China to impose more restrictions on companies like Qualcomm

As EETAsia reports, China’s antitrust regulators are about to impose additional restrictions on foreign companies operating inside the country within the semiconductor industry. This means that companies such as Qualcomm and other American companies will be dealing with China’s antitrust regulators on an even greater scale. China’s semiconductor market is currently the world’s largest.

The Chinese government is likely trying to slow down companies such as Qualcomm (US) and MediaTek (Taiwan) in favor of state-run companies such as Semiconductor Manufacturing International Corp. (SMIC) and Spreadtrum Communications. Combine that with the fact that China is already probing Qualcomm over antitrust concerns and it isn’t hard to see why Qualcomm has been forced to cut sales and profit expectations for the year.

As the Financial Times notes, the investigation into Qualcomm by the Chinese government is being done by a powerful state central planning body, with a fearsome reputation and a win rate “which if it is not 100 per cent, it’s pretty close.”

Bloomberg

Qualcomm is not alone in dealing with China’s regulators. Whether it is Apple, IBM or Microsoft, China has “been counselling, cajoling and sometimes banning state companies and government agencies from buying US high-tech goods.”

“China seeks to strengthen such [state] companies through the anti-monopoly law and, in apparent disregard of the AML, encourages them to consolidate market power, though this is contrary to the normal purpose of competition law.” – US Chamber of Commerce, Financial Times

Considering that China owns the largest three domestic telecom service providers in China (China Mobile, China Unicom and China Telecom) and that all of them are moving to chips that are supported by Chinese vendors, many in the US continue to be skeptical of the motives of the Chinese government in their investigation of Qualcomm and other foreign corporations operating inside China.

It should also be noted that Qualcomm is far from an angel. The company was hit with a $20 million fine in South Korea in 2009 and was forced to renegotiate licensing agreements with Nokia and others by the European Commission in 2007.