High royalties key reason behind China Qualcomm fine: NDRC

The "unfair" and "excessively high" royalties Qualcomm Inc collected from Chinese smartphone makers were the key factors that led to the historical fine, the National Development and Reform Commission said on Tuesday.

"Qualcomm refused to provide patent list to its customers in China and out-of-date patents were included in the licensing package and charged," the NDRC said in a statement.

Other major breaches that violated the Chinese Anti-Monopoly Law include product bundling and adding unreasonable conditions in the sale of baseband chips, the NDRC said.

Nicole Peng, research director at Canalys China, said the rectification plan will have a "relatively small" impact on Qualcomm's revenue in China.

Qualcomm will change its patent fee on two device categories- 3G and 4G devices that don't have WCDMA and CDMA, according to a company statement.

"We expect these two categories in total to account for less than 40 percent of the overall LTE shipments in 2015 and even less in the coming years," said Peng.

In addition, as both categories are mainly lower-end products, it will not have significant impact on the total revenue, she added.

ZTE Corp, one of the top smartphone makers in China, said it wecomles the resolution from NDRC.

"The resolution will have a deep impact on global communication industry and is good for China to build a business environment that sees highly in intelligence protection," the company said in a statement.

The United States chip giant was fined 6.08 billion yuan ($975 million) according to the Anti-Monopoly Law, the amount accounts for 8 percent of the company's 2013 revenue in China.

Qualcomm Incorporated, the world's largest chipmaker, announced Tuesday US time that it will pay a fine of 6.08 billion yuan ($975 million).

The National Development and Reform Commission (NDRC) Administrative Sanction Decision found that Qualcomm has violated the country's Anti-Monopoly Law.

"Qualcomm will not pursue further legal proceedings contesting the NDRC's findings," Qualcomm released in a statement.

Qualcomm said it has reached a resolution with the NDRC regarding the regulator's 14 month investigation of the chipmaker under China's Anti-Monopoly Law.

"We are pleased that the investigation has concluded and believe that our licensing business is now well positioned to fully participate in China's rapidly accelerating adoption of our 3G/4G technology," said Derek Aberle, president of Qualcomm. "We appreciate the NDRC's acknowledgment of the value and importance of Qualcomm's technology and many contributions to China, and look forward to its future support of our business in China."

Qualcomm has agreed to implement a rectification plan that modifies certain aspects of its business practices in China to fully satisfy the requirements set by the NDRC. According to the company's press release, the company is disappointed with the results of the investigation but is pleased that the NDRC has approved the company's rectification plan.

Key terms of the rectification plan includes that Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents separately from licenses of its other patents and it will provide patent lists during the negotiation process.

Qualcomm also said it plans to continue to grow its investments and expand collaborations in China, including with China's mobile operators, handset and device suppliers, and within the Chinese semiconductor sector.