Nov. 5, 2009 (The Korea Times) -- By Kim Yoo-chul
Staff Reporter
Samsung Electronics has sealed a new 15-year contract with Qualcomm (NASDAQ:QCOM) Inc. for the cross-licensing of wireless telecom technology.
The world's No. 2 mobile handset maker will make a down payment of $1.3 billion to Qualcomm for using the U.S. firm's patents for third- and fourth-generation wireless technology, a Samsung spokesman said.
The deal also involves payment of running royalties, but Samsung failed to give specifics on the matter.
Qualcomm, the world's leading producer of mobile phone chips, owns key patents in code division multiple access (CDMA) technology, one of the most widely used wireless network standards in the world.
Under the contract, Qualcomm will gain the right to use Samsung's 57 patent licenses in mobile technology. The cross-licensing deal also includes fourth-generation wireless technology used in handset devices and base stations.
Samsung officials and a spokesman of Qualcomm's South Korean subsidy declined to comment on the number of licenses transferred from Qualcomm.
The latest agreement is a revised version of an existing technology licensing. Usually, mobile phone makers pay between 5-5.75 percent of each handset's price to Qualcomm in royalties.
"Samsung is in a better position thanks to the revised agreement. The contract will help us cut royalty payments by a sizable amount," the spokesman said.
"The contract is a normal extension. It has no relation to a recent penalty decision by the South Korean anti-trust watchdog," the Qualcomm official added.
In July, the nation's top anti-trust watchdog slapped Qualcomm with $208 million in fines for violating the nation¡¯s fair competition rules by abusing its monopoly over the mobile handset chip market.
The chip giant is also ready to extend licensing deals with LG Electronics and Pantech, according to industry sources. Qualcomm declined to confirm such activities.
Qualcomm's revenue generated from Korean clients and business partners currently stands at around 4 trillion won or some $3.4 billion a year.
"Samsung's cash-injection decision was good news for Qualcomm, which has been mired in falling profits," said an analyst at Prudential Investment, a local brokerage.
Over 99 percent of mobile phones used in Korea are embedded with Qualcomm chips.
The U.S. technology provider is also a key supplier of mobile phone chips to Samsung Electronics and LG Electronics.
