Intel invests $1.5bn in Chinese chip maker, hopes for mobile breakthrough

With little success in mobile to date, Intel has decided to invest in Chinese companies that are beating them at the game.

Intel hopes to boost its presence on mobile phones with a new $1.5bn investment in Tingshua Unigroup, the owner of mobile system on chip (SoC) makers Spreadtrum and RDA.

Intel and Tingshua announced they have signed a series of agreements designed to expand the adoption of Intel-based mobile devices in China.

Intel says it will invest up to 9bn RMB, or about US$1.5bn, to gain approximately a 20 percent stake in Tingshua Group which owns Spreadtrum and RDA Microelectronics, both fabless semiconductor manufacturers that produce SoCs for mobile phones and other devices that support wireless standards such as 3G and 4G.

Tingshua Unigroup is an operating subsidiary of the state-owned corporation funded by the Tingshua University of China, located in Beijing.

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Intel, which has long dominated the PC market, has struggled to gain a foothold in the fiercely competitive mobile market, reporting second quarter 2014 mobile revenues of just $51m compared to $8.7bn for PCs. It made a loss of about $1.1bn on mobile in the quarter.

The deal may also give Intel a leg up in the in the burgeoning Chinese market, which has become a focus for all mobile handset makers. Samsung this week announced plans to launch its Note 4 phablet in China along with Korea, ahead of Western markets.

The focus on China comes as smartphone makers see growth slow in western markets with higher penetration rates, while growth remains higher in emerging markets where demand is stronger for lower-cost devices.

"China is now the largest consumption market for smartphones and has the largest number of internet users in the world," Brian Krzanich, Intel’s CEO, said in a statement.

"These agreements with Tsinghua Unigroup underscore Intel's 29-year-long history of investing in and working in China. This partnership will also enhance our ability to support a wider range of mobile customers in China and the rest of the world by more quickly delivering a broader portfolio of Intel architecture and communications technology solutions."

Tsinghua acquired Shanghai-based Spreadtrum last year in a US$1.7bn merger. Spreadtrum was earlier this year also announced as a key partner on Mozilla's project to deliver a $25 Firefox OS smartphone . Its SoCs, which are aimed at cheaper devices, are also shipped with a number of phones designed for China Mobile's TD-SCDMA network.

So now, besides ARM chips, under the new agreement with Intel, Spreadtrum will jointly create and sell a host of Intel Architecture-based SOCs. Intel expects products to be available in the second half of next year.

The deal is subject to regulatory approval and other closing conditions, according to Intel.

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