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Big spender: MediaTek ploughs $48.9M into China's chip fund

Posted: 26 Nov 2014 ?? ?Print Version ?Bookmark and Share

Keywords:China? Shanghai? investment? MediaTek?

Taiwan's MediaTek is pouring $48.9 million into a China's chip fund in a move that is positioned to strengthen its foothold in the world's largest smartphone market.

MediaTek said in a Nov. 24 statement that it will invest in the fund created by the Shanghai City Government and Chinese venture capital firm Summitview Capital. (See $1.7B fund promises to boost China's semicon market) The fund will have $487 million initially and increase to $1.6 billion.

MediaTek's planned investment comes as China's chip industry is expected to outpace global growth during the rest of this decade. The company is aiming to catch up with Qualcomm in China's smartphone chip business, where Qualcomm has about half of the market, followed by MediaTek with a quarter.

China's largest chip foundry, Semiconductor Manufacturing International Corp. (SMIC), is also an investor in the fund. Other participants include U.S.-based Knight Capital, Shanghai Jiading Venture Capital Fund and Tsinghua University's Tsinghua Holdings Co.

In Shanghai to sign the agreement, MediaTek chairman Tsai Ming-Kai said his company aims to invest in the fund to build a deeper alliance with China and enhance MediaTek's competitive edge in the global semiconductor industry.

MediaTek said its investment will be subject to approval by government authorities.

Taiwan's government may need to give consent for the plan. Taiwan regulates investment by its chip companies in China on concerns about potential losses of jobs and technology. Taiwan and China have been political rivals for nearly 65 years, since the Chinese Communist Party overthrew the Nationalist Party in 1949, after which the Nationalists withdrew from China to Taiwan.

Targeting huge growth

China is targeting a CAGR for the domestic chip industry of 20 per cent between now and 2020, with potential financial support from the government of up to $170 billion over the next five to ten years, according to a report this year by market consulting firm McKinsey & Co.

Cooperation between companies in Taiwan and China has helped boost their growth, MediaTek's Tsai said, helping some Chinese companies become global brands.

MediaTek chips run mobile phones from leading handset makers in China including Xiaomi Corp. and Lenovo. Xiaomi is the world's third-largest smartphone vendor after Apple and Samsung, according to market research firm International Data Corp (IDC). Lenovo ranks fourth.

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