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Dell, Qualcomm and Brocade are all using partnerships with Chinese entities to expand their presence in the country’s massive market.
Officials with all three U.S. tech vendors this past week said they are either creating joint ventures with Chinese companies or the government or investing in a Chinese-owned startup to gain more traction in a country that offers one of the fastest-growing tech markets in the world but that also has made it increasingly challenging over the past several years for foreign technology companies to do business there.
According to the China Daily newspaper, Dell CEO Michael Dell this past week said his company is investing in a cloud startup in China that is owned by Guizhou Wing Cloud High Technology, which has been partnering with Dell in the Chinese cloud market since last year. Michael Dell made the announcement during the China Big Data Industry Summit in Guiyang, capital of the Guizhou province.
Dell will offer technology support to the startup, called Guizhou YottaCloud Technologies Co. Ltd. The company also will be a way for Dell to sell cloud services to small and midsize businesses in China, which is Dell’s second-largest market in the world, behind the United States.
For his part, in an interview with the Wall Street Journal, Derek Aberle, president of chip maker Qualcomm, talked about his company’s work with the Chinese government to create a joint venture that will enable Qualcomm to build and sell custom processors in the country. Qualcomm is the world’s largest provider of systems-on-a-chip (SoCs) for smartphones, but the chips developed via the joint venture will be for servers that will run in data centers, power Website and store data.
Qualcomm officials first announced the partnership in January. Qualcomm will own 45 percent of the joint venture, with the other 55 percent being owned by the Guizhou government.
It’s a win for Qualcomm not only because it gives the company another foothold in China, but it also furthers the company’s ambitions to sell ARM-based server processors, which will be increasingly important to Qualcomm as the smartphone market continues to slow. Qualcomm is one of a number of chip makers—including Applied Micro, Cavium and Advanced Micro Devices—looking to bring ARM’s low-power SoC designs into the data center in servers, networking systems and storage devices.
“This is really going to be the primary vehicle from which we build our data center business in China,” Aberle told the Wall Street Journal. “We are actually trying to create the company that is going to be able to win the market here as opposed to just licensing old technology.”
Brocade officials May 27 announced a partnership with Guiyang High-Tech Industrial Investment Group to create a joint venture called Guizhou Huiling Technology Co. Ltd. that will combine Brocade’s data center networking offerings with Guiyang’s big data technologies.
The new company will sell Brocade networking products and services, including switches and routers, to the local government in Guizhou as well as state-owned organizations, universities and enterprises. Guiyang will own 51 percent of the new company, and Brocade will own 49 percent.
The agreements announced by Dell, Qualcomm and Brocade are the latest examples of U.S. companies hooking up with Chinese vendors or governments to gain entry into the market. Chinese lawmakers over the past several years, due to a desire to grow the country’s own tech sector as well as ongoing suspicions of state-sponsored espionage between China and the United States, have put regulations in place that call for U.S. companies to partner with their counterparts in China.
Editor’s note: This story has been changed to better reflect the details of Brocade’s agreement with Guiyang.
Dell, Qualcomm, Brocade Pave the Way Into China via Partnerships
A broad array of U.S. tech vendors, including Intel, Hewlett Packard Enterprise and Cisco Systems, have announced partnerships in China, and many also have unveiled other investments in the country. Dell officials in September 2015 said the company would invest $125 billion in the China market over a five-year period, which will drive the vendor’s “In China, for China” 4.0 strategy. Like other tech executives, Michael Dell has argued that future growth will come from emerging regions.
“When you’re talking about the next billion users, they’re not going to come from developed markets,” he said during an interview with foreign journalists at the Dell World 2014 show. “They’re going to come from developing markets.”
Qualcomm’s relationship with China has been complicated. The company last year agreed to pay a $975 million fine and change its business practices to settle an antitrust investigation by Chinese regulators. Qualcomm also has been working with Chinese device OEMs in the country to reach licensing agreements in line with the NDRC settlement. In addition, Qualcomm in 2014 said it was investing $40 million in Chinese companies and creating a $150 million fund for the Chinese market, and last year partnered with Huawei Technologies, Chinese foundry Semiconductor Manufacturing International Corp. and others to create the SMIC Advanced Technology Research and Development Corp., a joint venture to push R&D toward next-generation chips for both the Chinese market and abroad.
Brocade officials said the alliance with Guiyang was only a step in the company’s China strategy.
“As Brocade continues to expand our investments in high-growth markets such as China, partnerships with innovative local government entities are critical,” Ken Cheng, CTO and senior vice president of corporate development and emerging business at Brocade, said in a statement.