Headline Feb 27, 2015/ ''' CHINA-CROWN : CHANGING TIMES - CROSS HAIRS '''

''' CHINA-CROWN : 

CHANGING TIMES - CROSS HAIRS '''

IN AN OFFICIAL statement, the regulator, the National Development and Reform Commission, said that it had gathered proof that:

Qualcomm had taken unfair advantage of its dominant market position for chips that support  cellular technology.

In particular, the commission said, Qualcomm based royalties on the sale price of a smartphone, rather than the patents themselves-

Included expired patents in licensing agreements and insisted that the smartphone companies gave permission to use their intellectual property free in cross-licensing agreements.   

Qualcomm customarily demands  cross-licensing agreements from its customers, in part to avoid patent disputes, but also so it can clients patents along with its own to own to other customers, giving it an edge in the market.

Sheng Jiemin, a law professor in Peking University, called the amount of the fine ''astonishing''. ''This is by far the highest antimonopoly fine ever exacted in China.,'' he said.

But he noted that internationally there was a basis for such heavy fines.

''Qualcomm has not only been investigated in China, so this decision is actually a step forward for China,'' Mr. Sheng said.

Shi Jichun, a law professor at Renmin University of China, said the commission's actions would also help protect the consumers from high prices and:

Encourage innovation by making competition between China's relatively new smartphone companies more fair.

Chinese polled online also said did not see any problem with the commission's actions. 

In a survey of more than  4,000  people by the Internet Portal Sina, more than three-quarters indicated that they thought the penalty against Qualcomm was not strong enough.

The investigation into Qualcomm also coincides with new initiatives by the Chinese government to bolster the nation's fledgling semiconductor industry.

Though China produces many of the world's electronics devices, it is heavily reliant on foreign companies to design and produce the chips that run those devices.

In 2013, China imported  $232 billion  of  semi-conductor imports, eclipsing even the amount spent on petroleum.

The help address the imbalance, Ma Kai, a vice premier, is leading a task force charged with making China's chip industry a world leader by 2030.

The task force is estimated to have a $170 billion in government support to spend over five to 10 years, according to a June report by Mckinsey & Company,

The new ferocity of investigations is leading foreign tech companies to rethink their strategies in the Chinese market.

''Most of the leading American tech companies feel they're in the cross-hairs here,'' said Daniel H Rosen, founding partner of the Rhodium Group, an economic research and advisory firm.

''One of the strategies they have contemplated is cooperating with a powerful Chinese player to innoculate themselves from being boxed in out of the marketplace.''

In September, the chip maker Intel a rival of Qualcomm, seemingly took that approach, agreeing to invest  $1.5 billion in Tsinghua Unigroup, a state-run company that emerged from relative obscurity last year-

To spend $2.7 billion to acquire two major Chinese chip design companies.

Analysts say Beijing plans to make Tsinghua and Unigroup into a national champion for chip design. 

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