Qualcomm Slapped $773M Fine by Taiwan Antitrust Regulators October 12, 2017, 08:42:00 AM EDT By Zacks Equity Research Leading wireless chipset manufacturer, QualcommIncQCOM has recently been fined around $23.4 billion Taiwan dollars (approximately U.S. $773 million) by the Taiwan Fair Trade Commission ("TFTC") on grounds of anti-trust violations of its chip technology. Qualcomm is being accused for the prices charged for its mobile phone chips and patents, which are in violation of Taiwanese competition law. Notably, Taiwanese companies purchased $30 billion worth of Qualcomm baseband chips. As per TFTC's investigation, Qualcomm has been violating antitrust rules for at least seven years and has collected roughly $400 billion Taiwan dollars (U.S. $13 billion) in licensing fees from local companies during that time. Moreover, TFTC has drawn attention towards Qualcomm misusing its monopoly market status over key mobile phone standards. The chipset manufacturer has been accused of not providing products to clients who do not agree with the company's conditions. Meanwhile, Qualcomm has also drawn scrutiny from regulators around the world. Regulators in South Korea, China, Japan, the European Union and elsewhere are investigating the company's practices. However, Qualcomm disagrees with TFTC's decision. The company aims to appeal to the Taiwanese courts after receiving TFTC's formal decision, which is expected in the next few weeks. The fine bears no relationship to Qualcomm's revenues or activities in Taiwan. The company will appeal the amount of the fine and the method used to calculate it. The decision by the Taiwanese regulator is the latest challenge to Qualcomm's business model, which involves selling chips and licensing a suite of patents related to their utilization. While the regulatory and legal attacks differ to some extent, Qualcomm has been commonly alleged due to its monopolistic strategies in the chipset market. The company continues to receive charges for unfair business practices and licensing royalty payments. In December 2016, South Korea's regulatory authority for economic competition , Korea Fair Trade Commission (KFTC), imposed an administrative fine of approximately 1.03 trillion South Korean Won (approximately U.S. $865 million) on Qualcomm due to unfair business practices. In May 2017, Qualcomm settled a licensing dispute with BlackBerry Limited BBRY by paying $940 million. Meanwhile, the ongoing $1-billion lawsuit dispute with tech giant Apple Inc AAPL continues to get bitter, which is badly affecting the company's margins. European regulators have also expressed antitrust concerns over Qualcomm's bid to buy NXP Semiconductors N.V. NXPI . The U.S. Federal Trade Commission (FTC) is also suing Qualcomm over its licensing practices. We expect Qualcomm to quickly resolve all such disputes and focus on its growth strategies. Moreover, aggressive competition in the mobile phone chipset market remain headwinds for the company. The company faces severe competitive threats from its closest rival, Intel Corporation INTC , which has been redesigning chipsets for the mobile computing market. We wait to see if this hurts Qualcomm's sales in the fiscal second quarter. Price Performance Over the past month, shares of Qualcomm have returned 6.1% compared with the industry 's gain of 3.3%.
Is there a Q in "GAFA" ? Nope Today, GAFA is trendy, Qualcomm not. Same story with Apple and Nokia. One man's meat is another man's poison. So expect a wake up of Qualcomm when people would be bored of GAFA... Can take months, even years. CM
To be honest: I don't think so. QCOM had/has a dominant position in the mobile phone market due to its patent portfolio. This allowed them to "bully" all semiconductor manufacturers and mobile phone manufacturers over the years. The industry wants to get out of this situation, so they develop new standards where not one company has a dominant patent portfolio. Besides that are mobile phones becoming a mature market, with lower revenue growth and profit margins for the semiconductor manufacturers. Other markets promise more revenue growth and profit in the coming years/decade. QCOM is too focused on mobile phones and they know it: they try to take over NXPI in order to diversify. If this take-over fails they will be in deep trouble.
Interesting post. What i meant is that when everyone is focused on GAFA, other big tech names are disavantaged. GAFA are overbought, and overbuy leads to overbuy. You should be really strong in order to attract buyers. As you mentioned, Qualcomm is fundamentally weak, which doesn't help here. CM
most likely people did not read the trend correctly, and they traded and lost money. also most likely people listen to reports saying how great qcom was. qcom is ranging from 48 to 58. so when qcom went up and hit the ceiling, get ready to short or sell call option. also when qcom went down and hit the floor, get ready to long or sell put option. so those who earn money trading qcom never hate it.
Self-criticism ? There is a long road before you understand what a trend is. There ain't any trading range when a stock makes new lows lower and new highs lower. QCOM is in a bear trend for the last year. You don't have to get a Phd in price action to understand that. So expect a new low below 48 for the coming months if no big surprise. CM
I agree with you on this: the "over-focus" on GAFA. However, none of GAFA are semiconductor makers. My remarks on QCOM were more in relation to their competitors and the semiconductor market in general. Compare for example QCOM to SMH and you see a large discrepancy.