Qualcomm share price down, faces South Korean antitrust investigation

Qualcomm Inc became a subject to yet another investigation, this time from South Korean authorities, following the chip designers record fine in China.

According to a person familiar with the situation, Samsung Electronics, LG Electronics and Pantech, also a smartphone maker, complained to the Fair Trade Commission about Qualcomms current royalty rates, claiming they are too high.

As a results South Koreas anti antitrust authority launched an investigation into Qualcomm, the person said.

South Korean smartphone manufacturers are highly dependent on the companys semiconductors, as they supply the technology needed to support high speed data transfers on 3G and 4G networks.

The San Diego-based company makes the better half of its profit from royalties received from smartphone manufacturers.

The FTC will also drag direct rival Intel Corp into the investigation, despite being involved into the mobile chip manufacturing business only for a few years.

This is not the first time Qualcomm has been put under closer observation, in 2009 the company was fined more than $200 million over taking advantage of its dominant market position.

On Monday the company agreed to pay a $975 million fine, following a 14-month investigation from Chinas National Development and Reform Commission. The fine represents 8% of Qualcomms sales in China during 2013.

However, under the settlement the company also agreed to use a different approach when calculating its royalty fees in China. Qualcomm will now charge royalties based on 65% of the net selling price of the device instead of 100%, while also using lower percentage rates.

After the agreement, Qualcomms share price increased, outlining investors relief about the future of the company in China, where Qualcomm generates around half of its revenue.

However, the settlement also raised the question whether other authorities will also pursue the goal of lowering royalties rates for their domestic smartphone makers, putting Qualcomms long-term profitability at risk.

Qualcomm fell 0.07% on Wednesday and closed at $70.21 on the NASDAQ. On Thursday the stock dropped 0.30% to $70.00 at 15:45 GMT, marking a one-year decrease of 8.74%. The company is valued at $115.82 billion.

According to the Financial Times, the 32 analysts offering 12-month price targets for Qualcomm have a median target of $75.00, with a high estimate of $90.00 and a low estimate of $50.00. The median estimate represents a 6.82% increase from the last closing price.