* China regulator 'confirms' Qualcomm has monopoly -report
* Report did not say if regulator found abuse of monopoly
* Almost half of Qualcomm FY13 revenues came from China
(Adds quotes from Qualcomm executives, details from earnings,
By Paul Carsten and Michael Martina
BEIJING, July 24 China's antitrust regulator has
confirmed that Qualcomm Inc, one of the world's biggest
mobile chipmakers, has a monopoly, the state-run Securities
Times newspaper reported on Thursday, as Qualcomm's chief
executive held talks in China.
The regulator, the National Development and Reform
Commission (NDRC), is investigating Qualcomm's local subsidiary
after it said in February the U.S. chipmaker was suspected of
overcharging and abusing its market position in wireless
communication standards, allegations which could see it hit with
record fines of more than $1 billion.
The Securities Times report, based on unidentified sources
it said were close to the NDRC, did not say whether the
regulator had determined that Qualcomm had abused its monopoly.
Angela Zhang, an antitrust expert at King's College London,
said the report was a "loose expression that the NDRC has
gathered facts that Qualcomm has abused its dominant position."
"It seems likely that the decision will be announced soon,"
she said, noting that having a monopoly alone is not a violation
of China's anti-monopoly law.
Qualcomm CEO Steven Mollenkopf, who launched a $150 million
"strategic venture fund" in China on Thursday, declined to take
questions from reporters. A spokeswoman travelling with
Mollenkopf also declined to comment on the newspaper report.
The NDRC declined to provide immediate comment.
China is a key market for Qualcomm, accounting for nearly
half of its revenue. The country is the world's biggest market
for smartphones and is preparing to roll out faster 4G mobile
networks this year.
While most of Qualcomm's revenue comes from selling chips
that enable phones to communicate with carrier networks, most of
its profit comes from licensing patents for its widespread CDMA
The Securities Times report said the NDRC was probing
Qualcomm's local sales data and that Qualcomm's Aberle has been
communicating with the NDRC over issues relating to the
Analysts say that the process of confirming sales data is
common in the late stage of an anti-trust investigation, and
that the NDRC is likely calculating the extent of fines.
Qualcomm President David Aberle, speaking as the company
reported a lower-than-expected outlook for the September quarter
on Wednesday, said "some loss would be probable" from the probe.
"We are really not in a position to be able to estimate what
that might look like, we just believe whatever the resolution
may be, will likely include some form of payment," he added.
Aberle said the investigation concerns Qualcomm's licensing
business as well as interactions between its licensing business
and its chipset business, and that the probe was making it
harder to negotiate new 4G licenses with manufacturers in China.
Qualcomm was also struggling to collect licensing revenue
from some device makers in China, including a growing number of
local manufacturers it has done little or no business with in
the past, Aberle added.
Some Chinese customers of San Diego-based Qualcomm, such as
electronics giant TCL Corp, complain the firm is
using its dominant market position to charge high patent fees on
Industry experts, however, say the NDRC, which is also the
government's main economic planning body, is trying to lower
domestic costs as China rolls out the 4G mobile networks.
TECHNOLOGY AND PATENTS
The Securities Times said Qualcomm was charging lower
royalties for patents to undercut competitors who have similar
technology and maintain market share. The report also said that
Qualcomm, as the only provider of chips for high-end phones, can
dictate those fees.
During the launch of the China fund, Qualcomm CEO Mollenkopf
defended the company's licensing programme, saying the $30
billion spent in research and development over the company's
lifetime had allowed it to spread its technology in China.
"It's really why anybody that signs up on a license,
actually does it voluntarily - because it is a way of leveraging
all of that R and D," Mollenkopf said.
Under China's six-year-old anti-monopoly law, the NDRC can
impose fines of between 1 and 10 percent of a company's revenues
for the previous year. Qualcomm earned $12.3 billion in China
for its fiscal year ended September 29, or nearly half of its
Qualcomm has previously said it is cooperating with the
(Additional reporting by Megha Rajagopalan and Beijing
Newsroom; Editing by Miral Fahmy)