QIHU Qihoo 360 Technology Co. Ltd. American Depositary Shares, Every 2 of Which Representing Three Class A Ordinary Shares

By Don Clark and Anne Steele 

Qualcomm Inc. is picking up more patent licensing deals in China, a sign of progress in protecting a business that provides more than half of the chip maker's profits.

The company said Tuesday that two Chinese smartphone makers, Beijing Tianyu Communication Equipment Co. and Haier Group, agreed to pay royalties under patent licenses that allow them to manufacture mobile devices using 3G and 4G wireless technologies.

Qualcomm's announcement comes one day after it announced a similar deal with QiKu Internet Network Scientific (Shenzhen) Co., a joint-venture of Qihoo 360 Technology Co. Ltd. and Coolpad Group Ltd. that sells smartphones and other products.

Financial terms weren't disclosed. But Qualcomm said the three deals were consistent with the licensing terms set under a settlement in February with China's antitrust agency.

Qualcomm, based in San Diego, gets most of its revenue from selling chips that handle wireless communications and calculating chores in smartphones. But a bigger share of profits comes from licensing patents on wireless inventions.

The company's licensing practices have prompted a series of government investigations, including probes by the U.S. Federal Trade Commission and agencies in South Korea and Taiwan. European authorities are investigating issues related to chip sales.

The company has said it is cooperating with the investigations and believes it is acting legally.

The China settlement, which followed an investigation that stretched for 18 months, had been expected to trigger a stream of licensing agreements with Chinese handset makers. But Qualcomm in early November cited continuing delays in reaching licensing deals in China when it reported a 44% drop in profit in the fiscal fourth quarter and issued disappointing earnings guidance for the year.

Those disclosures sent Qualcomm's shares down 15% in a single trading session. The stock remains off more than 30% for 2015, despite a 3% rise Tuesday and subsequent signs of progress in China.

Earlier this month, for example, Qualcomm reached a patent-licensing deal with Xiaomi Corp., one of China's largest smartphone makers. The company had previously disclosed deals with China's Huawei Technologies Co., TCL Communication Technology Holdings Ltd. and ZTE Corp.

Qualcomm has also been in talks with Lenovo Group Ltd., people familiar with the matter have said, but no deal has been announced.

Steve Mollenkopf, Qualcomm's chief executive, said on Dec. 15 that the company was "actively engaged" in negotiations with all remaining major Chinese handset makers. "And although the timing is uncertain, we remain confident we will conclude additional agreements over time," he said.

Those comments followed Qualcomm's decision not to split the company's chip business from its patent licensing business after a lengthy study prompted by pressure for change from an activist investor.

Despite recent signs of licensing progress, some analysts have continued to publish bearish reports on the company, predicting that its royalty rates likely will decline over time. Meanwhile, the company's market share in mobile chips faces growing competition from companies such as MediaTek Inc., a unit of Huawei, and the internal design operations of smartphone makers Apple Inc. and Samsung Electronics Co.

Will Strauss, an analyst with market research firm Forward Concepts, said MediaTek is selling chips "like gangbusters" in China, but he is becoming more optimistic about Qualcomm's financial position following the recent licensing deals.

"They are finally getting that straightened out," he said.

Write to Don Clark at don.clark@wsj.com and Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

December 29, 2015 17:04 ET (22:04 GMT)

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