Chip maker Qualcomm Inc. is looking to extend its reach beyond the U.S. shores and has collaborated with China's People's Government of Guizhou Province for a joint venture worth $280 million.
On Sunday, the chip maker took another step towards strengthening its relations with China as it partnered with People's Government of Guizhou Province for the venture dubbed the Guizhou Huaxintong Semi-Conductor Technology Co., Ltd, which will focus on the development, design and sale of advanced server chip technology.
"The actions announced today are important steps for Qualcomm as we deepen our level of cooperation with, and investment in, China. We have worked actively with our partners in China for more than 20 years; however, the strategic cooperation with Guizhou represents a significant increase in our collaboration in China," said Derek Aberle, president of Qualcomm.
The joint venture has a registered capital of RMB 1.85 billion which is equivalent to $280 million. 55 percent of the stakes in Guizhou Huaxintong Semi-Conductor Technology Co. Ltd is owned by the investment arm of the provincial government of Guizhou. The remaining 45 percent stakes are under the ownership of a Qualcomm subsidiary.
As part of the terms of the deal, Aberle said that Qualcomm will not only be pumping in capital, but also be licensing its server technology to the new entity. This will aid the new entity to create an altered variant of the chipset which will cater to the requirements of the Chinese market.
Qualcomm will also be helping the new entity in R&D and "implementation expertise." The U.S.-based chip maker will also be establishing an investment arm in Guizhou through which future investments in China will be taken care of.
Moreover, the new entity's engineers — in tandem with Qualcomm — will be working towards the creation of a novel server chip for China. This server chip will be throwing the gauntlet to offerings from Intel. Currently, Intel rules the roost in the market, in the context of offering silicon to data centers.
The Guizhou Huaxintong Semi-Conductor Technology Co., Ltd. will begin by selling the server designs belonging to Qualcomm. The server designs were shown off by Qualcomm in October 2015 and are anticipated for a 2016 launch. However, with time the server chips will be customized to fit the requirements of the local Chinese consumers.
Qualcomm is optimistic that the joint venture will create a "win-win scenario" for both the company and its partner.
