Qualcomm, Broadcom Partner With Chinese Tech Vendors

The chip makers' moves mirror those of other U.S. companies that are looking for ways to build inroads into the massive Chinese market.

tech business

Chip makers Qualcomm and Broadcom are expanding their efforts in the potentially lucrative China market through partnerships with tech vendors from the country.

Qualcomm is partnering with Semiconductor Manufacturing International Corp. (SMIC), a Chinese semiconductor foundry, Huawei Technologies and others in creating the SMIC Advanced Technology Research and Development Corp., a joint venture that will push R&D toward next-generation chips for both the Chinese market and abroad.

For their part, Broadcom officials on June 25 announced that the company is signing agreements with three Chinese tech vendors—including former Hewlett-Packard networking company H3C Technologies—to push innovation around home entertainment and digital home products.

"It's an exciting time for the China electronics market as it transitions from a manufacturing base to a global leader in design and development," Michael Hurlston, executive vice president of worldwide sales at Broadcom, said in a statement. "This fast-growing and evolving industry represents an important element in our ongoing strategy for continued growth in existing markets and diversification into new areas."

China, with a huge and modernizing population, is an attractive market for outside tech companies. However, the country presents some challenges. Chinese officials are pushing local businesses to buy technology developed and built by Chinese vendors, and China and the United States for several years have traded shots regarding cyber-espionage—as highlighted by the recent hacking of computers of the U.S. Office of Personnel Management, allegedly by Chinese interests that compromised the personal data of millions of U.S. government workers—and the use of technology from foreign vendors. U.S. lawmakers have said products from such Chinese vendors as Huawei Technologies, ZTE and Lenovo threaten national security.

Chinese officials have countered that U.S.-based companies like Intel and Cisco Systems pose similar threats.

That isn't stopping U.S. vendors from trying to gain more traction in the country. Intel has been particularly aggressive, including announcing last year it is investing $1.5 billion in Chinese chip maker Tsinghua Unigroup, giving it a 20 percent stake in the state-owned venture that runs Chinese chip designers RDA Microelectronics and Spreadtrum Communications. Intel also is partnering with Rockchip to create Intel-based systems-on-a-chip (SoCs), and last year created a $100 million fund and said it is building an innovation center in China to fuel the development of smart systems powered by its processors. In December 2014, officials said Intel is spending another $1.6 billion over 15 years to upgrade a chip plant in China.

The OpenPower Foundation is courting Chinese vendors, and Cisco earlier this month announced it will spend $10 billion over the next few years in the country.

Qualcomm has had its own troubled recent history in China. The company in February settled a long-running dispute with Chinese regulators over business practices by paying a $975 million fine. Still, company officials said they were pleased to be a part of the new SMIC joint venture.

"This is a significant milestone for the Chinese and global [integrated circuit] industries, which reinforces Qualcomm's commitment to the continued growth of the vibrant semiconductor ecosystem in China," Qualcomm President Derek Aberle said in a statement. "This venture will serve to better meet the growing needs of local Chinese and global customers who demand high performance, low power mobile devices."

It also will bring more advanced technology and wafer manufacturing capabilities to the country, which will help China build FinFET technology, Aberle said.

According to SMIC officials, the initial focus of the new joint venture—which includes Belguim tech vendor Imec—will be on developing 14-nanometer logic technology for mass production, adding that the goal will be able to shorten development cycles and quickly create products that can meet industry demands. Qualcomm will hold a minority stake in the new company.

Broadcom will work with H3C—which HP sold to Tsinghua Holdings in May for about $2.3 billion—on developing technology for cloud environments and Internet services, as well as Inspur Group and StartTimes on innovating and developing high-end set-top boxes in China and Africa.