Qualcomm is under investigation by the European Union's antitrust authority, which suspects the company of abusing its dominant position in the market for 3G and 4G chipsets used in smartphones and tablets.
The European Commission has initiated proceedings against Qualcomm in two investigations, it said Thursday. The first concerns whether Qualcomm breached EU antitrust rules by offering financial incentives to phone manufacturers on condition that they buy chipsets exclusively, or mostly, from the company; the second, whether Qualcomm engaged in predatory pricing, selling below cost to force competitors out of the market.
Mobile processors and baseband chipsets, which handle the communications protocols used in wireless networks, form a significant proportion of the cost of a mobile phone and, at least at the low end of the market, margins are getting thinner, leaving phonemakers more vulnerable to pricing pressures from their suppliers.
The EU Commissioner in charge of competition policy, Margrethe Vestager, said "We are launching these investigations because we want to be sure that high tech suppliers can compete on the merits of their products. Many customers use electronic devices such as a mobile phone or a tablet and we want to ensure that they ultimately get value for money. Effective competition is the best way to stimulate innovation."
Qualcomm's business practices have come under antitrust authorities' scrutiny before. Earlier this year, Chinese regulators fined Qualcomm US$975 million for overcharging device makers there.
While the Commission is investigating the issue of financial incentives on its own initiative, the predatory pricing probe was triggered by a complaint.
Commission officials declined to name the complainant, but U.K. fabless semiconductor company Icera filed such a complaint against Qualcomm in 2010.
Staff at the Icera division of Nvidia, which now owns the company, could not immediately be reached for comment. Nvidia bought Icera in 2011 in order to add 3G and 4G baseband capabilities to the chipsets it was developing for mobile phones. However, Nvidia has now abandoned development of baseband chips, and said in May this year that it will buy such components from other suppliers when Icera's current 4G LTE modem is no longer suitable.
The Commission has no deadline for completion of its antitrust investigations. While it has been investigating Qualcomm's business practices for some time, Thursday's announcement marks a new stage in the process.
Qualcomm said it had been notified that the Commission had initiated proceedings against it in the two ongoing investigations. It will continue to cooperate with the Commission, but believes the concerns are without merit, it said.
Loek is Amsterdam Correspondent and covers online privacy, intellectual property, online payment issues as well as EU technology policy and regulation for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to email@example.com
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.