licensee, Qualcomm will negotiate in good faith with the licensee and give fair consideration to the rights.

From the latest quarterly revenue report, Qualcomm's chip sales contributed 74%, but in pre-tax profits, patent licensing fees accounted for 58%. Over the past 5 years, Qualcomm cumulative patent licensing fee income of up to 30 billion U.S. dollars.

Industry insiders believe that these adjustments will have a high Qualcomm charge of the business model to form an important impact, this is the middle of the pain point of Qualcomm.

In addition, "The Total wholesale net sale price of 65% charge patent license fee" is also a concern, which means that Qualcomm mobile phone patent charges will be overall down 35%. For example, the original 1000 yuan mobile phone, the patent cost is 50 yuan, now reduced by 35%, that is, the reduction of 15 yuan, for users, not much change. But for the handset manufacturer, a handset reduces 15 yuan, 1 million handset reduces 15 million yuan, 15 million yuan obviously is not the small number, is very important to the manufacturer.

Although the penalty is not very stressful, Derrick Aboli said, "We are delighted that this investigation is over and that our licensing business is now well engaged in China's rapid promotion of our 3g/4g technology." ”

"Qualcomm has played an important role in the success of China Mobile and the semiconductor industry over the years, and we look forward to making that foundation stronger by strengthening our investment, engagement and business activities in China," said Qualcomm CEO Steve Mollenkov. We are pleased that this solution eliminates our business uncertainty in China, and we will now devote all our energies and resources to supporting our customers and partners in China to look for many future opportunities. ”

The umbrella is disappearing.

Qualcomm's core business model has been changed, for domestic handset manufacturers, a few happy several worries.

Previously under the Qualcomm "anti-licensing agreement" requirements, as long as the use of Qualcomm Chip mobile phone companies, must be licensed to pass the patent to Qualcomm, and may not be the patent to any Qualcomm customers levy royalties. This is an important part of the Qualcomm Patent licensing business model. As a result, emerging handset makers, including millet and hammers, are happy to use Qualcomm's chips.

"Because these companies pay Qualcomm, although the cost is not cheap, but after handing over the need to deal with Huawei, ZTE, Lenovo and other enterprises." As a result, the cost of their business negotiations is reduced, and asset annual fees may not be that high, as Qualcomm has circled the patent package. "said Xiang, a communications industry observer.

On the contrary, Huawei, ZTE and Lenovo, which hold a large number of patents, are in a disadvantageous position. Data show that as of November 2014, Huawei received nearly 30,000 patents. Only more than 80 of the charm, Millet invention authorized only 10.

Huawei Consumer Terminal CEO Yu has publicly said that "many domestic counterparts in addition to Qualcomm to pay royalties, not to any patent holders to pay royalties." To Qualcomm authorized, also borrow Qualcomm's patent ' umbrella ', once the cancellation of the anti-authorization agreement, the loss of the ' umbrella ', many of the domestic lack of patented technology, mobile phone manufacturers will face a 10% increase in costs, will exceed the profitability of handset manufacturers. ”

Now this "umbrella" is disappearing. Xiang pointed out, "The future Huawei, ZTE and other enterprises will have more advantages." Huawei, ZTE used a Qualcomm chip, there is no way with the millet rights, can not find millet to patent fees, can not be sued. Now the situation is different, they want to find millet to find millet, when you want to find when to find. This is not just about money, it can also hit opponents, create market pressure, and even some products can apply for court injunctions. ”

According to media reports, ZTE's mobile phone has already issued a letter to the manufacturers of the industry to start charging negotiations on patent licensing issues. According to many sources, in addition to ZTE, Huawei, Cool faction and other manufacturers have issued a patent letter to other manufacturers.

Patented short board with acquisition

In the domestic mobile phone market, manufacturers are still around the price, marketing and other confrontation, but the industry predicted that the future may be around the patent, launched a new round of shuffle.

In Xiang's view, the shuffle is not to mention, but there will be such a result. "If the accumulation of intellectual property, is a larger enterprise, it becomes more powerful." On the contrary, if it is particularly small enterprises, especially the smaller size but want to build a brand, it is more difficult to bear the costs, including the cost of intellectual property, there are many enterprises need to talk about, not so easy, the interests of various enterprises are not the same. And Qualcomm's idea is to hope that these companies can develop, can sell mobile phones, so that they earn more money. ”

At present, the domestic handset market is becoming saturated. According to data released by the China Institute of Information and Communications, China's mobile phone market has accumulated 452 million shipments a year in 2014, down 21.9% from 2013 's 579 million.

In this context, many domestic mobile phone manufacturers began to go overseas. Huawei, ZTE this kind of overseas war for many years of the enterprise natural, in recent years, including millet, cool, gionee, Vivo and other domestic brands have begun to test water overseas markets, layout of retail channels to seek breakthroughs.

However, they are now developing mainly India, Indonesia, Russia, Southeast Asia and other emerging markets, which is important because the protection of intellectual property in emerging markets is far less mature than in North America, Europe and other regions, and when companies want to enter the United States and other markets, the importance of patents immediately highlighted.

"What is feasible now is to buy more companies, buy already-patented companies, and then cross-authorize and negotiate, such as Lenovo's ability to buy Motorola, and Motorola itself accumulates a lot of valuable stuff." So for millet, patent application time is too late, but the current strength of millet should be able to acquire some enterprises. "Xiang said.