Broadcom, the U.S. semiconductor company, has lost an administrative lawsuit challenging a 19.1 billion won fine imposed by Korea's Fair Trade Commission (FTC) for forcing unfavorable contract terms on Samsung Electronics (005930.KS).
The Seoul High Court's Administrative Division 6-1 (presiding judges Kim Min-ki, Choi Hang-seok, and Park Young-ju) ruled against Broadcom's U.S. headquarters, its Korean branch, and two other affiliates on Thursday in their lawsuit seeking to overturn the FTC's corrective orders and fine.
Broadcom is a semiconductor company with a dominant market share in cutting-edge, high-performance wireless communication components used in smart devices such as smartphones and tablets. The company manufactures RF Front-End (RFFE) and connectivity components required for smart devices.
In 2023, the FTC imposed corrective orders and a 19.1 billion won fine on four Broadcom entities, including its U.S. headquarters and its Korean and Singapore branches, for abusing their superior bargaining position in violation of the Fair Trade Act.
In March 2020, Samsung Electronics signed a contract with Broadcom to purchase at least $760 million worth of RFFE components, which enhance communication frequency quality, along with Wi-Fi and Bluetooth-related components, each year for three years starting in 2021. Under the contract, Samsung agreed to compensate Broadcom for any shortfall if purchases fell below that amount.
The FTC determined that during the contract negotiations, Broadcom, the world's No. 1 player in the RFFE market, used unfair means such as halting approval of purchase orders and suspending product shipments and production to unilaterally force unfavorable terms on Samsung Electronics. The commission said Broadcom coerced Samsung into signing the Long-Term Agreement (LTA) to exclude competitors such as Qorvo and Qualcomm, and internally described its own actions, including the suspension of purchase order approvals, as "dropping a bomb," "nuclear bomb," "against corporate ethics," and "threats."
The FTC concluded that Broadcom was the world's leading supplier with an overwhelming share of the RFFE market and that Samsung had no choice but to accept Broadcom's unilateral demands to prevent production disruptions for its newly launched Galaxy S20 and other products.
According to the FTC, Samsung Electronics had limited component choices, was forced to purchase more components than needed, and could not use cheaper competitor parts such as those from Qorvo, resulting in at least $160 million (approximately 213.7 billion won) in additional costs. Samsung has claimed it suffered damages of about $326.3 million (approximately 437.5 billion won), including additional costs, due to Broadcom's coercion over the LTA.
During the FTC's review, Broadcom argued that the contract was a mutually beneficial agreement signed voluntarily, but the argument was rejected. Broadcom also contended that as a component supplier, it was not in a position to exert unfair pressure on Samsung Electronics, and that Samsung had repeatedly broken verbal promises regarding component purchases, leaving Broadcom with no choice but to sign the LTA to maintain the strategic partnership.
