(Yicai) Jan. 26 -- Shares of Chinese radio frequency chipmaker Kangxi Communication Technologies, known as Kxcomtech, jumped more than 10 percent today after the United States International Trade Commission issued a preliminary ruling finding that the company did not infringe Skyworks Solutions’ patent rights.

Kxcomtech [SHA: 688653] opened at CNY15.88 (USD2.30) per share today, up over 10 percent, before paring gains to 2.9 percent by the close.

The Shanghai-based company said it learned on Jan. 24 that the USITC had ruled its subsidiaries did not infringe two Skyworks patents, while investigations into the remaining three patents were terminated after Skyworks withdrew those claims during the evidence disclosure stage.

The ruling is significant for China’s emerging semiconductor players competing under international intellectual property rules. While the dispute marks a legal win for Kxcomtech, the multi-year litigation has already cost the firm more than CNY100 million (USD14.4 million) in attorney and legal fees, far exceeding its annual profits in recent years.

The dispute has not yet concluded. Skyworks retains the right to request a review of the preliminary ruling within the statutory period, after which the case would enter the USITC’s administrative review and final ruling stage. A final decision is likely to be issued in May, Kxcomtech Deputy General Manager Zhao Huan said.

Patent battle background

“This preliminary victory demonstrates that the products of Chinese enterprises can withstand international scrutiny and that we have the confidence and capability to compete with industry giants,” Chairman Peng Ping said at a communication meeting today. He described the case as a clash between companies with vastly different scales.

Skyworks reported revenue of about CNY28 billion (USD4 billion) in 2024, while Kxcomtech generated only around CNY500 million. Over the past five years, Kxcomtech’s highest annual profit was nearly CNY20.5 million (USD2.9 million) in 2022, meaning the lawsuit has consumed several years of earnings.

Skyworks first filed a patent infringement lawsuit in May 2024 with the United States District Court for the Central District of California against Kxcomtech and Grand Chip Labs, Kxcomtech’s US subsidiary focused on research and development of RF front-end chips and overseas market expansion. Skyworks alleged that some of Kxcomtech’s Wi-Fi radio frequency front-end modules infringed five US patents and sought damages of up to three times its losses, as well as a market ban.

In July 2024, Skyworks also applied for a Section 337 investigation with the USITC, requesting general and limited exclusion orders and injunctions. Zhao said the ITC’s findings carry significant weight for the California court case, adding that if the final ITC ruling confirms no infringement, Skyworks’ lawsuit in California would be substantially weakened and could even struggle to proceed.

Market implications

Skyworks and Qorvo, two American companies, together account for more than half of the Wi-Fi communication market. Skyworks’ major clients include Apple, although Apple has been seeking alternative radio frequency module suppliers beyond Skyworks, putting pressure on the company’s business performance.

Kxcomtech, which focuses on radio frequency front-end chip design, does not regard the US as its primary market. In 2024, its overseas sales were mainly in Hong Kong and Taiwan, while other overseas markets accounted for less than 5 percent of total revenue. Its overseas expansion has focused on Southeast Asia and Europe.

“European and Southeast Asian customers once took a wait-and-see approach to purchasing our products, but the preliminary ruling has dispelled those concerns,” Peng said, adding that the decision also provides crucial legal backing for exports to the US market.

To respond to Skyworks’ patent lawsuits and the Section 337 investigation, Kxcomtech hired a specialized legal team in the US and spent CNY38.8 million on litigation and attorney fees in 2024, when it reported a net loss of CNY76 million. The company spent another CNY50.6 million on related legal costs in the first three quarters of last year.

Taking into account the upcoming final ruling and further proceedings in the California court, total litigation and attorney fees are expected to exceed CNY100 million, most of which are attorney fees. Under US practice, the losing party does not cover the winning party’s legal costs.

Editor: Emmi Laine