Qualcomm CDMA commissions have a dynamic structure
14 Jul 2006
In response to the ongoing controversy over the commission that Qualcomm charges over its CDMA handsets, the company has clarified its position. In a letter, the company said that it charges as its commission a percentage of the net selling price of its hand sets after some deductions, and not seven per cent as reported.
The letter says, "Qualcomm's worldwide standard royalty rate is a percentage of the wholesale net selling price (after certain deductions) of the handset and the percentage is in the low single digits. In fact, the average royalties paid on devices sold in India over the past twelve months have averaged 15 per cent lower than royalties that have been paid on devices sold in China, for instance, and are far lower than royalties that have been paid to Qualcomm in markets like Korea, Japan and the US In sum, royalty payments associated with the Indian market are the lowest in the world.
The letter also quotes Dr Paul Jacobs, CEO of Qualcomm, as saying during his recent visit to India, "Our royalty rates are somewhere below the five per cent range, so if you have a $40- phone that's maybe $2 at most. If we cut our royalties in half and it's $1 and you contrast that with the fact that over the last year we dropped the handset prices by 25 per cent, so those royalties that are coming into Qualcomm we're actually using that to fund R&D and to create competition among handset manufactures, which then brings the handset prices down. That's what benefits the operators and consumers."
