Smartphone makers are not paying royalties Qualcomm is going to cry

November 5, China's mobile phone market is the cornerstone of Qualcomm's future. But now, while China's smartphone market offers a huge potential return to Qualcomm, it poses some risks to the company's future performance. The reason is that Chinese smartphone makers are reluctant to pay a patent fee to Qualcomm. Qualcomm is expected to benefit from a rise in demand from Chinese consumers for smartphones. But in the release of the last fiscal quarter, Qualcomm said the Chinese market has a huge challenge. What does this mean? What kind of dilemma does Qualcomm face in the Chinese market? China's domestic handset-makers rely on Qualcomm's technology, and Qualcomm is also able to access a huge number of royalties. Qualcomm is now counting on this part of the revenue. Chris Rolland, an investment banker FBR, predicts that if Chinese smartphone makers use Qualcomm technology to sell a 200-dollar smartphone, the company would have to pay at least 8 dollars in royalties to the latter, under an agreement with Qualcomm. But Qualcomm said in the company's last quarterly earnings call that China's smartphone makers either did not pay royalties or reported fewer handsets. That really affected Qualcomm's performance, as royalties accounted for about 30% of the company's total revenue. Market analysts said uncertainty about the future development of the Chinese market would have an impact on Qualcomm's share price. Qualcomm's share price rose less than 4% in 2014, and has fallen by more than 2% in the past 6 months. But not all analysts are worried about the current plight of Qualcomm in the Chinese market. Slini Pajari Srini Pajjuri, a CLSA analyst in France, gave the Qualcomm stock a rating for the market and set the target price at $90 trillion. The analyst said in a recent investor report that even if we were to assume that Qualcomm's royalty revenues in China were zero, the firm's current dynamic P/E ratio was only 17 times times. Pajari said smart-phone manufacturers such as Huawei, Lenovo Group, Millet, cool and ZTE have been paying royalties to Qualcomm as promised. Qualcomm's problem in China is not just a question of smartphone makers ' reluctance to pay royalties. The company has said in the near future that the Chinese government is conducting an antitrust investigation. Mark Sue, an analyst at Royal Bank of Canada, Mark Su that the Qualcomm's antitrust investigation in China could take another 12 months. Qualcomm investors need to keep in mind that the Chinese market has accounted for nearly 20% per cent of Qualcomm's revenues, and Qualcomm has been counting on the Chinese market to be the driving force behind the company's future growth. (Mingxuan)