Boston, MA 04/29/2014 (wallstreetpr) – QUALCOMM, Inc. (NASDAQ:QCOM), leading mobile chipmaker, received notice from the Securities and Exchange Commission against the violation of the Foreign Corrupt Practices Act (FCPA).
Allegation over bribery
The chipmaker will face legal action from the U.S. authorities over the allegation of bribery to the officials with state-owned companies in China. Even, China’s anti-monopoly regulator is also investigating Qualcomm for overcharge and trade violation. The Chipmaker believes that the value for the benefit was less than $250K, but, the legal issue may lead to fines of more than $1 billion.
Prior to QUALCOMM, Inc. (NASDAQ:QCOM), Hewlett-Packard involves in such bribery investigation where HP executive paid $500K to win the contracts to supply computer equipments to Polish Police headquarters. So, HP faces legal action for the violation of FCPA in Poland, Russia and other countries and ready to pay $108 million to settle the allegations.
China – Growth hub for smartphone
Smartphones market in China is increasingly competitive with multiple players and offer broad range products from low-end to high price levels. So, the growing demands attract OEMs, and mobile chip makers to focus on developing market that help them to sustain their margins as developed market is showing slow growth. However, doing business in China may lead to disagreement over royalties and antitrust investigation.
The United States is a mature market for smartphone and expects slow growth with growing competition due to increasing users’ choices to differentiate mobile devices with their experiences. As a result, companies are focusing on developing countries like India and China that shows significant growth opportunities for smartphones.
Qualcomm’s presence in China
QUALCOMM, Inc. (NASDAQ:QCOM) dominates the China market for 3G/LTE chipset solutions and growing global demand for 3G/LTE smartphone will provide future revenue growth. China is the hub for smartphone growth and companies operating in the region will have potential growth opportunities. However, bribery investigation may have a financial impact and credibility issue in the market.
