The National Development and Reform Commission raided Qualcomm's background and secrets: the sneak report

One party is the National Development and Reform Commission, and one party is the absolute leader of the global mobile chip industry. On February 19, 2014, at the press conference on price supervision and anti-monopoly work, Xu Kunlin, director of the Price Supervision and Anti-monopoly Bureau of the National Development and Reform Commission, confirmed that the news of the NDRC's price monopoly investigation on Qualcomm was true and the investigation is still in progress.

Xu Kunlin revealed that the anti-monopoly report of Qualcomm came from relevant industry associations and enterprises. The report mainly reflected that Qualcomm was suspected of abusing its dominant position in the wireless communication standard essential patent market and mobile phone chip market, and implementing price monopoly behavior. It mainly includes unfair high prices, discriminatory pricing, and additional unreasonable trading conditions.

This is the first public statement made by the National Development and Reform Commission after the investigation. This day, Qualcomm has been in the anti-monopoly investigation for three months.

Compared with the litigation trial in the anti-monopoly case, the standards of anti-monopoly administrative law enforcement are difficult to grasp, and generally the law of law enforcement decisions is not disclosed at the end. The Qualcomm case itself involves a large number of standard patents in intellectual property rights, which makes the application of anti-monopoly law extremely complicated. However, for law enforcement agencies, before the investigation was launched on November 19, 2013, there is already a judicial experience that can be used for reference.

Prior to the end of October 2013, Huawei’s lawsuit with the American Interactive Digital Corporation (IDC) was finalized in Guangdong. This judicial referee also deals with the price monopoly of standard patent holders. It provides a reference for establishing the scope of relevant markets in Qualcomm, judging whether Qualcomm has and misusing market dominance.

The background of this interest game is the ongoing struggle for the 4G market. At the time when the Chinese telecom industry entered the 4G era from the 3G era, a new round of reshuffles has begun. At this critical juncture, what aspects of this law enforcement investigation are involved, what criteria are used, and how is progress, and what kind of "butterfly effect" will it bring?

Before and after the "raid"

At 16 o'clock on the afternoon of November 19, 2013, in an online interview initiated by an e-commerce company on Weibo, Shen Jin, vice president of business development of Qualcomm, was asked how much Qualcomm has and for the 4G terminal market. Does the home terminal have a related product plan?

"In China Mobile's LTE test procurement, the number of terminals using Qualcomm chipsets is among the best; I believe that the vast majority of the earliest 4G terminals that will be seen will use Qualcomm chipsets," he replied.

In addition to reflecting the current strength and market share of Qualcomm, this answer has inadvertently become the best footnote for this anti-monopoly investigation. Before and after this online interview, the work of the Law Enforcement Investigation Division under the Anti-Monopoly Bureau of the National Development and Reform Commission The staff also made a surprise visit to Qualcomm's offices in Beijing and Shanghai.

According to a person familiar with the investigation, in this "raid", the investigators took away the company's electronic information on price and market, and raised a series of questions to Qualcomm. The problem mainly covers two aspects: first, the price of Qualcomm chips, followed by Qualcomm's anti-monopoly investigations in other countries.

For the former, Qualcomm needs to explain to the NDRC how the prices of all chips and technologies involved in the Chinese market are determined, what are the costs, and how their prices have changed over the past few years, and what is the basis for the changes; The latter, the NDRC intends to understand what issues have been asked about the anti-monopoly investigations involved in Qualcomm in Japan, South Korea, and Europe, and what aspects are involved.

In this process, Qualcomm does not clear the main direction of the NDRC. However, from the content of the question, the direction of the investigation is likely to be around the third chapter of the Anti-Monopoly Law, "Abuse of market dominance."

Although for a long time, both sides of the event did not express their views to the outside world, the outside world can analyze the characteristics of Qualcomm products, sales models and market structure.

At present, Qualcomm is at the tip of the pyramid in the global mobile communication chip design field. In the 3G era, Qualcomm led the development of a huge 3G technology standard and obtained a large number of basic patents in the field of CDMA communication. Therefore, most of the chip manufacturers and terminal manufacturers in the world can only circumvent the payment to Qualcomm as long as they produce 3G equipment. Patent "protection fee"; on the other hand, in terms of R&D and integration, its strength is far superior to competitors, and it can provide chip solutions suitable for all 3G and 4G systems worldwide.

Since 2007, Qualcomm has been the leader of the global chip market for six consecutive years. Its customers include international brands such as Apple, Samsung and HTC, as well as Chinese companies such as Tianyu, ZTE, Lenovo and Huawei. In the field of mobile chips, almost no company can compete with it. In China's 3G mobile phone market, Qualcomm accounts for about 40%.

This leading advantage will be further expanded with the arrival of the 4G era. The most typical example is that when China Mobile purchased chips for TDD terminals in the second quarter of 2013, Qualcomm's chips accounted for more than 60%.

"4G is not an independent existence. In fact, it needs to be integrated with 2G, 3G and even other wireless technologies. Therefore, after entering the 4G era, Qualcomm's competitiveness has been further strengthened." Communication Observer, "Communication World Weekly" Editor-in-Chief Yang Haifeng explained.

According to the information disclosed by domestic mobile phone manufacturers, Qualcomm plans to use the program in each of the “five modes and ten frequency” (terminal devices capable of supporting five communication modes and ten corresponding frequency bands). The mobile phone imposes a 5% patent license fee. Coupled with the cost of chip solutions and other expenses, Qualcomm will take more than 20% of the sales price on each 4G mobile phone that uses the solution in the future. One contrast is that the net profit of most Chinese mobile phone manufacturers is only the total selling price. 5%, this cost is unbearable.

Compared with Huawei and IDC's intellectual property dispute lawsuit from the United States to China, Qualcomm's opponents lurked in the dark.

"Reporters should be downstream, that is, mobile phone manufacturers. Because if you pass the lawsuit, first, the other party's winning rate may be small; second, public words will undermine the product cooperation relationship between the two parties." An industry insider speculated.

Because the pricing behavior of enterprises is very complicated, if there is litigation against Qualcomm's pricing problem, there will be difficulties in proof. On the other hand, because of the absolute dominance of Qualcomm's chips in the current domestic smart phone market, small businesses cannot resist Qualcomm. The risk of out of stock. In this situation, it is a rational and favorable choice to report to the NDRC.

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