The state-run Securities Times newspaper reported that the country's powerful antitrust regulator has determined that Qualcomm has a monopoly. The regulator, the National Development and Reform Commission (NDRC), is investigating Qualcomm's local unit for allegedly overcharging and abusing its market position. The NDRC started its investigation last November.
The paper, which quotes unnamed sources close to the NDRC, did not say whether Qualcomm had abused its monopoly.
However, the Communist Party-backed Global Times newspaper did. In an article, the paper argues that, in the high end cellphone market, companies choose Qualcomm chips because "they don't have other choices."
"Qualcomm has an absolute monopoly in wireless communication standards and chips," the paper reads. "Its high – and only high – licensing fees have generated Qualcomm incomparable profits and cash flow compared to its competitors giving Qualcomm more capital for chip R&D….This is why, in a 4G era, it is difficult for Huawei Kirin 920 to hold on till today."
The state press reports ran one day after Qualcomm said on an earnings conference call that its licensing patents business faced "significant challenges" in China. China is an important market for Qualcomm due to the country's fast growing smartphone market. CEO Steven Mollenkopf is in China to launch a US$150 million venture fund.
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The Securities Times reported the NDRC is investigating Qualcomm's sales data, a move that could be a precursor to determining penalties. Analysts say the company could face a billion dollars in fines.
The reports also come at a time when many in the international business community in China have been frustrated with what they say is a hostile work environment and feel foreign companies are being increasingly targeted as the government attempts to improve standards for various industries, including food and pharmaceuticals.
One consultant, who wished not to be named, complained that China uses its leverage from its dominant market position to get its way with foreign companies—ironically, exactly what China appears to be accusing Qualcomm of.
—By CNBC's Eunice Yoon