TheChek News Flow

Qualcomm is under attack for its dominant position in intellectual property for mobile chips. On Wednesday the US chipmaker was hit with a T$23.4bn (US$774m) fine by Taiwan’s Fair Trade Commission.

A lower-profile skirmish over chips for the forthcoming 5G standard could be more consequential, however. China is pushing for a bigger share in the design of the next generation of mobile data services. If it succeeds, Qualcomm will be hurt, equipment makers such as ZTE will benefit and operators such as China Mobile will pay the bill.

The US chip group owns 12.5 per cent of patents essential for the current 4G standard, according to Jefferies. Qualcomm recorded royalty revenues of $4.4bn in the nine months to June. China is the largest mobile market — China Mobile alone has 873m customers — but the nation’s share of intellectual property has historically been small.

The intellectual future involves more Sino influence. China owns a tenth of essential 5G patents, Jefferies notes. The country has moved to strengthen its role in the international regulatory bodies. So much so that US officials have complained about efforts by “authoritarian governments” to influence future networks.

The future of the standard rests in large part on the international co-operation necessary to make sure devices and protocols work across borders. The most basic difference between the approaches of the two countries concerns which frequencies 5G should use. US companies claim an advantage in high frequency millimetre waves. China will likely aim to be a first mover with its lower frequency approach, in hopes of swaying undecided countries.

Mobile operators will have to bear most of the costs of implementation — estimated at Rmb1.65tn ($250bn) to 2025 by government researchers. Equipment manufacturers and patent owners will benefit via higher royalties. Shares in ZTE more than doubled this year. Investors betting on the group must simultaneously believe in the success of China’s patent push.