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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting

QCOM 180.90

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Oct 31 9:30 AM EDT

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To: foundation who wrote (13629)	8/5/2001 8:38:12 AM
From: foundation	Read Replies (4) of 196388

Korean Firms Protest Qualcomm's Deal with China 08/05(Sun)17:39 The US firm Qualcomm has reportedly offered a lower patent fee on its CDMA mobile service technology to Chinese service operators than what the company has been charging to Korean mobile companies. China Unicom is the only Chinese company which is due to offer CDMA mobile service in China around the end of this year. Reports had it that Qualcomm has fixed its patent rate of 2.65 percent per set for handsets which will be used within China and 7 percent on mobile sets for export. The ratio is applicable to sales. Korean mobile handset manufacturers, including Samsung Electronics and LG Electronics, have been paying 5.25 percent on handsets for domestic use and 5.75 percent for handsets for export. A local industry observer said that when Chinese company pays just 2.65 percent in royalties to Qualcomm, its price competitiveness will be far higher than that of Korean products. The handset market in Korea is largely seen as saturated and Korean handset manufacturers have been stepping up their bids to ship more CDMA handsets to China and South American countries. Noticing that Qualcomm is offering a lower royalty rate to Chinese firms, Korean mobile handset makers have begun demanding that Qualcomm honor its original promise to apply the most-favored royalty rate to Korean manufacturers. Korean firms said Qualcomm committed to levy the lowest rates back in 1993, when the US company and four handset producers in Korea reached an agreement that Korean firms paid such royalty on condition that they succeed in commercializing the Qualcomm-invented technology. Spearheading the claim to lower the royalty is Samsung Electronics. In fact, a negotiating team from Samsung Electronics is now visiting Qualcomm's head office in San Diego to see if the royalty could be lowered. Qualcomm has also announced that all the ongoing negotiations on the royalties will be wrapped up by the end of August. One official at a telecommunication company said that China has succeeded in earning the lower rates from Qualcomm as the Chinese government has stepped in and carried out direct negotiations. The official said the Korean government should come forward and mediate the dispute. (Cho Hyung-rae, hrcho@chosun.com) chosun.com ---------- So.... aside from China's domestic rate, may we infer that Korea's 5.25 percent on handsets for domestic use and 5.75 percent for handsets for export most-favored royalty rate is as low as it gets for a Q license? And China's low domestic rate appears to have come at a cost of a rather high 7% on exports.... (will they make this up with lower labor costs?) But after China's experience with foreign GSM vendor hegemony, China is clear that it wants a domestic advantage. In securing its most-favored royalty rate, will Korea opt for the China plan - 2.65% for handsets which will be used within China and 7% for handsets which will be used elsewhere? <g> Can Korea rationally expect a 2.65% rate within China without accepting a higher rate liability elsewhere - as China has assumed with its 7% export rate - if Korea asserts that China's deal is superior? I suspect the best that Korea can do is a China rate lower than other vendors - aside from China's domestic vendors.

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