China's national quest to expand its domestic semiconductor industry suddenly looks more realistic and even winnable now that Intel Corp., the world's largest semiconductor company, has revealed a plan to invest up to RMB 9 billion ($1.5 billion) -- to get a roughly 20% stake in the semiconductor business under Tsinghua UniGroup. The Chinese government-affiliated private equity company controls the Chinese chip designers Spreadtrum Communications and RDA Microelectronics.
China is buying its way into the global semiconductor market. Getting Intel on its side early on in its quest for a global presence will only accelerate the process -- much faster than China doing everything from scratch and competing head on with advanced semiconductor firms.
Piggybacking on that Chinese dream is Intel, which hopes its technology and chips will penetrate the hugely untapped market where millions of consumers own no smartphones or tablets. The move could be viewed as a stroke of genius by Intel. It is offering to help China build an indigenous mobile force -- via Spreadtrum/RDA -- so that Chinese OEMs and white box vendors will have an alternative to Qualcomm.
China appears to know exactly which of Intel's buttons to push. The company must grow in China and in the rest of the world, and it needs a willing partner to help promote Intel Architecture in the mobile market. China can fulfill both of those needs.
"Both parties have signed a series of agreements," Intel said Friday. The agreements are meant to expand product offerings and adoption for Intel-based mobile devices in China and around the world "by jointly developing Intel Architecture and communications-based solutions for mobile phones."
Though Spreadtrum is unlikely to abandon its own ARM-based mobile chips and switch to Intel's X-86-based solution, Spreadtrum will be surely persuaded to add an X-86-based product line. "Spreadtrum will jointly create and sell a family of Intel Architecture-based system-on-chips (SoCs)," Intel said. "Initial products will be available beginning in the second half of next year and will be Intel Architecture-based SoCs sold by both companies."
Intel's deal with China has ramifications on multiple levels.
1. Qualcomm vs. China
"Alternative to Qualcomm" is an important concept that isn't getting lost in Tsinghua Unigroup's decision to make a deal with Intel. Qualcomm, which dominates the global mobile chip market, has been under investigation in China for almost a year over how it licenses its patents and prices chipsets.
The Chinese government has been reportedly concerned with an ever-widening gap between China's IC consumption and production. As Chinese box vendors make more smartphones and tablets in big volumes using chips developed by companies like Qualcomm or MediaTek, the government sees little room left for Chinese chip designers and foundries to grow. Intel could help solve that worry.