Chapter 304: Acquiring 40% Of Qualcomm’s Shares
Translator: Nyoi-Bo Studio Editor: Nyoi-Bo Studio
To be honest, Chen Jin still felt some goodwill towards Qualcomm, even though it was an out-and-out gangster. But compared to the Fruit company, who was a gangster of all gangsters, Qualcomm seemed to be more like a philanthropist.
It was well-known that Fruit company pursued profits with any and all means. On the other hand, the price of Fruit mobile phones was getting higher and higher. Its selling price was more than three times the cost of its hardware. It took more than 80% of the hardware profits of the entire mobile phone industry. Even so, Fruit company was still unsatisfied. They made use of the closed features of the ios system to seize any and all opportunities to earn a buck. All applications that were recharged and marketed in the ios system had to pay a 30% fee, only a few apps could be exempted. This was also known as the “Fruit tax.”
With multiple heavy-handed means, the Fruit company became the most profitable technology company in the world, with a market value of over $1 trillion. However, after adopting Qualcomm’s baseband, the Fruit company found that it would have to pay Qualcomm their patent license fees of up to tens of billions of dollars every year. All of this money that was wasted; all of this money that was actually given to Qualcomm. According to the 5% chargeable principle, the more expensive the Fruit mobile phones were, the larger the amount that Qualcomm would earn in patent license fees.
How could they tolerate this?
Unwilling to give up any profit, Fruit company immediately abandoned Qualcomm and supported Intel instead. It chose to use Intel’s communication baseband and completely ended its relationship with Qualcomm. The problem was that Intel had only been engaged in communication technology for a few years. There was no way for another company to circumvent Qualcomm’s patent barriers for many of its patented technologies. However, the Fruit company chose to disregard this and allowed Intel to explicitly infringe on the patents. It risked patent lawsuits by using Qualcomm’s patents directly. The Fruit company really gave their all in the name of profit.
However, once the Fruit company did this, Qualcomm, who had been rolling around in surplus profits, had a 30% drop in revenue that very year. Qualcomm was instantly enraged. Breaking off one’s income source was akin to killing one’s parents. They determined that Fruit violated their patents and immediately initiated a patent lawsuit. Hence, this was how the two started feuding.
After fighting furiously for two years, Qualcomm collected enough evidence to prove that the Fruit company did infringe on their patents, and fully emerged as the victor. First, a court in Z country ruled that the sale of Fruit mobile phones was prohibited. Then, other countries and regions also made judgments in favor of Qualcomm. The war between the two gangsters ended with Qualcomm’s victory.
After the sales prohibition took effect, the Fruit phone vanished from Z country’s market for a few months. In the end, the Fruit company had to give in and make a one-off payment for the fine that was tens of billions of dollars. They also promised that they would not carry out any further activities that would infringe on Qualcomm’s patents. The two sides finally reached an understanding.
The Fruit company paid for their greed.
In the fiercely competitive trade war a few years ago, Hua Yao’s 5G suffered from Merica’s barricades and interceptions. At that time, there were countless appeals on the Internet to boycott Fruit products, and countless expose articles on the gangster nature of the Fruit company. Even so, all these efforts could not persuade the die-hard Fruit fans to stop purchasing the Fruit phone. However, a Merican company helped to fight against the success of the Fruit company.
What was this spirit called? Hence, the title of “Righteous Exterminator of the Fruit Company” was given to Qualcomm on the Z country’s internet. They praised Qualcomm for being benevolent and righteous. Last year, Qualcomm moved its headquarters to Z country, which reduced the patent licensing fees for Z country’s market. This move won the favor of the majority of netizens who gave another title of “The Conscience of Z Country” to the company.
However, Chen Jin knew that Qualcomm was still a gangster deep down. But since it had done a few good things, Qualcomm was a better “gangster” in his eyes. Hence, he greatly welcomed Qualcomm’s initiative in applying for a collaboration. This was because Xing Hai Technologies had not accumulated many patents in the field of communication technology and was very dependent on Hua Yao.
In the short-term, there was no great issue with this kind of dependence, but in the long run, it would be somewhat subjected to external control. The range of applications that communication technologies could be used for was too broad and there would always be ample scope where one could employ the technologies. The market performed at a scale of more than one trillion every year.
Xing Hai Technologies did not want to enter this field. It was even more unrealistic to develop from scratch. Xing Hai Technologies simply wanted to avoid being subjected to restrictions and the future possibility of being slaughtered in a single blow.
