"...we can now cushion its impact on our business by using alternative technologies that avoid the patent infringement allegations." said Yeom Cheol-jin, a Samsung spokesperson.
US QUALCOMM IMPORT BAN COULD HURT S. KOREAN HANDSET MAKERS
Asia Pulse
SEOUL June 8
A U.S. decision to ban imports of cell phones using Qualcomm Inc.'s chips could damage South Korean handset makers which depend heavily on them, industry sources said Friday.
The U.S. International Trade Commission ruled Thursday that Qualcomm had infringed a patent of its smaller rival Broadcom Corp. in producing chips capable of high-speed Internet access via mobile phones.
The decision bans foreign handset makers from exporting their products with Qualcomm chips to the U.S. The move will go into effect when it is approved by U.S. President George W. Bush within 60 days.
As most South Korean handset makers including Samsung Electronics Co. use Qualcomm's chips, experts worry that the commission's move will reduce exports of locally-produced mobile phones to one of the world's largest markets.
"It comes as bad news for local handset makers especially when their business is showing signs of an improvement," said David Min, an analyst at Goodmorning Shinhan Securities.
"Unless Qualcomm and Broadcom can settle the patent issue, exports of handsets to the U.S. market will inevitably be affected," he said.
South Korea is home to Samsung Electronics (KSE:005930) and LG Electronics (KSE:06657), the world's third- and fifth-largest handset manufacturers. Sixteen per cent of Samsung's handset exports, for example, goes to the U.S. market, industry sources said.
They all use Qualcomm's chips by paying a huge amount of royalties to the U.S.-based company, raising concerns about their dependence on a single chip maker.
South Korean companies have paid a combined 3.03 trillion won (US$3.2 billion) to Qualcomm in royalties since 1995, according to a government report,
Min noted that the ITC's move will also serve as a wake-up call for local handset makers to diversify their mobile-chip business partners.
"In the short term, the decision by the trade body is expected to affect the operation of those companies in the U.S. but it could also help them think about how to reduce their heavy dependence on Qualcomm," he said.
Ha Ki-seok, an analyst at the IDC, said it is quite difficult to estimate losses that the ITC's decision would incur among local manufacturers but those losses would certainly depends on how long the ban will be imposed.
"Local manufacturers claim the impact will be smaller than expected but they believe if the ban remains in place for a long period of time, it will inevitably hit their profitability," he said.
Local companies are responding cautiously to the ban but say they will not be affected by the ITC's ruling as seriously as many predict.
Samsung Electronics said it has been preparing to reduce the impact that the ruling could have on its business since the legal issue was raised in 2004.
"We (Samsung and Qualcomm) have been bracing for this situation since the suit was filed and we can now cushion its impact on our business by using alternative technologies that avoid the patent infringement allegations." said Yeom Cheol-jin, a Samsung spokesperson.
"Besides, not all handset products will be subject to the import ban, only those to be shipped after the decision. All mobile phone being sold there at this moment will remain on the market." he noted.
(Yonhap)
AI
