Case closed

Qualcomm has been in a legal dispute since 2017 with the US Federal Trade Commission (FTC), which accused the company of abusing its dominant position in smartphone chips.

Qualcomm's (QCOM) licensing practices have been the subject of investigations in US courts for many years.

Qualcomm is one of the largest chip developers in the world, while outsourcing their production to companies such as Taiwan Semiconductor and Samsung Electronics.

In addition to selling chips, Qualcomm earns a significant share of its revenue from licensing the thousands of patents it holds on the technologies that underpin today's phone systems.

On 21 May 2019, a district court ruled that Qualcomm's licensing practices for premium LTE modem chips were anti-competitive and detrimental to smartphone manufacturers and end consumers. The US Federal Trade Commission (FTC) suit was granted and the court ordered Qualcomm to change its business practices.

However, Qualcomm appealed to the San Francisco Court of Appeals, which found that the company's aggressive competitive practices did not constitute unlawful conduct.

Investors may view the news as positive for Qualcomm, as this FTC decision removes risks to its future revenues and profits.

Qualcomm shares fell sharply on February 4, after the company warned that "chip supply will remain limited during the first half of 2021" due to a shortage in the semiconductor industry. Qualcomm shares fell 21.3 per cent from a high of 3 February to close on Monday. At the same time, Qualcomm's share price is still 97% higher than it was 12 months ago, with the last two quarters showing a sharp jump of 35% and 62% in revenues and 86% and119% in earnings per share for Q4 FY 2020 and Q1 FY 2021 respectively.