Qualcomm is in the enviable position of owning intellectual property used in, effectively, every mobile phone. That envy may soon make itself felt anew.
Yesterday, the company — which makes chips for phones, too — settled its pricing dispute with Chinese regulators after more than a year of haggling. It will pay a fine of $975m, and has agreed to new royalty rates for its patents in China. Phonemakers using its 3G technology will pay 5 per cent; those using 4G will pay 3.5 per cent. This looks rosy. The fine is modest next to the company’s $30bn cash pile, and the royalties are in line with estimates of the company’s average rates, at something over 3 per cent. After market, the stock bounced 3 per cent.
Consider the fine print, though. Elsewhere in the world, Qualcomm customers pay licensing levies on 100 per cent of the net selling price of a handset. In China, they will pay it on 65 per cent, cutting the realised fee to 2.28 per cent for its 4G technology.