Qualcomm Inc. QCOM has been involved in an extensive tussle with regulators and domestic smartphone companies in China lately over its licensing business.
However, the signing of a Chinese Patent License Agreement (CPLA) with QiKu Internet Network Scientific (Shenzhen) Co., Ltd, has allowed the company some respite.
We note that most recently the chipset maker signed a 3G/4G patent-licensing deal with Chinese smartphone maker – Xiaomi Inc. as well.
Deal Details
Notably, QiKu is a joint venture between global internet giant Qihoo 360 Technology Co. Ltd. QIHU and telecommunications equipment manufacturer Coolpad Group Ltd.
Per the agreement, Qualcomm has granted QiKu a royalty-based license to develop, manufacture and sell devices that are integrated with the former’s 3G and 4G technology. The financial details of the deal have been, however, kept under wraps.
Notably, the royalties that QiKu will be paying for those patents are consistent with the rectification plan submitted by Qualcomm to China's National Reform and Development Commission (NRDC).
Rationale Behind & Benefits
With the deal, Qualcomm aims to support QiKu’s entry into China with 3G/4G smartphones and aid it in delivering the best to consumers in terms of performance and reliability.
We believe this new patent license agreement will lessen the chip maker’s struggles in the country and take it a step closer to solving issues pertaining to its most profitable licensing patent business. Further, the deal should boost Qualcomm’s top line by bringing in additional royalties and also solidify its foothold in the Chinese market.
Our Take
Qualcomm is the largest baseband chipset developer for mobile handsets globally. The company’s chipsets are used in Apple Inc.’s AAPL iPhone as well as Alphabet Inc. GOOGL-developed Android smartphones.
It seems that other Chinese smartphone manufactures are following in the footsteps of Xiaomi and have started entering licensing deals with Qualcomm – which has already inked agreements with majority of the top phone makers in China.
Qualcomm currently carries a Zacks Rank #4 (Sell).
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