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China's IC dream gets $1.5 billion backing

Posted: 29 Sep 2014 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? Spreadtrum Communications? RDA Microelectronics?

China is on a quest to conquer the global semiconductor market, and one chip firm is piggybacking that dream. Intel recently revealed a plan to invest up to $1.5 billion to get about 20 per cent stake in the semiconductor business under Chinese government affiliated Tsinghua UniGroup, which controls local 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.

Intel, on the other hand,is hoping its technology and chips will penetrate the hugely untapped market where millions of consumers own no smartphones or tablets.

The investment 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 fulfil both of those needs.

"Both parties have signed a series of agreements," Intel said last week. 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.

2. Intel vs. China's national priority

China's latest national priority to develop its own semiconductor industry is very different from those in the past. The country is relying on the infusion of private investment funds to let professional financial investors bet on which entities!fabless, foundries, and/or research institutes!deserve the funding.

Reportedly, as much as $98 billion will flow to local governments and their regional private equity investments in China to promote M&A activity. This is in addition to government funds for national IC industry support.

The national blueprint for semiconductor industry development is much more "market driven," according to China hands familiar with the industry. The Intel-Tsinghua Unigroup deal precisely fits the bill of such a market-driven move.

3. ARM vs. X86

There is no question that ARM is winning, not just in China, but everywhere in the world on the mobile segment. That has left little fighting chance for Intel thus far.

But to Chinese companies suffering from a typical me-too product syndrome, since practically everyone in China is doing ARM-based apps processors, Intel could become a breath of fresh air.

Jon Peddie, president of Jon Peddie Research, told us that Spreadtrum has been primarily a radio supplier in the smartphone business. "The best Spreadtrum could do is to be a 'me-too' ARM customer," despite its global ambition to challenge MediaTek. "With Intel's architecture and tech support, they will jump to the forefront and give Qualcomm, MediaTek and [other apps processor companies] a serious run for the money."

4. Intel vs. TSMC (and SMIC)

The deal could give Intel a chance to steal!in the long run!a part of the foundry business from Taiwan Semiconductor Manufacturing Co. (TSMC) in Taiwan and Semiconductor Manufacturing International Corporation (SMIC) in Shanghai.

We do not know at this point if Intel's "series of agreements" with Tsinghua Unigroup include any foundry deals. However, given Intel's foundry ambition, it might make sense for the comany to start early in courting China's fabless companies.

When Intel opened its first wafer fab in Dalian, China, in 2010, the 300mm wafer fabrication facility was said to be equipped to manufacture 65nm chipsets for laptop computers, high-performance desktop PCs, and powerful servers. An industry observer recently told us that the facility is running significantly under its capacity.

- Junko Yoshida
??EE Times





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