Intel is paying $1.5 billion for a 20 percent stake in two China-based chip makers and forging new partnerships to develop Intel-branded processors for smartphones and other mobile computing devices.
Spreadtrum Communications and RDA Microelectronics are controlled by Tsinghua Unigroup Ltd., which is a state-owned company based in Beijing.
"It has become a national priority of China to grow its semiconductor industry," said Tsinghua Unigroup Chariman Zhao Weigo. "The strategic collaboration between Tsinghua Unigroup and Intel ranges from design and development to marketing and equity investments, which demonstrate Intel's confidence in the Chinese market and strong commitment to Chinese semiconductor industry."
Speculation surrounding the deal has been circulating in Chinese media for a number of weeks however the deal was not confirmed until Friday.
The move is seen as an attempt by Intel to become more competitive in the smartphone and tablet processor market, which is currently dominated by the likes of Qualcomm. Intel is likely trying to recreate the success it has had with personal computers.
Through the Chinese partners, Intel will develop a new set of chips for smartphones and tablets to be released next year. The deal itself will close at some point in 2015.
The Tsinghua Unigroup is controlled by Tsinghua University in Beijing, which counts China's President, Xi Jinping, as one of its alumni.
Intel has begun perusing a number of new deals since Brian Krzanuch became CEO last year.
"Intel's new CEO has proven to be willing to take on new partnerships and approach new business opportunities that stray from prior conventions," said Suji Da Silva, analyst at Topeka Capital Markets. "They should do as much of this as they need to be in markets that are important to them."
Intel has enjoyed a very successful 2014 so far, partly because of the stabilization in demand for computers. The company's stock has risen 32 percent. Despite this, shares in the company dropped 13 cents to $34.01 on Friday morning.
Demand for smartphones in countries like the United States has begun to drop, causing many companies to turn to emerging markets. There is a very strong demand in China for smartphones that sell for under $150.
Creating alternatives to Qualcomm runs deeper in China than simply developing new chips. Qualcomm has been under investigation in the country for over a year now due to allegations regarding license patents.
