Industry Intelligence Program
Semiconductor
China's Antitrust
Sentence and Its Impact
on Qualcomm and the
Chinese Industry
Abstract
In 2014, the Mobile China Alliance reported to the Chinese
NDRC (National Development and Reform Commission),
alleging Qualcomm of harming China's mobile phone
industry. After 14 months of anti-trust investigation,
Qualcomm is found guilty of violating Chinese antitrust
laws and sentenced to a fine of US$975 million. On top of
that, Qualcomm is prohibited to sell bundled patents to
Chinese companies. Master in the core technology of
communications, Qualcomm has its main source of profit
from royalties of patent licensing. This report examines the
impact of China's anti-trust sentence on Qualcomm, the
overall chip industry and China's mobile phone industry.
By Yaru Shih, Kenny Yang, and Joen Yang
Document Code: SCRDR15041001
Publication Date: April 2015
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SCRDR15041001
China's Antitrust Sentence and Its Impact on Qualcomm and the Chinese Industry ___________________________ i
Table of Contents
Page
1.Background ............................................................................................... 1
2 Impacts on Qualcomm ............................................................................ 1
2.1 Financial Aspect ................................................................................ 1
2.2 Sales Aspect ........................................................................................ 1
3 Qualcomm's Possible Strategies ............................................................ 2
3.1 First Scenario: Sustain Profits with High Pricing Strategy ......... 2
3.2 Second Scenario: Trade Price for Market Share ............................ 2
4 Subsequent Impacts on the Industry .................................................... 2
4.1 Chinese Companies' Competitiveness to be Enhanced with
Reduced Licensing Costs ................................................................. 2
4.2 Importance of Patent Deployment Increases to Benefit the
Industry in the Long Run ................................................................ 2
4.3 International Brands' Cooperation with Chinese Companies
Growing in Importance .................................................................... 2
5 Conclusion ................................................................................................ 2
5.1 Qualcomm Pricing Strategy Reshapes IC Makers' Market
Landscape........................................................................................... 2
5.2 Chinese Mobile Phone Brands Become More Competitive ........ 8
5.3 The Model of International Businesses' Entry into the Chinese
Market is Changing .......................................................................... 3
Appendix ................................................................................................... 10
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
April 2015
ii _________________________________________________________ Industry Intelligence Program - Semiconductor
List of Figures
Page
Figure 1 Qualcomm's Revenue and EBT by Business Unit, 2010
- 2014 ........................................................................................................... 1
April 2015
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
China's Antitrust Sentence and Its Impact on Qualcomm and the Chinese Industry _________________________ iii
List of Tables
Page
Table 1 Qulacomm's Revenue Share by Regional Market, 2010 – 2014
........................................................................................................................ 1
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
April 2015
China's Antitrust Sentence and Its Impact on Qualcomm and the Chinese Industry __________________________ 1
1. Background
2 Impacts on Qualcomm
Figure 1
Qualcomm's Revenue and EBT by Core Business Unit, 2010 - 2014
Note: EBT% is profit proportion before tax
Source: Qualcomm, compiled by MIC, April 2015
Table 1
Qulacomm's Revenue Share by Regional Market, 2010 - 2014
Year\Country China
2014
2013
2012
2011
2010
South Korea
Taiwan
Japan
Source: Qualcomm, compiled by MIC, April 2015
2.1 Financial Aspect
2.2 Sales Aspect
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
April 2015
2 _________________________________________________________ Industry Intelligence Program - Semiconductor
3 Qualcomm's Possible Strategies
3.1 First Scenario: Sustain Profits with High Pricing Strategy
3.2 Second Scenario: Trade Price for Market Share
4 Subsequent Impacts on the Industry
4.1 Chinese Companies' Competitiveness to be Enhanced
with Reduced Licensing Costs
4.2 Importance of Patent Deployment Increases to Benefit
the Industry in the Long Run
4.3 International Brands' Cooperation with Chinese
Companies Growing in Importance
5 Conclusion
5.1 Qualcomm Pricing Strategy Reshapes IC Makers' Market
Landscape
5.2 Chinese Mobile Phone Brands Become More Competitive
April 2015
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
China's Antitrust Sentence and Its Impact on Qualcomm and the Chinese Industry __________________________ 3
5.3 The Model of International Businesses' Entry into the
Chinese Market is Changing
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
April 2015
4 _________________________________________________________ Industry Intelligence Program - Semiconductor
Appendix
Glossary of Terms
CDMA Code Division Multiple Access
EBT Earnings Before Tax
IoT Internet of Things
LTE-TDD Long Term Evolution-Time Division Duplex
QRD Qualcomm Reference Design
April 2015
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
China's Antitrust Sentence and Its Impact on Qualcomm and the Chinese Industry __________________________ 5
List of Companies
CCIA China Communications Industry Association
HP
Huawei
Intel
Marvell
MediaTek
Microsoft
NDRC
National Development and Reform
Commission
Qualcomm
Spreadtrum
ZTE
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001
April 2015
6 _________________________________________________________ Industry Intelligence Program - Semiconductor
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April 2015
© 2015 Market Intelligence & Consulting Institute
SCRDR15041001