The Korea Fair Trade Commission recently levied some huge fines at Qualcomm and forced them to change their licensing practices, meaning that licensees who were paying Qualcomm royalties, especially big names like LG and Samsung, stand to save some serious dough each year over what they had been paying. Specifically, Samsung stands to see an extra trillion won or so staying in their coffers each year, and LG is staring down similar savings under the new rules of engagement that antitrust authorities in Korea imposed on Qualcomm for licensing their technologies to device makers in the country. Along with the new rules, December 28 saw Qualcomm eating a fine of 1.03 trillion won ($857 billion) from the Korea Fair Trade Commission.
The new rules do away with Qualcomm's existing deals, which were proven unfair in court. The ruling is expected to go final in the next few months, at which point many of Qualcomm's current contracts with device makers will have to be renegotiated to be more in line with industry standards. The reverberations of this ruling could be far-reaching, with Qualcomm possibly ending up forced to reevaluate how they do things worldwide on the back of Korea's victory against their practices. Device prices may even fall thanks to the vastly decreased licensing costs, in some cases.
In order to understand just how much moolah Qualcomm's clients stand to save, we have to take a look at how they were doing things until now. For decades, Qualcomm had engaged in three key business practices with licensees that were deemed unfair. For starters, they essentially coerced them, usually with their processors as bait, to buy licenses that they had no need for or had alternatives for. Second, they charged licensees 3-5% of their total smartphone sales. That doesn't sound like a lot, but in the industry, it is practically unheard of outside of Qualcomm, because they produce processors and network equipment. Usually, such things would be charged according to the value of chipsets used. Third, Qualcomm's "standard essential patent" portfolio, consisting of patents that are pretty much integral to doing business in the industry, was only shared around as it should have been with select partners. With the final ruling set to fix all of these behaviors, it will be interesting to see how it affects Qualcomm's business and bottom line, as well as the rest of the industry.