Ling Jundong suggested, “President Chen, we are better off acquiring Qualcomm and getting the free rights to use its tens of thousands of communication patents. We could then collaborate with Qualcomm to develop more advanced 6G communication or other new communication technologies to make up for this disadvantage on their side. Of course, Hua Yao is also our partner. We will not give up collaborating with Hua Yao. But what about after ten or twenty years? If Hua Yao became the only major company in the communication field, would it continue to give us a discount?”
When that time came, was it possible for Hua Yao to become a new gangster? In any case, the future was hard to predict.
“Acquiring Qualcomm?” Chen Jin nodded. “This is a good idea.” There were tens of thousands of communication technology patents. He had to admit that he was somewhat envious. He, too, wanted to experience what it was like to be a gangster. Actually, there was no need to think about it. Xing Hai Technologies was already on the path to become a gangster of patents. Take, for example, Xing Hai Technologies’ recent breakthrough of the graphene technology. It did not build a variety of factories to produce various graphene products. Instead, the company recruited partners and licensed a large number of their graphene technologies to their partners in return for a net profit of 50%. At present, more than 30 partners were recruited. It was expected that various graphene products would soon appear in rapid succession.
But with Qualcomm’s current market value of $60 billion, did Xing Hai Technologies have so much money to spend on this?
“Money is not a problem, as long as Qualcomm agrees to the acquisition request. Even if it is a premium of 500 billion, I have a way to get that money.” Ling Jundong’s statement was astonishing.
Chen Jin was shocked. $500 billion, was this kind of overkill necessary?
Ling Jundong explained that in the field of capital operation, there was a concept of “leverage.” Xing Hai Technologies did not need to really withdraw 500 billion. Simply taking out 100 billion was enough. Then, it would raise 100 billion from the private sector, and the remaining 300 billion would be in the form of bank loans… the funds would then be sufficient. With the profitability of Xing Hai Technologies, there was no pressure about devouring a Qualcomm.
After listening to Ling Jundong’s analysis, Chen Jin nodded. “Ok, try your hand at acquiring it. If you can close the deal with an offer of 500 billion or less, then do it.”
At Qualcomm, after receiving the request to acquire them as initiated by Xing Hai Technologies, the Qualcomm executives refused without thinking about it. They sat on a gold mine. They made a lot of money every year without really working. Who would sell the gold mine under their a**? Moreover, the Merican government would never approve of it. There was no possibility of an acquisition. However, Qualcomm moved its head office to Z country and it was not subject to the jurisdiction of Merica. Xing Hai Technologies could be a shareholder.
The senior executives of the two companies conducted negotiations that lasted for several days. The two sides finally settled on an agreement and signed a collaboration plan which mainly consisted of the following points:
One, Xing Hai Technologies would inject funds of 80 billion and hold 40% of the shares of Qualcomm (Z Country), enjoying the free use of all Qualcomm’s communication patents.
Two, OEM orders for Qualcomm’s chips would all be completed by Zhongxin International.
Three, Xing Hai Technologies would provide technical services such as the “virtual factory,” etc. to accelerate the speed of Qualcomm’s research and development and reduce R&D costs.
Four, the two sides would begin a technical collaboration to jointly develop more advanced communication technologies.
After a collaborative agreement was successfully reached, it was doubtless a win-win partnership.
To Chen Jin’s Xing Hai Technologies, he only spent 80 billion and got the free rights of use to tens of thousands of communication patents. He saved a lot of time and massive R&D funds. He could even enjoy a share of the profits in the process.
As for Qualcomm, it received support and a cash flow injection from Xing Hai Technologies by collaborating with the company. It might not catch up with the obvious leader, Hua Yao, but it would at least be on an equal footing to quickly turn its disadvantages around. It would not be beaten into a steady retreat from the market by Hua Yao.
Qualcomm’s President, Christian Amon, sighed and walked back and forth. He said excitedly, “We will be able to get out of the woods soon. Just based on Xing Hai Technologies’ 5G baseband orders alone, it can bring us tens of billions of revenue every year! In addition, with the help of ‘virtual factory’ technology, we have accumulated patents and saved costs to the extent that we would very soon be on the same level as Hua Yao Company (Hua Yao purchased a supercomputer equipped with a virtual factory). We are finally on a fair track.”
On November 20th, Xing Hai Technologies became a shareholder of Qualcomm. Once the news of their strategic cooperation had been announced, it immediately caused a huge wave of response.