If you can’t beat them in the open market, then you get the authorities involved. That is a routine tactic which we have seen time and again used against Microsoft. Well, now, the same tactic is being used against Qualcomm. Eight months after I wrote my piece on Qualcomm, and its far reaching control of the wireless industry, six major wireless players – Broadcom, Ericsson, NEC, Nokia, Panasonic and Texas Instruments – are accusing San Diego-based Qualcomm for abusing its W-CDMA patents. They have filed a complaint with European Commission.
Specifically, the vendors accused Qualcomm of offering lower royalty rates to handset vendors that buy chipsets exclusively with Qualcomm and refusal to license key technology patents to other chipset vendors on fair terms.
From the way I see it that most of these vendors for the first time have had to compete with Qualcomm, that has a take-no-prisoners approach to business. They will have a tough time proving their case, given that there are many vendors such as Freescale who are not part of the complaint. I remember, at the time of the writing of my story, Ericsson was kicking butt in 3G, NEC was holding its own, Texas Instruments was late to the party, and Broadcom was no where in sight. Business Week writes:
Gartner analyst Alan Brown says total royalties for W-CDMA phones likely amount to 8% to 10% of their selling costs. And Qualcomm’s share is roughly half of that, figures analyst Albert Lin of American Technology Research in San Francisco. That means the total intellectual-property burden of a 3G phone approaches $50 — making it tough to deliver phones priced less than $250 at retail.
In a response to the complaint, Qualcomm issued a statement
The many new handset market entrants, working in cooperation with QUALCOMM, threaten the market shares of these entrenched manufacturers and their component suppliers. The action appears to be nothing more than an attempt by these licensees to renegotiate their license agreements by seeking governmental intervention.
I agree, for I suddenly see that service providers such as Orange and Vodafone are using devices made by no-name white label manufactures like HTC, or South Koreans like Samsung and LG Electroncis. Even in Japan where NEC and Panasonic have enjoyed a pretty decent market share, other players are muscling in.
The interesting aspect of this complaint is that it is being filed in Europe and not in Asia and United States, where Qualcomm actually has a dominant footprint. I also find it interesting that the complaining parties repeatedly have said that they have more than enough intellectual property in the W-CDMA standards to blunt Qualcomm. From what I understand, the more important play for Qualcomm is CDMA2000, where it has more IP.