1

Liren Chen, VP Engineering and Legal CounselKirti Gupta, Director of Economic Strategy

Competition Data and Antitrust – a Corporate Perspective

2

Invent~$36B invested

in Cumulative R&Dover the past 30 years

QUALCOMM

3

Advancing technology through innovation and foresight

InventedDigitized wireless communications

ForesightDemand created for higher quality voice

InventedIncreased voice

quality

ForesightAdd data to the

network

InventedData added with 3G

technology

ForesightUsing phone as

computing device

InventedFirst 1GHz mobile

processor

Qualcomm Snapdragon is a product of Qualcomm Technologies, Inc.

4

Advancing technology through invention and foresight

Foresight1000x increase in video

on mobile

InventedLTE Broadcast

ForesightEnhance experienceof video on mobile

InventedBrought 4K intomobile devices

ForesightBillions of connected

devices

InventedTechnologies that

enable IoE

5

Diverse patent portfolioCovering all aspects of mobile devices

NFCAppsprocessor GPU Position

locationOS/user interface

Wireless charging Camera Security

WWANSensors Semiconductor Videocodecs

RF andantenna Display Audio

processingConnectivity

(Wi-Fi)

6

Investment in technology standards years in advance

2011Rel-A 10

2006HSDPA Rel 5

2009HSPA + Rel 7

2010EV-DO Rev B

3GHigh Speed Data

4G

2000CDMA 2000 1X

2001WCDMA Rel992G+ 1988

Qualcomm R&D Conception of Cellular CDMA

1995CDMA IS-95A

1997EV-DO

2002EV-DO Rel0

2002OFDM

2009LTE Rel 8

5G 20065G technology

1998EV-DV

2000EV-DO Demo

R & D Commercial

2007HSUPA Rel6 & EV-DO Rev A

7

Consistently growing innovation, large portfolio in China

Source: Qualcomm Incorporated data

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fiscal yearCurrent worldwide Qualcomm patent portfolio

(pending and granted)

Compound annualgrowth rate32%

8

Innovation in mobile technology driving trillions of dollars of impact

Source: “The Mobile Revolution: How Mobile Technologies Drive a Trillion Dollar Impact”, Boston Consulting Group (2015)

$1.8 trillioninvested in past 5 yearsR&D and infrastructure investments from 2009-2013

$3.3 trillion in revenue

Revenues of the global mobile value chain in 2014

Jobs in the global mobile value chain

Another $4 trillioninvestment comingAdditional R&D and infrastructure investments needed by 2020

$3.3T

11 million jobs

9

IP frameworks and standard setting are two fundamental enablers of mobile’s growth

Source: “The Mobile Revolution: How Mobile Technologies Drive a Trillion Dollar Impact”, Boston Consulting Group (2015)

Consumer-oriented data practices

Strong IP frameworks and patent protection

Collaborative industry standard-setting processes

Adequatespectrum allocation

Free international trade and capital flows

Healthy network operator environment

Dynamic digital servicesecosystem

10

Chinese consumers value their mobile device at ~40% of their income, well above US, Germany, Korea, and Brazil

2011

45%

2011

11%

2011

12%

2011

13%

2011

20%

2011

43%

Mobile valued at 20~40% of their incomeby consumers in emerging economies1

Mobile valued at ~11% of their incomeby consumers in developed economies2

1. For Brazil and China, 3G consumers as 4G only very recently rolled-off in both countries 2. Developed country our reference consumer is a 4G user 3. Based on the nominal GDP per capita (2013)Source: Conjoint analysis, BCG Consumer Impact Survey (USA: n=1003, Germany: n=1014, Korea: n=1002, Brazil: n=1000, China n=1070, India: n=2640)

$770 $2,270$2,270 $5,800$6,300 $3,150

Value in USD

$3,300

Value as% of income3

11

Mobile contributed to more than $1.2 trillion to GDP in Mobile industry GDP contribution in 2013 in USD B (as % of country GDP)600

400

200

0

$477B(2.8%)

$43B(1.9%)

$307B(3.3%)

$61B(1.7%)

$140B(10.8%)

$41B(2.2%)

12

IP and antitrust: Technology standards under scrutiny

Concerns raised by FTC, DOJ, and most recently NDRC, about potential “consumer harm” due to IPR related to standards

For example, see:• FTC (2011) report, “The evolving IP marketplace”• DOJ (2012) remarks “Six “small” proposals for Standard Setting Organizations (SSOs)

before launch”• Kuhn, Scott-Morton, Shelanski (2013), “SSOs can help solve the Essential Patents

licensing problem”

