Intel Invests $1.5 Billion in Chinese Mobile Chip Makers

The deal will help Intel in its efforts to gain more traction in the mobile chip space and to grow its presence in the booming China market.

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Intel is investing $1.5 billion in Chinese chip maker Tsinghua Unigroup, the latest move in its effort to expand its reach in the competitive mobile processor market and a way to grow its presence in the increasingly important Chinese market.

The investment, which will give Intel a 20 percent stake in the state-owned venture that runs Chinese chip designers RDA Microelectronics and Spreadtrum Communications, is the second alliance Intel has made with a Chinese chip manufacturer this year. In May, Intel officials announced the company was partnering with Rockchip—which has a history of making ARM-based chips—to create Intel-based systems-on-a-chip (SoCs) for the tablet market.

Intel also has made other efforts to establish a strong presence in China, from partnering with Chinese search giant Baidu last year to create software for the country's mobile Internet market to its decision this year to create an innovation center in China to fuel the development of smart systems—from smartphones to wearable devices—that are powered by Intel Architecture.

"China is now the largest consumption market for smartphones and has the largest number of Internet users in the world," Intel CEO Brian Krzanich said in a statement Sept. 26, noting the company's 29-year history of investments in the country. "This partnership will also enhance our ability to support a wider range of mobile customers in China and the rest of the world by more quickly delivering a broader portfolio of Intel architecture and communications technology solutions."

Since taking over the top spot last year, Krzanich has ramped up Intel's efforts to gain traction in a mobile chip market dominated by ARM and its chip manufacturing partners—including Qualcomm and Samsung—and has said partnerships will be a key part of the effort. Intel also has spent several years driving down the power consumption in its energy-efficient Atom platform so that the chips are more competitive with ARM's designs, and has accelerated the development schedule for the Atom chips.

Intel has had some design wins in smartphones, and officials have said the company is on track to see 40 million Intel-based tablets ship this year. At the same time, the company has been pushing new PC form factors—such as two-in-ones, which can be used as both a traditional laptop and as a tablet—in hopes of reviving the global PC market; is branching out into a wide range of new markets, including wearable devices, microservers and the Internet of things (IoT); and is growing its foundry business so it can build chips for other vendors.

The agreement with Tsinghua Unigroup, which is expected to close in early 2015, will help Intel grow the product offerings and drive adoption of mobile devices powered by Intel chips in China, the companies said. Spreadtrum and RDA both create mobile chipsets for consumer electronic devices—including smartphones and feature phones—that support the 2G, 3G and 4G wireless standards. Spreadtrum and Intel will jointly develop and sell Intel-based SoCs, with the first products from the partnership coming onto the market in the second half of 2015.

Chinese government officials have been vocal in their ambitions to see companies in the country grow their presence in the global semiconductor market, according to Zhao Weiguo, chairman and president of Tsinghua Unigroup.

"It has become a national priority of China to grow its semiconductor industry," he said in a statement, adding that the agreement with Intel shows the chip maker's "confidence in the Chinese market and strong commitment to Chinese semiconductor industry, which will accelerate the technology development and further strengthen the competitiveness and market position of Chinese semiconductor companies."

The Intel deal also comes at a time when Qualcomm—the world's largest mobile chip supplier—is dealing with problems in China, particularly an antitrust investigation. However, Qualcomm Chairman Paul Jacobs earlier this month said during a trip to China that the company's business opportunities in the country are still strong, according to a report in Bloomberg. According to the report, Qualcomm is working with 90 partners on developing devices in the country.