American semiconductor company Broadcom lost its administrative lawsuit against a 191 billion KRW (approximately 128 million USD) fine imposed for alleged unfair practices against Samsung Electronics.
On Wednesday, the Seoul High Court’s Administrative Division 6-1, presided over by Judges Kim Min-ki, Choi Hang-seok, and Park Young-joo, ruled against Broadcom and three other companies in their suit to overturn the corrective order and fine issued by the Fair Trade Commission.
Broadcom dominates the market for cutting-edge, high-performance wireless communication components used in smart devices like smartphones and tablets. The company manufactures RF front-end (RFFE) components and connectivity solutions crucial for these devices.
In September 2023, the Fair Trade Commission fined Broadcom Incorporated (U.S. headquarters), Broadcom Corporation (U.S.), Avago Technologies International Sales Private Limited (Singapore), and Avago Technologies Korea Limited (Korean branch) 191 billion KRW (approximately 128 million USD) for violating the Monopoly Regulation and Fair Trade Act. The commission also issued a corrective order.
At the time, Samsung Electronics was heavily reliant on Broadcom for most of the advanced, high-performance components used in premium smart devices as it fiercely competed with Apple.
However, competition emerged in 2018 over the RFFE-related component OMH PAMiD. In 2019, Samsung began sourcing some components from Broadcom’s competitors, leading to a decline in Broadcom’s market share and Samsung’s dependence on the company.
To prevent Samsung from shifting to competitors, Broadcom pushed for a long-term agreement (LTA). During this process, the company allegedly employed unfair tactics, including halting purchase order approvals, shipping, and technical support, to pressure Samsung into signing the contract. This sparked controversy over Broadcom’s alleged abuse of power.
On February 9, 2020, before long-term contract negotiations began, Broadcom informed Samsung of its intent to suspend transactions. Three days later, during the first negotiation session, Broadcom threatened to reconsider supplying components for Samsung’s smart devices.
After negotiations started, Broadcom stopped accepting purchase orders from Samsung.
Samsung expressed difficulty in securing long-term contracts for both RFFE and other connectivity components. In response, Broadcom insisted that the long-term contract must include both types of components.
As the continued suspension of purchase order approvals became burdensome, Samsung agreed to a long-term contract for connectivity components and requested temporary approval for purchase orders. However, Broadcom rejected this request and strongly demanded that RFFE components be included in the long-term contract.
When Samsung reiterated that including RFFE components in the long-term contract was impossible, Broadcom halted negotiations on March 4 of the same year.
The day after negotiations ended, Broadcom suspended all shipments of components to Samsung, halted technical support during development and production phases, and stopped producing RFFE and connectivity components for Samsung.
Broadcom then demanded either 100% inclusion of RFFE components or an annual purchase of 800 million USD. Although Samsung found this unacceptable, concerns about severe supply disruptions led the company to sign a long-term contract on March 27, agreeing to purchase over 760 million USD worth of components annually.
Once the long-term contract was established, Broadcom immediately lifted all restrictions on component supply, including the suspension of purchase order approvals, shipping, production, and technical support.