competition files

Vestager targets Qualcomm

The European Commission has revived a long-running antitrust dispute against the world’s largest supplier of chips for mobile phones.

The European Commission launched two formal investigations Thursday against Qualcomm, the world’s largest chip maker for mobile phones, highlighting the cut-throat competition and rapidly changing industry landscape.

Both cases relate to chips for 3G and 4G mobile phone technology. Those chips are used in more than 3 billion phones worldwide and sales total an estimated €18 billion annually, according to research firm Strategy Analytics. Qualcomm has a two-thirds chunk of those sales.

“We are launching these investigations because we want to be sure that high-tech suppliers can compete on the merits of their products,” said Margrethe Vestager, the commissioner for anti-trust issues within the 28 countries in the European Union.

The first case will focus on whether Qualcomm offered financial incentives to customers who bought baseband chipsets exclusively or almost exclusively from Qualcomm, effectively shutting out rivals. The second case will examine whether Qualcomm sold some of its products below cost, undercutting competitors.

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The first case stems from a wide-ranging complaint in 2010 against Qualcomm from Icera, a U.K. chipmaker. (Icera was bought in 2011 by U.S. tech firm Nvidia.) The second case was based the Commission’s own market analysis of prices.

Nvidia declined to comment.

If formal charges are filed in both cases, Qualcomm could face maximum fines of about €4 billion, or 20% of annual revenues, although fines are generally much less.

Mathew Heim, vice president at Qualcomm, in an emailed statement, said he was “disappointed” by the investigations, which were “without merit,” but would “continue to cooperate with the Commission.”

This is not the first time that the Commission has examined the business practices of Qualcomm. The Commission spent four years looking into whether Qualcomm overcharged companies for patents that were included within industry-agreed standards, but closed the case in 2009.

The San Diego, Calif.-based company has also caught the attention of regulators in other countries. In February, Qualcomm paid €895 million to settle a Chinese probe into its patent licensing business earlier this year. A similar investigation is ongoing in the U.S. by the Federal Trade Commission

Fierce competition and rapidly changing technology are transforming the industry.

Last month, Intel said it would buy Altera for $16.7 billion, following on the heels of a $37 billion bid in May by Avago Technologies for Broadcom.

At the same time, intense competition has driven some chip makers out of the mobile market. This month, Nvidia said it would wind-down its mobile business. ST-Ericsson announced its exit in 2013.

Even Qualcomm is losing business to foreign firms.

Taiwan’s MediaTek and China’s Spreadtrum are stealing market share for higher-end chips for the 4G market. Qualcomm’s baseband units accounted for 61 percent of the market in the first quarter of this year, down from 87 percent for the year-ago period, says Sravan Kundojjala, an associate director with Strategy Analytics.

This story was updated to add quotes and context.