Broadcom Announces 'Gapjil Prevention Measures' Including 20 Billion Investment and Ban on Contractual Penalty Fees

[Asia Economy Reporter Eunju Lee] Broadcom, a U.S. semiconductor company accused of abusing its power against domestic manufacturers such as Samsung Electronics, has presented measures to prevent such abuses. Along with corrective measures prohibiting forced actions in parts supply contracts, it also proposed an investment plan worth 20 billion KRW to promote coexistence with small and medium-sized enterprises. For Samsung Electronics, which was the target of the abuse, Broadcom promised technical support and quality assurance policies for purchased parts.

On the 9th, the Korea Fair Trade Commission (KFTC) announced that a provisional consent decree for Broadcom, based on these contents, has been prepared. The consent decree will be finalized after a 40-day period from the 10th to February 18, during which opinions from stakeholders and related ministries will be collected. The consent decree system allows a business operator to propose reasonable corrective measures such as restoration and compensation for damages, and if the KFTC recognizes their validity after collecting opinions from stakeholders, the case is swiftly resolved without determining illegality.

Broadcom proposed a plan to restore fair competition by not forcing supply contracts through unfair means such as halting shipment of parts, stopping purchase order approvals, suspending technical support, or production stoppages to domestic smart device manufacturers. It also pledged not to prevent its trading partners from dealing with its competitors. Furthermore, to implement these corrective measures, Broadcom plans to appoint an independent supervisor and establish and operate a ‘compliance system’ to ensure adherence to the Fair Trade Act.

Broadcom will create a fund worth 20 billion KRW to support coexistence in the domestic semiconductor industry. The Korea Semiconductor Industry Association will independently establish a ‘Semiconductor Talent Development Center (tentative name)’ with Broadcom to operate semiconductor talent education programs. Additionally, to support startups of small fabless companies (companies specializing in semiconductor design without direct production), an ‘Innovation Design Center (tentative name)’ will be established and operated, and an environment for verifying the functions and performance of semiconductor prototypes will be built.

The KFTC explained that this amount exceeds the maximum fine that can be imposed. Shim Jae-sik, Director of the Manufacturing Monitoring Division of the Market Surveillance Bureau, stated, "It is difficult to accurately estimate the damage scale, but if a fine were imposed on Broadcom, the amount would certainly exceed the maximum level of fines that can be imposed." He added, "Samsung Electronics estimates the damage caused by Broadcom to be in the tens of billions of KRW." Meanwhile, in 2021, Apple Korea promised coexistence support worth 100 billion KRW as a consent decree measure for the allegation of forcing iPhone advertising and repair costs onto domestic mobile carriers.

Regarding Samsung Electronics, Broadcom promised a three-year quality guarantee for parts purchased during the long-term contract period (March 27, 2020 ? July 2, 2021). It also agreed to provide technical support upon Samsung Electronics’ requests. Broadcom is accused of forcing long-term contracts on domestic smart device manufacturers such as Samsung Electronics to exclude competitors, thereby preventing the use of other companies’ products. Director Shim explained, "The long-term contract was voluntarily corrected and terminated by Broadcom, so there are no ongoing transactions. This measure was intended to completely exclude the possibility of deliberately withholding technical support requests from Samsung Electronics or providing disadvantages."

The Korea Fair Trade Mediation Agency will monitor Broadcom’s implementation plan. Broadcom must submit reports on the implementation of corrective measures to the Mediation Agency for the next five years. The KFTC stated, "Since the start of the consent decree process, we have prepared the provisional consent decree through several consultations with Broadcom over about 130 days. The final consent decree will be finalized after reviewing the collected opinions and undergoing further deliberation and resolution by the KFTC."

This content was produced with the assistance of AI translation services.