Korea's FTC fines Broadcom $14.3M for pushing 'unfair' deal onto Samsung

Updated South Korea's Federal Trade Commision (FTC) has issued a $14.3 million fine to US chipmaker Broadcom for "unfair" practices against Samsung Electronics.

In addition to today's fine, the regulatory watchdog will also issue a corrective order.

According to the Korean FTC, Broadcom abused its market position and "forced" Samsung to enter into what it described as an unfavorable long-term parts supply contract in 2020.

The contract required the purchase of $760 million annually between 2021 and 2023, and compensation to the chipmaker if Samsung's orders fell short. It also required Samsung remain loyal to Broadcom and not buy from rivals.

According to the watchdog, Broadcom put pressure on Samsung by threatening to suspend part shipments, purchase order approval and technical support. The FTC also accused Broadcom of inflating its price.

In pre-pandemic 2020, the market was tight, with Samsung competing against Apple in particular both in the market place and for chips. This led Samsung to sign the contract with Broadcom, but the pandemic arrived and conditions changed as demand for phones deteriorated.

The chaebol soon found itself with a host of parts it couldn’t use, and subsequently lost millions.

According to local media, the deal ended in August 2021.

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But in 2022, the FTC was made aware of the situation and began seeking corrective action. It asked Broadcom to solve the dispute, a common procedure in such cases.

Broadcom proposed a $15.5 million fund for South Korea’s small semiconductor companies and some support for Samsung, but the FTC turned down the proposal, meaning the FTC would be determining a solution instead.

The FTC said on Thursday that Broadcom’s behavior took away the opportunity for other industry players to compete, as well as the incentive for parts manufacturer to invest, thus hindering innovation and passing down the damage to consumers.

It also claimed the anticompetitive actions would have a ripple effect across industries, as the semiconductor market includes smart devices, automobiles, robots, artificial intelligence (AI), and more. ®

Updated at 1407 to add:

Broadcom has been in touch to say it was "disappointed with the decision announced by the Korea Fair Trade Commission (KFTC) today and intends to appeal the decision to the Seoul High Court."

It added: "For decades, Broadcom has been working closely with Korean customers in a fair and lawful manner and has made significant contributions to the innovation and success of the Korean economy and some of its largest technology organizations. In this matter, Broadcom worked very closely with the staff of the KFTC to reach a mutually beneficial outcome that is fair and reasonable for all parties involved and unfortunately, as a result of the unprecedented intervention of some third parties, the joint recommendation of Broadcom and the KFTC staff was not adopted by the Commission itself.

"Despite this, Broadcom will continue to support our customers in Korea and work with them to deliver the market leading products for which we are known."