Broadcom to give Samsung warranties to avoid Korea penalties

US chipmaker Broadcom Inc. agreed to provide three-year warranties and technical support for components equipped in products such as smart devices of Samsung Electronics Co., the world’s largest mobile phone maker, to avoid penalties by South Korea’s antitrust body.

Broadcom also vowed to establish a fund of 20 billion won ($16.1 million) to support small and medium-sized enterprises in the country’s semiconductor industry, while offering measures to cease putting undue pressure on Samsung and other local tech companies, the Korea Fair Trade Commission (FTC) said on Monday.

The FTC said it reached a preliminary agreement with Broadcom on a consent order requested by the semiconductor and infrastructure software solutions provider.  A consent order is a way to wrap up an anti-competition case -- even before determining whether a company under an FTC investigation has breached the law -- if the firm voluntarily proposes appropriate corrective measures.

The antitrust watchdog is scheduled to collect opinions from stakeholders and related ministries on the measures for 40 days from Jan. 10 to Feb. 18.

“Broadcom pledged to offer three-year warranties for its parts, which Samsung has ordered under a long-term agreement from March 27, 2020, to July 2, 2021, and installed in smart devices and models released before March 2022, while providing technical support for three years,” the FTC said in a statement.

The models include the Galaxy Z Flip3 launched in August 2021 and the Galaxy S22 introduced in February 2022, according to the regulator.

The US company also vowed to provide Samsung with parts and technical support, which are similar to those for other customers, when the South Korean tech giant requires, the FTC added.

NOT TO FORCE DEALS

Broadcom promised not to force South Korean smart device makers to sign deals with the company with unfair means such as suspending part production and shipments, ceasing approvals of purchase orders, as well as stopping technical support, the FTC said.

The company also said it will not restrict the options for components of the country’s smart device manufacturers and not keep them from dealing with its competitors.

In addition, the chipmaker plans to operate a compliance program to implement those pledges and observe South Korea’s fair trade regulations.

Broadcom allegedly compelled Samsung to ink a three-year deal for components of smart devices including parts for radio frequency (RF) front-end circuitry, Wi-Fi and Bluetooth.

The contract included provisions that Samsung had to purchase Broadcom’s parts worth $760 million from January 2021 to the end of 2023 while the world’s top memory chipmaker would make up any difference if it purchases less than that. The deal ended in August 2021 before its expiration.

The FTC judged that Broadcom allegedly abused its superior market position in this regard and sent a review report including potential punitive actions in January of this year. The regulator had planned to deliberate on Broadcom’s violation and penalties through a plenary session, but Broadcom applied to begin a consent order process in July last year.

Write to So-Hyeon Kim at alpha@hankyung.com
Jongwoo Cheon edited this article.