Qualcomm to reduce charges for CDMA terminals due to antitrust pressure in China

Qualcomm has finally decided to change its "one configuration, two prices" policy.

Recently, Liu Ping, general manager of China Telecom's marketing department, stated at the "2015 China Telecom Terminal Industry Cooperation Strategy Conference" that starting from December 1, for China Telecom's CDMA network terminals priced below RMB 1,299, Qualcomm chips will be priced the same as China Unicom's UMTS network terminals of the same price.

This "significant benefit" for the CDMA industry chain is expected to help manufacturers using Qualcomm's CDMA chips reduce costs by more than $4 per device. In the past, the price of the same configuration chips provided by Qualcomm to CDMA networks was generally $5 higher than that of UTMS networks (WCDMA/GSM dual-mode or TD-SCDMA/GSM dual-mode).

According to industry insiders, Qualcomm changed its policy due to market reasons such as its competitors MediaTek and Marvell entering the CDMA industry chain. At the same time, the NDRC's antitrust investigation into Qualcomm's use of "the entire device as the basis for calculating licensing fees" indicated that Qualcomm may have been suspected of using its monopoly position to set "unfairly high prices."

China Telecom has been striving for many years

"Qualcomm charges more on CDMA networks, this is history," Coolpad Group Vice President Cao Jingsheng told reporters.

In order to change the current situation of CDMA network, China Telecom Chairman Wang Xiaochu and Deputy General Manager Gao Tongqing in charge of marketing personally led the negotiations with Qualcomm. "Chairman Wang and General Manager Gao started talking several years ago. Sometimes they flew to the United States just for this matter and talked for a day before flying back." Liu Ping said.

"Qualcomm has an absolute monopoly in the EV-DO network (i.e., China Telecom's CDMA network). If the mobile terminal chip market of other operators grows by 10%, Qualcomm can grow by 3% to 4%. If China Telecom grows by 10%, Qualcomm's growth can reach at least 9%." Wang Yanhui, Secretary-General of the China Cellphone Alliance, told reporters on the 25th.

Article 17 of my country's Anti-Monopoly Law prohibits operators with a dominant market position from "selling goods at unfairly high prices." In the NDRC's Anti-Price Monopoly Provisions, one of the factors considered in determining "unfairly high prices" is whether the sales price is significantly higher than the price of the same goods sold by other operators.

"For chips with the same configuration, EV-DO has always been about US$5 more expensive than UTMS," said Wang Yanhui.

Cao Jingsheng believes that there may be two reasons why Qualcomm changed its policy: "One is to support the development of the CDMA industry, and the other is to express its position to the government under antitrust pressure."

Next year, MediaTek, Marvell and Spreadtrum are likely to enter the CDMA market. "For example, Meizu's 6752 is already on the market. MediaTek's chips supporting EV-DO should be mass-produced in the first half of next year, and now is the time for manufacturers to select models," said Wang Yanhui.

Impact limited to CDMA networks

In the antitrust investigation of Qualcomm, the National Development and Reform Commission announced seven investigation directions, the first of which is "the whole machine as the basis for calculating the license fee", which is also Qualcomm's unique way of collecting patent fees that is different from other industries. Terminal manufacturers not only have to pay Qualcomm a chip price, but also a "whole machine billing" licensing fee.

Terminal manufacturers generally hope to reduce chip costs through government investigations. However, rather than simply reducing prices, they hope that Qualcomm will change its charging model.

Although there is no definite news that Qualcomm's price cut is necessarily related to the NDRC investigation, Wang Yanhui believes that Qualcomm's chip fees "will definitely be reduced" and "it has to give the NDRC a face." However, "the patent fees paid by manufacturers will not be significantly reduced."

Wang Yanhui explained that even if the billing model of "using the entire machine as the basis for calculating the license fee" is changed, charging according to the unit price of the chip will mainly target standard essential patents, and Qualcomm has a large number of other patents besides standard essential patents.

In the current 4G chip market, Qualcomm chips still have no strong competitors. Although MediaTek claims to have sold 30 million chips this year, most of these are ultra-low-end chips, and are separate from the baseband chips. Wang Yanhui believes that Qualcomm's policy changes may further help Qualcomm consolidate its position in the CDMA industry chain.

Cao Jingsheng told reporters that Coolpad currently pays more than 10 or 20 US dollars for Qualcomm chips in the 1,299 yuan price range. The 4 US dollar price cut is a boost to encourage sales of terminals in this price range, but the scope will not be expanded to all product lines. "CDMA is a relatively closed channel, and the two are not compatible in many basic hardware."

This adjustment may just be the beginning. As of press time, Qualcomm has not yet responded to the reporter's interview.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.