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Qualcomm fine could bring trade war

by on29 December 2016


East versus West


2017 could be the year of the trade war as the US and Far Eastern start to slug it out over technology.

This week Qualcomm was slammed with a $852 million fine from South Korea’s antitrust watchdog imposing a record fine on Qualcomm. Qualcomm disputed the ruling, saying it would take the case to court.

But in an escalation of the case Qualcomm insisted that the fine was in breach of the Korea-US Free Trade Agreement (KORUS FTA). This means that the US will be looking into it and might start taking retaliatory measures against the likes of Samsung.

Normally this might have been smoothed over, but the incoming president Donald (Prince of Orange) Trump is already squaring off for a trade war against China. He already acused China of “raping” the US and threatening to put a 45 percent tariff on Chinese imports. He assumes that will force all those US companies like Apple to return to the US, particularly if he changes the tax laws which will enable them to bring their cash mountains which are squirreled away in tax havens back to the US.

But the power is mostly on the side of the Chinese. US companies are desperate to sell to China and losing such huge markets would seriously damage the likes of Apple, Intel and Microsoft. In 2010 the University of Gottingen in Germany coined the term “the Dalai Lama effect” after its study found countries whose top leadership met with Tibet’s exiled spiritual leader lost on average 8.1 percent in exports to China in the two years following the meeting. Meeting with the Dalai Lama is nothing in comparison with the sort of trade war that analysts are expecting Trump to come up with.

The Koreans insist that it has guaranteed Qualcomm's rights and take the view that if it disagrees it can take legal steps. But cases like this take a long time to settle. Most think it will be three to four years.

Qualcomm cannot give in and pay up either as it will face pressure to lower the royalties it demands, due to the FTC decision if it loses.

In the meantime, Korean companies might suffer from a possible trade war - Samsung Electronics and LG Electronics rely heavily on Qualcomm's processors.

Last modified on 29 December 2016
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