Qualcomm faces big trouble in China

Antitrust regulators have reportedly found Qualcomm abused its monopoly in China. Meanwhile, the chipmaker is forging ahead there, investing up to $150 million for local startups.

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Qualcomm CEO Steve Mollenkopf at the 2014 International CES. Justin Sullivan/Getty Images

Qualcomm's woes in China look to be worsening.

Citing the state-run Securities Times newspaper, Reuters said Thursday the China National Development and Reform Commission found that Qualcomm abused its monopoly in the country and could face stiff fines of more than $1 billion. The Securities Times report was based on unidentified sources it said were close to the antitrust regulator.

Qualcomm representatives didn't have an immediate comment about the report, though the company has previously said it's cooperating with regulators on the investigation.

Qualcomm's shares are down about 6 percent at $76.40, despite stronger-than-expected fiscal third quarter results Wednesday, as investors are reacting to several negative issues for Qualcomm out of China.

The company, which holds a dominant position selling wireless processors, revealed Wednesday that it believes some licensees in China are underreporting their licensed-product sales to the company, while it also faces a dispute with a licensee. These problem appear to be bubbling up due to the investigation by Chinese antitrust officials. Regulators in November of last year told the company they were looking into potential monopolistic practices by Qualcomm in China, primarily related to its licensing business. The underreporting could be particularly harmful for Qualcomm, since its licensing segment provides most of the company's profits.

Qualcomm has been working on capturing more business in China as the country's economy continues to grow and its mobile infrastructure develops 4G LTE capabilities.

At the same time Qualcomm is struggling with a handful of problems in China, the chipmaker is pushing ahead with its investment in the country. The company also on Wednesday announced plans to invest up to $150 million in Chinese startups, focusing on mobile technologies. Cambridge Wowo, a mobile education startup, and Boohee, a mobile health care company, were recently funded. Qualcomm said it has been actively investing in China for more than 10 years.

 

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