Chips Fall Anew on Qualcomm Antitrust Defeat, Trade War Anxiety

Elena Popina, Bloomberg News

Qualcomm Centriq branding sits on a motherboard on display at the Qualcomm Inc. stand during day two of the Mobile World Congress (MWC) in Barcelona, Spain, on Tuesday, Feb. 27, 2018. At the wireless industry's biggest conference, more than 100,000 people are set to see the latest smartphones, artificial intelligence devices and autonomous drones exhibited by roughly 2,300 companies. Photographer: Simon Dawson/Bloomberg , Photographer: Simon Dawson/Bloomberg

(Bloomberg) -- Tuesday’s respite in semiconductor stocks didn’t last long. Blame Qualcomm Inc.

The San Diego-based chipmaker fell 12% after a U.S. District Court Judge sided with the Federal Trade Commission, saying Qualcomm’s licensing practices violated antitrust law. The ripple effect spread fast, pushing the iShares PHLX Semiconductor ETF down 2.3% in pre-market trading and the VanEck Vectors Semiconductor lower by 1.7%. Qualcomm is the biggest and third-biggest part of those ETFs, respectively.

Qualcomm fell below $70 after Judge Lucy Koh, in San Jose, found Qualcomm also charged high royalties for its patents, and that its key role in manufacturing modem chips for smartphones using 5G made it likely that its behavior would continue. Qualcomm’s licensing business provides the majority of the firm’s corporate profits. The decision was made public on Tuesday night.

The judge ruled against Qualcomm on nearly every measure, Sanford Bernstein analyst Stacy Rasgon said in a note to clients, despite some investors’ expectation that the judge would “soften” her stance after the firm settled the dispute with Apple.

Worsening sentiment on technology stocks Wednesday also stemmed from reports the U.S. is considering blacklisting as many as five Chinese video surveillance firms, a move that would escalate tensions and raise questions as to whether the U.S. is going after more of what are considered China’s corporate champions.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Scott Schnipper