Sat, Sep 27, 2014 - Page 15 News List

Intel seeks US$1.5bn China investment

MUTUAL BENEFITS:The collaboration would enable access into the Chinese mobile chip market, while offering support to China’s semiconductor industry companies

Reuters, BEIJING

Intel Corp said it will pay as much as US$1.5 billion for a 20 percent stake in two mobile chipmakers with ties to the Chinese government, in the hopes of catching up in a smartphone chip industry dominated by rival Qualcomm Inc.

Intel is set to acquire the stake in Spreadtrum Communications Inc (展訊通信) and RDA Microelectronics Inc (銳迪科微電子) through a deal with Tsinghua Unigroup (清華控股), a government-affiliated private equity firm which owns the two mobile chipmakers.

The landmark deal would give Intel a greater foothold in the Chinese mobile chip market, which has become a nexus of the global smartphone industry.

Conversely, the deal would provide two Chinese chipmakers support from a US semiconductor giant on chip design and development, an area deemed to be of vital strategic importance by Beijing.

“It has become a national priority of China to grow its semiconductor industry,” Tsinghua Unigroup chairman Zhao Weiguo (趙偉國) said in a statement released by Intel on yesterday.

“The strategic collaboration between Tsinghua Unigroup and Intel ranges from design and development to marketing and equity investments, which demonstrates Intel’s confidence in the Chinese market and commitment to the Chinese semiconductor industry,” Zhao said.

Intel’s stake will be via a newly created holding company that owns the units Spreadtrum Communications and RDA Microelectronics, Unigroup said, adding that the deal is still waiting for government approval.

Unigroup is controlled by the prestigious Tsinghua University in Beijing.

The institution counts Chinese President Xi Jinping (習近平) as one of its alumni.

The Chinese government has said in published policy papers that it views semiconductors as an industry of vital strategic importance and hopes to spur its development domestically.

Since chief executive officer Brian Krzanich took the helm last year, Intel has pursued an array of deals and strategies to ensure its chip technology gets into more smartphones and tablets.

The newest investment comes less than six months after Intel reached an agreement with Chinese chip maker Rockchip Electronics Co (瑞芯微電子) to make inexpensive tablet chips with Intel’s architecture and branding.

Krzanich has also opened the chipmaker’s prized, cutting-edge factories to paying customers.

More recently he has struck partnerships in the fashion world with companies such as Fossil Group and Opening Ceremony to design stylish smart clothing.

“Intel’s new CEO has proven to be willing to take on new partnerships and approach new business opportunities that stray from prior conventions,” Topeka Capital Markets analyst Suji Da Silva said.

“They should do as much of this as they need to be in markets that are important to them,” he added.

While Intel excels at developing processors for laptops and desktop computers, it has less experience designing “system on chips,” or SoCs, the key processors on mobile devices, which combine features such as modems, Wi-Fi and memory.

The company’s stock has risen 32 percent this year, in part because of stabilization of demand for personal computers.

With demand for smartphones cooling in the US, manufacturers have increased their focus to China, where demand is strong for handsets priced under US$150.

Spreadtrum is one of several chipmakers that specialize in turnkey smartphone platforms that are easy for manufacturers to use.

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