Wednesday, July 05, 2006

End Qualcomm's Korean Kash Machine?

In an interesting development, TI and Broadcomm have filed a case with the Korean Fair Trade Commission against Qualcomm for anti-competitive practices. This is one of many filed against Qualcomm throughout the world. They are currently on the receiving end of similar actions in the US and EU. Locally some smaller Korean firms filed a similar complaint earlier this year. At issue is Qualcomm's IP licensing policies. 

What is interesting here is not simply that its in Korea, but the Korean market and manufacturers are key to Qualcomm's revenue base. Much of Korea's mobile network is CDMA, and even some of the technologies claimed as "Korean Made" use Qualcomm IP in some way such as DMB and WiBro.

Qualcomm's links are so extensive that Korean manufactures in the past have similarly complained about "onerous" licensing policies in Korea pretty regularly. Needless to say other issues play into this. Korea routinely worries about its IP trade deficit, and national pride plays a role since arguably this is a foreign company making a handsome profit off Korean work and consumption. Consider a quote from this puff piece in the Korea Times:

Receiving royalties from Qualcomm carries a particular significance. 

Korea posted a deficit of $992 million in royalty payments in the first quarter of this year with domestic firms having paid a total of $1.41 billion in royalties to overseas technology companies, up 31.1 percent from a year earlier.

 Local firms’ royalty payments are expected to snowball to some $6 billion this year from $4.45 billion in 2004. Under a license agreement, 

Qualcomm collects 5.25 percent of domestic sales of CDMA mobile handsets in royalties and 5.75 percent of exports from Korean manufacturers. 

As figures show, a huge chunk of Korea’s profits from robust exports have been drained by the hefty royalty payments. Amid the chronic gap between royalty income and expenditure Korea has been suffering... 

Seems like there is a segment of Korea that has it in for Qualcomm. Also notable that an Uri politician has taken up the cause against the evil Qualcomm. Makes me wonder what kind of hearing will Qualcomm get in the KFTC. Or for that matter will the KFTC kick the can and delay a decision until precedents have been set in the European and US cases? Should be an interesting case to watch.


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