Broadcom fined $14.3 mn in Korea over Samsung contract

Broadcom Inc. a US smartphone components maker, was slapped with a fine of 19.1 billion won ($14.3 million) in South Korea on Thursday for allegedly unfair business practices with Samsung Electronics Co.

After a four-year probe into a Broadcom-Samsung business contract, the Korea Fair Trade Commission (KFTC) concluded the US company had abused its market dominance to force Samsung to sign a three-year supply agreement under unfair conditions in 2020.

The contract was aimed at keeping Samsung from using cheaper products from Qualcomm and Qorvo, the antitrust body said at a briefing.

Under the agreement, it was required to purchase from Broadcom more than $760 million worth of components related to RF front-end (RFFE) control interface, WiFi and Bluetooth a year.

If Samsung purchased less than that, it had to make up any difference.

The KFTC said Samsung had no choice but to yield to Broadcom's unilateral demands to prevent production disruptions for the Galaxy S20 smartphones because Broadcom was the world's No. 1 operator with an overwhelming share in the RFFE market.

RFFE is an integrated circuit that performs signal conditioning such as switching a radio frequency signal.

The supply agreement with Broadcom resulted in Samsung spending at least $160 million more to buy the relevant components, according to the KFTC.  

Broadcom had argued that the contract was a voluntarily agreed-upon and mutually beneficial contract. However, the KFTC rejected the claim.

The deal ended in August 2021, after the KFTC launched the probe into the contract.

The amount of the fine was based on the $800 million Samsung had paid to Broadcom between May 2020 and August 2021.

The KFTC decision will place Samsung in an advantageous position against Broadcom in a civil lawsuit, which the smartphone maker is expected to file to seek compensation for damages in connection with the business contract.

Broadcom was not immediately reached for comment on the KFTC's decision.

To avoid a penalty in relation to the probe, Broadcom in July 2022 suggested it voluntarily correct its business practices and contribute to the development of South Korea’s semiconductor industry by creating a 20 billion won fund to support small-sized IT companies.

But the KFTC in June dismissed the proposals.

Write to Sul-Gi Lee at surugi@hankyung.com
 

Yeonhee Kim edited this article.