Intel Spends $1.5 Billion to Bolster China Market Access

By Ian King 

Intel Corp. (INTC), struggling to break into the market for chips that run smartphones, will spend as much as 9 billion yuan ($1.5 billion) on a stake in Tsinghua Unigroup Ltd., owner of two Chinese chip designers, to speed up its access to the world’s largest mobile market.
Intel will take a maximum 20 percent in the owner of Spreadtrum Communications Inc. and RDA Microelectronics Inc., the Santa Clara, California-based company said in a statement. Spreadtrum will develop products jointly with Intel that will be marketed to its domestic phone-manufacturing customers from the second half of 2015. Tsinghua is a state-funded corporation.
The investment is the latest move by Chief Executive Officer Brian Krzanich to jump-start stalled attempts to get Intel chips into phones, a market dominated by rival Qualcomm Inc. The alliance is Intel’s second with a Chinese company aimed at spreading the use of
Intel’s mobile processors in a country where one service provider alone, China Mobile Ltd., has more subscribers than the population of the U.S.
“China is now the largest consumption market for smartphones and has the largest number of Internet users in the world,” Krzanich said in the statement. “These agreements with Tsinghua Unigroup underscore Intel’s 29-year-long history of investing in and working in China.”
Tsinghua Holdings Co., owner of Unigroup, is a state-owned corporation funded by Tsinghua University. Unigroup bought Spreadtrum in December for about $1.7 billion, taking the company private.

Already There

Intel chose to make the investment because it wants a long-term strategic agreement. The $1.5 billion represents the value Intel sees in a long-term partnership, which will provide greater access to China and to overseas markets when Chinese phone makers expand internationally, Americo Lemos, an Intel vice president, said in an interview.
Intel which already has plants in China, said in May it was teaming up with China’s Fuzhou Rockchip Electronics Co. on a new product for mobile devices. The chipmakers signed an agreement to jointly offer a quad-core processor and integrated modem called Sofia, which will be available in the first half of 2015. Rockchip will market the chip to its Chinese customers.
The world’s biggest chipmaker is deepening its ties with the world’s most populous nation as other companies face challenges doing business there. San Diego-based Qualcomm, the largest maker of phone chips, is among businesses targeted in an antitrust investigation by the National Development and Reform Commission.
China is also investigating Japanese automakers and General Motors Co. In July, authorities raided the offices of software maker Microsoft Corp.
Qualcomm leads the global market for baseband chips that connect mobile phones to networks with a 68 percent share of revenue, according to Strategy Analytics. The market grew 17 percent to $5.2 billion in the second quarter.
Spreadtrum more than doubled shipments of some chips from a year earlier to grab a 5 percent share by revenue and ranked third behind Taiwan’s MediaTek Inc.’s 15 percent slice. Intel was in fifth place behind Marvell Technology Group Ltd.