TAIPEI, Taiwan (TheStreet) -- It's easy to forget in the context of China's global economic magnetism that a Communist party bent on long-term survival has run the country for 65 years. Per doctrine, a Communist state must periodically accuse foreigners of aggression to retain support, casting its own people as victims who should rally around their ethnic kin in power.
China once went after just foreign countries such as the United States. But the rise of multinational companies based offshore has added new propaganda punching bags as China tries to inspire growth in domestic private business.
Take, for example, American microchip maker Qualcomm (QCOM) .
China's not calling the company a foreign imperialist power. But a yearlong investigation of Qualcomm's business practices, possibly over now with stiff punishments on the way, has a storybook quality that could incite revolutionary vigor among China's peasant-class startups.
For investors wondering about Qualcomm's shares on Nasdaq, let's cut first to the story's likely end: The foreign force meekly takes China's heat, a lot of it in this case, but then stays in the huge market because it pays -- just less than before any fines and new restrictions.
Qualcomm shares already went up in early December after reports that the probe would soon end, showing confidence in its survival in China long term. A week later, Qualcomm said it had committed to investing $40 million in four Chinese tech firms and a venture-capital firm.
Jumping back to the middle of the story, state-run newspaper China Daily says Qualcomm's cross-licensing agreement "has been considered an unfair deal" because it gave the company rights to the patents of Chinese smartphone producers that use its chips. The smartphone companies can't in turn charge patent fees to Qualcomm's customers, the paper says.
This analysis doesn't speak about what Qualcomm did or didn't do, or should or shouldn't have done. Qualcomm declined comment.
But government media in China already have their version: Qualcomm will probably be fined at least $1 billion and ordered to cancel any cross-licensing agreements with Chinese smartphone makers, their reports say. It will also be told to cut licensing fees.
"A ruling forcing it to significantly reduce its licensing fees in China would definitely be a blow to the company, as it would likely be applied not only to sales of chips to Chinese makers like Huawei, ZTE, and Lenovo, but also to other big global brands like Apple (AAPL) that manufacture their phones in China," says Mark Natkin, managing director of Marbridge Consulting in Beijing. "It would also set a precedent in other markets, which would likely demand a similar adjustment to licensing fees and other terms."
A wise forecast. In other markets, pharmaceutical giant GlaxoSmithKline (GSK) was fined the equivalent of $482 million in September over bribery. In 2012, rights groups accused South Korea's Samsung Electronics (SSNLF) of forcing workers to sign blank contracts and hiring people under age.
Chinese firms are up to the same mischief as their foreign peers are, but pay less in proportion to their numbers, especially in terms of bad publicity. The Communist narrative would work backward if their cases got as much press as the big foreign ones.
For the would-be victim side of the Qualcomm story, if it's true, homegrown smartphone developers would pay 5% less to make advanced-model smartphones by avoiding Qualcomm's patent fee, says Wang Jun, senior analyst with Beijing-based consultancy Analysys International. That break would help Nasdaq-traded Lenovo (LNVGY) and Shenzhen-listed Huawei Technologies.
"Their costs will go down a lot," Wang says. As of now, "None of the makers can get around this supplier."
At least that's what the government wants its people to hear.
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TheStreet Ratings team rates QUALCOMM INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUALCOMM INC (QCOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, growth in earnings per share and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
You can view the full analysis from the report here: QCOM Ratings Report