Steve Mollenkopf, chief executive of the San Diego-based company, on Thursday said Qualcomm is benefiting both from more patent licensing deals in China and a new crop of handset makers in the country that are taking sales from international rivals.
- Qualcomm Chip Shipments Power Quarterly Results (July 20, 2016)
- Qualcomm to Pay $ 19.5 Million to Settle Claims of Bias Against Women (July 26, 2016)
- Qualcomm Sues Alibaba-Backed Smartphone Maker Meizu for Patent Infringement (June 26, 2016)
- Qualcomm Will Make China-Customized Chips Through Chinese Venture (May 27, 2016)
Another factor, he said, is that Chinese consumers are upgrading phones quickly to stay abreast of the latest technical features—a trend that benefits Qualcomm’s chip sales and requires handset makers to keep introducing new models quickly.
“It’s definitely a feature game,” Mr. Mollenkopf said during a meeting with Wall Street Journal reporters and editors. “If you are behind in providing features it causes a problem.”
Qualcomm is a pioneer in cellular technology, selling modems that manage wireless communications that often are combined with processors that carry out other key functions in handsets.
Mr. Mollenkopf’s remarks came after Qualcomm last week topped expectations with third-quarter financial results that included a 22% jump in profit. The company’s stock, already up 12% on the year before the announcement, has risen another 12%.
China has played a major role in Qualcomm’s sales for years, but has posed a series of challenges lately. The country’s antitrust authorities conducted a lengthy investigation of the company’s patent licensing practices, which resulted in a February 2015 settlement that required Qualcomm to pay a $ 975 million fine and required modifications to its licensing practices.
The company had hoped the settlement would prompt hardware makers in the country to quickly sign licensing deals. But many dragged their feet or didn’t provide accurate figures on their sales volumes needed to calculate royalty payments, Qualcomm executives said.
But that picture has changed, as Qualcomm recently announced a series of licensing deals with the country’s biggest manufacturers and said many smaller ones have also complied. The company said last week it reaped more than $ 200 million in the latest quarter in “catch-up” payments and other additional revenue associated with easing the licensing problems in China.
At the same time, Qualcomm’s chip business has gained as vendors introduce more handsets with 4G cellular technology and more Chinese manufacturers report strong sales. Foreign players such as Apple Inc. AAPL 1.35 % and Samsung Electronics Co. SSNHZ 0.00 % are encountering strong opposition from established Chinese companies such as China’s Huawei Technologies Co. and Xiaomi Corp., as well as newer brands such as Oppo Mobile Telecommunications Corp. and Vivo Electronics Corp.
Mr. Mollenkopf said the Chinese companies have thrived by innovating quickly, specializing in midprice phones and marketing aggressively in the country’s midsize cities—while laying the groundwork for expansion elsewhere.
“What they are adding next is the ability to go international,” he said.
Qualcomm is trying to court the handset makers by helping to add technologies that Chinese consumers care about most, such as longer battery life and faster transmission speeds to upload data, Mr. Mollenkopf said.
The company also attracted attention this week by agreeing to pay $ 19.5 million to settle claims that women at the company receive lower pay and fewer chances for promotion than men. The deal, which must be approved by a federal court, will affect roughly 3,300 current and former Qualcomm employees, primarily in technical roles.
The chip maker agreed to measures that include hiring independent consultants and an internal compliance officer, ramping up training, and conducting regular pay-equity and promotion analyses.
Qualcomm didn’t admit violating the law.
Mr. Mollenkopf said he felt the company had legal defenses against the allegations, but preferred to “move beyond it” and try to act as a positive force to address diversity and discrimination issues that have long troubled tech companies.
“It’s an area we feel strongly about,” he said. “It’s no secret that the technology industry doesn’t have a lot to be proud of, and Qualcomm is no different.”
Write to Don Clark at [email protected]