Broadcom fined $14.3 million for forcing unfair supply deal on Samsung

Tech

Published: 21 Sep. 2023, 14:10 Updated: 22 Sep. 2023, 22:19

Broadcom fined $14.3 million for forcing unfair supply deal on Samsung

A sign to the campus offices of chip maker Broadcom is shown in Irvine, California, U.S. [REUTERS]

Korea's antitrust agency fined Broadcom 19.1 billion won ($14.3 million) over the abuse of its dominant market power that it committed against Samsung Electronics.

The Fair Trade Commission (FTC) announced the decision on Thursday, following an investigation initiated by the complaint of Qualcomm, a main competitor of Broadcom, in 2021.

Broadcom enforced an unfair long-term agreement in 2020 that obligated Samsung Electronics to buy $760 million worth of chips from Broadcom from 2021 to 2023, according to the FTC.

The contract also required Samsung Electronics to compensate for any shortfall if it failed to purchase the stated amount. Owing to the unfair clauses, the agreement was terminated in August 2021.

Broadcom used to be the sole supplier of telecommunication-related modules for Samsung’s Galaxy phones, but things started changing in 2019 as other competitors like Qualcomm entered the market.

Upon hearing the report of Samsung diversifying its component suppliers, a CEO of Broadcom sent threatening messages to the top brass at Samsung.

“I am so disappointed to have confirmed today that the RFFE socket in the GS11 for North American markets has been awarded to my hated competitor,” the unnamed CEO is quoted as saying in an email sent to Samsung’s counterpart in September, 2019.

The FTC revealed the part of the message intended to block a deal with Qualcomm.

In response to the investigation launched by the FTC, Broadcom in January proposed to create a 20 billion won ($15 million) funding project for local tech companies and technical and quality assurance assistance for Samsung Electronics.

However, Samsung Electronics and other Korean electronics companies submitted a letter to the FTC to call on the regulator to compel Broadcom to reimburse damages in full.

Korea's antitrust agency rejected corrective measures proposed by Broadcom in June.

The attention now focuses on whether Samsung will file a damage suit based on the result of the FTC ruling as the Korean company has claimed damages worth up to $326 million.

Samsung Electronics declined to comment on the ongoing dispute with Broadcom.

“Samsung Electronics was forced to forgo the component supply from another vendor for its Galaxy S21, which was released in 2021,” said FTC Chairman Han Ki-jeong in a press briefing on Thursday.

“That limited the rights to choose ideal suppliers and hampered Samsung’s strategy of diversifying component suppliers, which incurred financial damages.”

“Broadcom’s competitors lost the chance to compete, and concerns arose that the event could pass on the harm to consumers,” Han said.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]