13

IP and antitrust: technology standards under scrutiny

Example 1: “Patent hold-up”• With no alternative to a technology standard, patent owners can potentially

“hold-up” the standard’s implementers, deriving supracompetitive rents and harming competition and consumers

For example:“Hold-up may have especially severe consequences for innovation and competition in the context of standardized technology.” (FTC (2011) report)

“Patent holders may seek to take advantage of that market power by engaging in one form of patent hold-up, such as excluding a competitor from a market or obtaining an unjustifiably higher price for its invention. Consumers could be harmed as well by (increased consumer prices).” (DOJ (2012) remarks to ITU-T)

14

IP and antitrust: technology standards under scrutiny

Example 2: “Royalty Stacking”• Royalties paid by product manufacturers to many different patent owners can

add to prohibitively high as a percentage of the product’s value, diminishing their margins & commercialization incentives

For example:“Time and time again, we have seen this sort of royalty-stacking problem arise. One great example is 3G telecom in Europe. The standard-setting organization (SSO) put out a call for essential patents, asking which they must license to make the 3G wireless protocol work and the price at which the patent owners would license their rights. 3G telecom received affirmative responses totaling over 6000 essential patents and the cumulative royalty rate turned out to be 130%. This is not a formula for a successful product.” (Lemley (2002))

15

Theory versus evidence: Lower costs and improved performance of mobile

0

100

200

300

0

2

4

6

8

2004 2006 2008 2010 2012 2014

$/megabyte

Consumer cost of data per megabyte relative to data consumption versus data speedMbps

Sources: Cisco Visual Networking Index, ITU, IE Market Research, Motorola, Deutsche Bank, Qualcomm

16

Source: Gelatovic and Gupta (2015), “Royalty Stacking and Standard Essential Patents: Theory and Evidence from the Mobile Wireless Industry:, Hoover IP2 Working Paper

Theory versus evidence: Lower consumer prices of products as patent owners increase

0

20

40

60

80

100

120

140

-

100

200

300

400

500

600

700

800

900

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Num

ber o

f ess

entia

l pat

ent h

olde

rs

Aver

age s

ellin

g pr

ice

($ 20

13)

Number of essential patent

holders

Averagesellingpriceof a

phone

17

Theory versus evidence: High market entry, more consumer products as patent owners increase

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0

20

40

60

80

100

120

140

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Milli

ons o

f pho

nes s

old

Num

ber o

f ess

entia

l pat

ent h

olde

rs

Number of essential patent

holders

Number ofphones sold

Source: Gelatovic and Gupta (2015), “Royalty Stacking and Standard Essential Patents: Theory and Evidence from the Mobile Wireless Industry:, Hoover IP2 Working Paper

18

Theory versus evidence: Higher market entry and lower concentration

-

5

10

15

20

25

30

35

40

45

50

-

5,000

10,000

15,000

20,000

25,000

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Num

ber o

f pho

ne m

anuf

actu

rers

Aver

age

sale

s per

pho

ne m

anuf

actu

rer (

in 2

013

$)

Numberof phone

manufacturersAverage sales per phone

manufacturer

2G Cell phones

introduced

3G Cell phones

introduced

Iphoneintroduced

4G Cell phones

introduced

Source: Gelatovic and Gupta (2015), “Royalty Stacking and Standard Essential Patents: Theory and Evidence from the Mobile Wireless Industry:, Hoover IP2 Working Paper

19

Need for future research

Filling the gap between theory and evidence

• What explains the disconnect between these policy concerns about competitive harm and the reality of a healthy, thriving industry?

• While one can always argue that the “but for” world would be better in some way, competition concerns demand consideration of objective criteria

• What policies should China and other emerging innovation economies embrace for promoting IP and standards

20

For more information, visit us at: www.qualcomm.com & www.qualcomm.com/blog © 2013-2015 Qualcomm Incorporated and/or its subsidiaries. All Rights Reserved.

Qualcomm and Snapdragon are trademarks of Qualcomm Incorporated, registered in the United States and other countries. Other products or brand names may be trademarks or registered trademarks of their respective owners.

References in this presentation to Qualcomm may mean Qualcomm Incorporated, Qualcomm Technologies, Inc., and/or other subsidiaries or business units within the Qualcomm corporate structure, as applicable.

Qualcomm Incorporated includes Qualcomm’s licensing business, QTL, and the vast majority of its patent portfolio. Qualcomm Technologies, Inc., a wholly-owned subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, substantially all of Qualcomm’s engineering, research and development functions, and substantially all of its product and services businesses, including its semiconductor business, QCT.

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