South Korea's competition regulator has fined Qualcomm 1.03 trillion won ($854m) for what it called unfair business practices in patent licensing and modem chip sales.

The US chipmaker said it will challenge the decision in court. 

The fine, the largest ever levied in South Korea, marks the latest competition setback for Qualcomm's most profitable business of licensing wireless patents to the mobile industry.

It comes at a time when the business is facing headwinds from a cooling smartphone market. 

The Korea Fair Trade Commission (KFTC) ruled that Qualcomm abused its dominant market position and forced handset makers to pay royalties for an unnecessarily broad set of patents as part of sales of its modem chips. 

Qualcomm also restricted competition by refusing or limiting licensing of its standard essential patents related to modem chips to rival chipmakers such as Intel, Samsung Electronics and MediaTek, the regulator said.

This hindered their sales and left their products vulnerable to lawsuits. 

The regulator ordered Qualcomm to negotiate in good faith with rival chipmakers on patent licensing and renegotiate chip supply agreements with handset makers if requested.

These measures would affect the US firm's dealings with major tech companies including Apple, Intel, Samsung and Huawei Technologies if upheld. 

The KFTC said it began its investigations into Qualcomm's practices in 2014 following complaints from industry participants, but did not name specific companies. 

Foreign companies including Apple, Intel, MediaTek and Huawei expressed their views during the regulator's deliberation process, KFTC Secretary General Shin Young-son told a media briefing in the country's administrative capital. 

"We investigated and decided on these actions because Qualcomm's actions limit overall competition," Shin said.

He added that the ruling was not about protecting domestic companies such as Samsung and LG Electronics but about improving market competition for all players. 

Qualcomm said it will file for an immediate stay of the corrective order and appeal the decision to the Seoul High Court. The firm will also appeal the amount of the fine and the method used to calculate it.

"Qualcomm strongly disagrees with the KFTC's announced decision," it said in a statement.

The fine is the latest in a series of competiton rulings and investigations faced by Qualcomm from regulators across the globe. 

In February 2015, Qualcomm paid a $975m fine in China following a 14-month probe, while the European Union in December 2015 accused it of abusing its market power to thwart rivals. 

The KFTC fined Qualcomm 273 billion won in 2009 for abusing its dominant position in CDMA modem chips, which were then used in handsets made by Samsung and LG.

Regulators in other jurisdictions, including the US and Taiwan, are also investigating Qualcomm. 

The KFTC move could serve as a benchmark for some of them.