Qualcomm suspected of chip monopoly, received the EU 1.2 billion US dollars fine

On Wednesday, US-based chipmaker Qualcomm was hit with a massive fine of 997 million euros ($1.23 billion) from the European Union. Following the announcement, Qualcomm's stock dropped by 1.35% during midday trading, reaching $67.42 per share. The fine stems from an alleged anti-competitive practice involving Apple. In 2011, Qualcomm entered into a "bundling" agreement with Apple, ensuring that the iPhone and iPad would exclusively use its chips in exchange for high rebates and payments. This deal gave Qualcomm a strong position in the market, but it also raised concerns about unfair competition. Apple had previously attempted to move away from Qualcomm, considering alternatives like Microsoft and Intel (some Intel modems were used in the iPhone 7 series starting in 2016). However, this plan was put on hold as the Qualcomm agreement expired in September 2016. Now, with the contract no longer in effect, Qualcomm faces increased competition from Intel, Microsoft, and other rivals. Qualcomm strongly opposes the EU’s decision and has announced its intention to appeal. The European Commission began investigating Qualcomm in 2015, focusing on its non-compliant business practices between 2011 and 2016, which allegedly harmed competition and innovation. The fine represents 4.9% of Qualcomm’s 2017 revenue. While the appeal is pending, the fine could add to Qualcomm’s quarterly expenses. Last year, the company was fined $774 million over unfair patent licensing, and faced additional penalties from regulators in China, Taiwan, and South Korea, totaling around $2 billion. This latest ruling may also increase the likelihood of a $103 billion hostile takeover bid from Broadcom. If successful, the acquisition could help resolve ongoing disputes with Apple. Recently, the EU approved Qualcomm’s $38 billion purchase of NXP Semiconductors, though the deal still requires Chinese approval and faces some investor pushback. Qualcomm remains under scrutiny from multiple regulatory bodies. The EU has previously issued two "objection statements," warning that if found guilty of violating antitrust laws, the company could face fines up to 10% of its global revenue and be forced to change its business model. In early 2018, the U.S. Federal Trade Commission (FTC) accused Qualcomm of refusing to license its standard-essential patents to competitors and entering exclusive deals with Apple. Despite the challenges, some Chinese smartphone manufacturers are resisting Broadcom’s takeover attempt. Companies like Oppo, Vivo, and Xiaomi, which rely heavily on Qualcomm’s technology, are concerned that a hostile takeover could lead to higher prices and more uncertainty. These companies have significant portions of their devices built on Qualcomm platforms, and their combined wafer shipments to Qualcomm exceed those of Apple. The relationship between Apple and Qualcomm is complex. EU Antitrust Chief Margrethe Vestager stated that the fine would not directly affect Apple. However, the legal battle between the two companies continues. Qualcomm filed a lawsuit last year, while Apple has demanded up to $1 billion in patent licensing fees. This case could provide Apple with legal support as it fights Qualcomm globally, from Beijing to California. In comparison, previous fines against companies like Intel and Google were also significant. In 2009, Intel was fined for bribing computer manufacturers to favor its chips, and in 2017, Google was penalized €2.4 billion for abusing its dominance in search services. Sources indicate that the EU antitrust authority aims to reach an agreement with Qualcomm in the coming months. Another case involves British firm ICera, later acquired by Nvidia. The EU suspects Qualcomm sold baseband chipsets at discounted prices to two customers between 2009 and 2011, aiming to drive ICera out of the market.

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