Intel Corp., has invested $1.5 billion in Tsinghua Unigroup Ltd today, a low-cost Chinese chip maker, as a part of its strategy to accelerate the sales of Intel’s chips in Chinese markets.
The Santa Clara, Calif.-based tech giant revealed that it would buy 20% of the state-owned holding company that operates two leading Chinese chip manufacturers - Spreadtrum Communications and RDA Microelectronics. The agreement comes following Intel’s announcement in May of a deal with another growing Chinese chip manufacturer Fuzhou Rockchip Electronics Co.
Intel has reinforced its efforts to expand its presence in the smartphone and tablet market that is slowly taking over PC market. As a part of its new strategy, Intel is now teaming up with rival Chinese chip makers who dominate smartphone and tablet market, with the aim of putting its technology in 40 million mobile devices by the end of this calendar year.
Reene James, Intel’s president, in an interview with the Wall Street Journal, earlier this year said that the company acknowledged that it required partners to help its customer-base in developing markets and adjust to the fast production cycles in the Chinese market. Chinese chip manufacturers have been early adapters of the “turnkey solution” in which they offer an entire device template to manufacturers alongside the chip, bringing about low generation expenses and fast turnaround times.
The most recent partnership with Tsinghua could turn out to be vital for a state-owned firm with much bigger government goals backing it. Last year Tsinghua acquired two major Chinese chip manufacturers, Spreadtrum and RDA for $1.78 billion and $907 million respectively.
China's Ministry of Industry and Information Technology has expressed its objective of manufacturing a comprehensively aggressive semiconductor industry, in spite of the fact that its engineering still lingers behind. In December last year, it was announced that it would put $5 billion into the semiconductor sector to boost mergers and upgrade their production assemblies.
It was announced that Intel and Tsinghua would jointly create Intel-based chips for mobile devices for China and other emerging markets.
Brian Krzanich, CEO of Intel in a statement said that the partnership would help Intel in "more quickly delivering a broader portfolio of Intel architecture and communications technology solutions."
Tsinghua Chairman Zhao Weiguo called the improvement of China's semiconductor industry "a national priority" in a statement, adding that Intel's $1.5 billion investment would "accelerate the technology development and further strengthen the competitiveness and market position of Chinese semiconductor companies."
The deal is expected to complete in early 2015, and is subject to regulatory approval.