Commission Alleges Qualcomm Kneecapped Samsung Exynos Chips Sales

Commission Alleges Qualcomm Kneecapped Samsung’s Exynos Chips’ Sales

Qualcomm is super, super, super-huge in it’s domain and even bigger in it’s influence over the smartphone industry. However the one thing it is not, is well-reputed.

The brand seems to be egotistic, almost neurotic when it comes to the control it wants to exert over the industry. I think this perhaps stems from being poor self worth.

Given it’s tech prowess, proprietary advancements and innumerable patents in the world of processors, Qualcomm has become the supplier choice for almost every premium brand out there. But… it’s proclivity to demand and enforce self-serving clauses in the agreements has been noticed by Trade Commission and Courts earlier. Now, it’s in a soup again, for the same self-serving and monopolistic restrictions placed within it’s agreements with Samsung.

Qualcomm has been accused by the Korean Fair Trade Commission of illegally blocking Samsung from selling its Exynos SoCs to third party phone manufacturers. However, no direct action is expected from Samsung against its ‘partner’.

Qualcomm and Samsung have had a symbiotic relationship for a couple of years now. This relationship while beneficial to both, has not really been a friendly one for either of the companies. Yet, given the fact that both these legal entities have leverage over each other, the ‘partnership’ shall remain existent until something of major consequence happens.

To understand why such an accusation has been made by the KFTC, acquainting oneself with a brief history about the relationship between both the companies becomes imperative. Here is the whole timeline of events leading up to the current relationship

  1. Back in 1993, Samsung had entered into and had signed a patent deal with Qualcomm.
    The deal enabled Samsung to produce System on Chips (SoCs) also called Processors, for its own phones while utilising a number of CDMA patents, but only for its own products.
  2. Being the patentee, Qualcomm was liable to receive an additional licensing fee from Samsung or a third party manufacturer in business with Samsung, if the transaction involved Exynos SoCs.
  3. In 2011, Samsung intended to negotiate new terms with Qualcomm, that would be fair, given the fact that the patent deal was signed 18 years back.
  4. In 2013, talks between both the companies broke down.
  5. The same year, the Korean FTC started its antitrust probe against Qualcomm
  6. Then in 2015, Qualcomm’s Snapdragon 810 received rampant complaints of overheating from smaller manufacturers. Samsung devices also used the same processor, but on the contrary had its own foundry, and decided to use its indigenous Exynos 7420 instead of the Snapdragon 810. Giving Samsung leverage against Qualcomm
  7. Qualcomm agreed to let Samsung’s foundry manufacture its subsequent Snapdragon SoCs presumably in exchange for a commitment that both Snapdragon and Exynos chips would be used in Samsung devices.
  8. December 2016, Qualcomm was fined USD 865 million for violating the antitrust law for charging royalty rates on phones rather than SoCs, not negotiating proper license terms and coercing customers to sign patent licenses while not paying fairly for patents held by other phone manufacturers.
  9. Then in March 2017, Qualcomm was accused by the Korean Fair Trade Commission of blocking Samsung from selling its Exynos chips to other manufacturers with the 1993 patent deal.

Qualcomm is currently appealing the fine, and it seems unlikely that Samsung will take any direct action against it for the Exynos sales to third party OEMs.
This might however change, if the regulators bring down the 1993 deal, leaving Samsung with the opportunity to sell Exynos processors to other smartphones without the risk of compensating Qualcomm with a high licensing fee.

Samsung might even turn into a strong competitor, on par with MediaTek, given the fact that it could add other components like memory chips and displays to the SoCs, which Qualcomm would not be able to match.

enter Why wouldn’t Samsung want to take direct action against Qualcomm?

As mentioned before, Qualcomm had agreed to let Samsung use both the Snapdragon (a Qualcomm product)  and Exynos (a Samsung product) SoCs in its devices. In case Samsung decides to stop using Snapdragon processors while using only the Exynos processors, Samsung would be costing its foundry its Snapdragon orders. Both, stock and flow of Snapdragon orders, would instigate unnecessary revenue cuts.
Given the fact that Samsung’s growth in mobile devices has been stagnant, this would be a business blunder.

The relationship remains symbiotic between these two companies, but any aggressive move is unlikely to be made by Samsung unless the 1993 patent deal is struck down. On the contrary Qualcomm’s reputation has been declining significantly given the fact that Apple, a longtime customer is suing it too, for lop-sided licensing agreements, along with many other smaller manufacturers.

There’s no other way to say this – Qualcomm needs to get real. The world today doesn’t suffer autocracy too well – and while Qualcomm may be whistling it’s way to the bank for now, however given that Apple, Samsung, MediaTek and Intel are all investing hugely in devising newer (and often better) chips of their own, Qualcomm may just have to use these agreements as packaging paper in a few years. With the Internet of Things well on it’s way, and Automobile Automation being the big ticket for the next decade, this mayn’t be the best time for Qualcomm to play the my-way-or-the-highway card.

It might just find itself on a rather desolate, lonely and barren stretch of road, with no place to go.

Also published on Medium.