Qualcomm Is Poised to Benefit Most From Mid- to High-End China-Made Handset Sales
Yicai Global
/SOURCE : Yicai
Qualcomm Is Poised to Benefit Most From Mid- to High-End China-Made Handset Sales

(Yicai Global) Aug. 10 -- As China-made mobile phones gain an increasing share of the mid- to high-end market, US-based Qualcomm Inc. [NASDAQ:QCOM] has profited from working with Chinese businesses on patents.

The leading chip supplier and world leader in mobile communications patents recently said it signed a new 3G and 4G China patent license deal with Vivo Communication Technology Co. and has granted Vivo a royalty-bearing patent license to develop, produce and sell 3G WCDMA, CDMA2000 and 4G LTE, including 'three-mode' GSM, TD-SCDMA and LTE-TDD, complete devices for use in China.

"We are pleased to sign a new licensing agreement with Vivo that builds on our long standing relationship," Mr. Alex Rogers, senior vice president and general manager at Qualcomm Technology Licensing, said in a document obtained by Yicai Global on Aug. 8.

China accounted for some 53 percent of Qualcomm's revenue in the last fiscal year, a fair portion of which came from technology licensing, Yicai Global has learned. After it reached an antimonopoly settlement with China's National Development and Reform Commission last year and agreed to pay a USD975 million fine, Qualcomm has signed licensing agreements with more than 100 Chinese handset makers including Huawei Technologies Co. and Xiaomi Corp.

"Qualcomm is undoubtedly the biggest beneficiary of the latest round of exponential growth of domestic-made handsets globally." Mr. Wang Yanhui, secretary-general of the Handset Alliance, told Yicai Global. "Qualcomm has entered into agreements with almost all of China's mainstream manufacturers."

"Vivo has seen a rapid increase in volume, especially in first- and second-tier cities," Mr. Wang said. "So the signing of the agreement was expected."

Qualcomm has a strong presence in 3G and 4G patents and enjoys a virtual monopoly position in the premium chip market for Android phones, so it is impossible for smartphone makers to circumvent its patents, whether they use its chips or not. Patent licensing and chip sales are the two biggest sources of revenue for Qualcomm.

Reports suggest Qualcomm will charge a 3.5 to 5 percent royalty on Chinese patents for 3G and 4G branded devices for sales and use in China, and each royalty would be charged based on 65 percent of a device's net sale price.

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