Samsung, LG to feel effects of U.S. patent fight

A U.S. decision to ban imports of cell phones using chips made by Qualcomm will affect Korean handset makers, industry sources said yesterday.
The United States International Trade Commission ruled Thursday that Qualcomm infringed a patent of its rival Broadcom Corp. regarding chips that are required to operate high-speed Internet on mobile phones. The decision, which still has to be approved by U.S. President George W. Bush, will ban foreign cell phone makers from exporting products containing Qualcomm semiconductors to the United States.
The news brought varied responses in the industry, mainly because most Korean handset makers such as Samsung Electronics and LG Electronics use Qualcomm chips, and the United States is one of the largest markets in the world. Samsung and LG are respectively the third and fifth largest global handset makers.
“Unless Qualcomm and Broadcom can settle the patent issue, exports of handsets to the U.S. market will inevitably be affected,” said David Min, an analyst at Goodmorning Shinhan Securities. He added that this situation could provide an opportunity to local handset makers to diversify their business partners.
Ha Ki-seok, an analyst at the technology information clearinghouse IDC, said it is quite difficult to estimate losses that the trade commission’s decision would incur among local manufacturers but those losses would certainly depend on how long the ban is imposed.
Local companies are responding cautiously but say they will not be affected by the ruling as seriously as many predict. Both Samsung and LG pay large amounts of royalties to U.S.-based Qualcomm. According to the Information Ministry, Korean cell phone makers and developers have paid 3 trillion won ($3.2 billion) in royalties to Qualcomm since 1995.
Samsung Electronics said it has been preparing for the impact the ruling could have on its business since the legal issue was raised in 2004.
“We 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 Samsung spokesman Yeom Cheol-jin. “Besides, not all handset products will be subject to the import ban, only those to be shipped after the decision. All mobile phones being sold there at this moment will remain on the market.”
The ruling did not affect share prices of major cell phone makers despite a dip in the main index.

By Wohn Dong-hee Staff Writer [wohn@joongang.co.kr]