Intel partners with China’s Spreadtrum to make new chips in $1.5 billion deal

[cirr]

Intel partners with China’s Spreadtrum to make new chips in $1.5 billion deal

September 26, 2014

By Steven Millward

Intel (NASDAQ:INTC) confirmed today that it’s paying RMB 9 billion (US$1.47 billion) to take a 20 percent stake in Chinese chip-maker Spreadtrum (NASDAQ:SPRD).

Spreadtrum is part of Beijing-based Tsinghua Unigroup. That’s the state-owned spin-off of the renowned Tsinghua University, which owns the CPU maker as well as RDA Microelectronics.

“The purpose of the agreements is to expand the product offerings and adoption for Intel-based mobile devices in China,” says today’s announcement by the company. The Intel investment will result in the creation of a new range of Intel architecture-based system-on-chips (SoCs) that can be used in budget Android phones. That’s been a speciality of Spreadtrum for the past few years, though previously the Chinese firm was making ARM-based CPUs. In late 2011, Spreadtrum created a low-power, ARM-based chip that enabled brands such as Huawei to create 3G-enabled smartphones for just US$50.

Intel CEO Brian Krzanich says the investment in Spreadtrum will help Intel “support a wider range of mobile customers in China and the rest of the world.” This might aid Intel in making inroads against arch-rival Qualcomm (NASDAQ:QCOM), maker of the popular Snapdragon chips found in numerous best-selling Android phones, such as some models made by Xiaomi.

See: Chinese video app gets $50 million funding to become China’s answer to Vine

Qualcomm is under investigation by Chinese regulators at present, accused of being a monopoly in the market. Rumors suggest that Qualcomm could face a record fine of more than US$1 billion. The regulator, the National Development and Reform Commission (NDRC), has yet to make a ruling. This makes for good timing for Intel.

Intel missed the boat on smartphones, with much of the success of Android and iOS phones built on top of ARM (NASDAQ:ARMH) processors built by the likes of Qualcomm, Nvidia, Samsung, and Apple. Intel’s former CEO, Paul Otellini, admitted as much last year. Now Intel is trying to catch up with the mass-market.

Intel arrived late to Android smartphone processors, launching the disastrous Medfield chip in 2011.

The new chips by Intel and Spreadtrum will be available “beginning in the second half of next year,” says the California-headquartered company.

Editing by Paul Bischoff

 

[cirr]

Spreadtrum was taken private in July, 2013 for 1.7 billion USD. Barely a year later the company is valued at 7.5 billion USD per Intel's latest investment.

SMIC: A Big Boost If Intel Buys Spreadtrum, Says Nomura

By Shuli Ren

My colleague Tiernan Ray reported on Wednesday that Intel (INTC) may buy a 20% stake in Chinese chipset designer Spreadtrum, which was taken private by Tsinghua Unigroup in July, 2013 for $1.7 billion. Spreadtrum competes with Qualcomm (QCOM) and MediaTek (2454.TW).

In Chinese media, there is some confusion as to whether Intel will invest in Spreadtrum or the parent Tsinghua Unigroup, which, apart from Spreadtrum, also bought RDA last July for $900 million. Both were listed in the US before being taken private by Tsinghua.

Regardless, the $1.5 billion rumored ticker price gives a big boost to Chinese semiconductor companies’ valuations, according to Nomura Securities analysts Leping Huang and David Hao:

If this news is confirmed, it would mean that Intel values the investment target at USD7.5bn. If the investment target is SPRD, then this implies 340% premium. If the investment target is Tsinghua Unigroup (mainly SPRD + RDA), this implies 190% premium since the company paid about USD2.6bn in total for SPRD and RDA. We think this is positive for SMIC and China semiconductor sector valuations and reiterate our Buy rating onSMIC (0981 HK) with a target price of HKD1.1.

The semiconductor industry in China is at interesting crossroads. We have Beijing keen to develop its home-grown technology on the one hand, and market leader Qualcomm selling new low-end 4G designs for very cheap on the other. The anti-trust investigation of Qualcomm has not been resolved either.

On Thursday, SMIC jumped sharply on the Intel news, rising 5.1%. Qualcomm fell 1.9%. Intel retreated 1.8%. MediaTek gained 0.6%. TSMC (TSM), which SMIC competes with, dipped 2.3%.

UPDATE:

Sp the rumors are correct: Intel confirmed that it would pay $1.5 billion for a 20% stake in Tsinghua Group. You can read more about it on my colleague Tiernan Ray‘s post here. Shares of SMIC fell 1.2% this morning, partially correcting yesterday’s big gain.

 

[cirr]

This is a great deal for China, a great early win for China's upcoming semiconductor industry.

Intel Invests $1.5 Billion to Tap Mobile Phone Chip Market in China

By QUENTIN HARDY

SEPTEMBER 26, 2014 12:05 AMSeptember 26, 2014 12:05 am

Seeking to spur itself in the fast-moving mobile phone sector, Intel is sinking $1.5 billion in a Chinese semiconductor business.

The investment in the business, Tsinghua Unigroup, a subsidiary of the state-owned Tsinghua Holdings Company, also involves agreements to create Intel-based chips with features like modems and wireless capability. The goal is to create a so-called system on a chip, or SOC, which can work inside inexpensive but technically advanced phones aimed at users in emerging markets.

Intel will receive about 20 percent of Spreadtrum Communications, a company controlled by Tshinghua Unigroup that currently makes these types of systems. Initially, Spreadtrum will use Intel designs, but the two companies may eventually cooperate on devising new kinds of systems on a chip, both for China and for other developing markets.

“Strategically, this is a long-term arrangement to develop a range of SOCs for the mobile market,” including smartphones and tablets, said Americo Lemos, vice president for Intel’s platform engineering group. “Spreadtrum has demonstrated they can produce large volumes fast, and we really want to increase the cadence that we bring out new products.”

Intel is looking at developing new products faster than it has in the past and wants to produce these cheap systems on a chip “at the range of several hundred million” units, Mr. Lemos said. Given the number of regulatory approvals required, he said, products probably would not ship until the second half of 2015.

Intel may also acquire an advantage over Qualcomm, which has dominated much of the advanced mobile market in China but has recently run afoul of authorities there over what China says are antitrust violations.

Qualcomm has denied the accusations, but it is known to charge high prices for its intellectual property, considered among the best for the management of things like fast data streams on smartphones.

If Intel can build similar technology with a Chinese partner, it could make significant inroads against its competitor, though the ultimate profitability of working in China is an open question.

Another signal of Intel’s changed approach is that the systems on a chip will be made in foundries of the Taiwan Semiconductor Manufacturing Company, and not in Intel’s own facilities. While Intel does have semiconductor manufacturing facilities in China, they tend to be of an older variety, so as not to risk losing intellectual property. In addition, the Taiwan Semiconductor Manufacturing Company may just be better at making systems on a chip.

Intel appears to be committed to such a strategy. In May, the company announced a deal with a Chinese company called RockChip to produce an Intel-designed system on a chip for inexpensive tablet computers using the Android operating system.

Brian Krzanich, who became chief executive of Intel last year, has made it a priority to give Intel a presence in more markets and on more devices. In a statement announcing the deal, he noted that China is now the world’s largest market for smartphones and has the greatest number of Internet users.

The more he can get them online, the thinking may go, the more he can sell Intel’s more expensive and sophisticated chips for computer servers into China’s Internet data centers.

 

[FairAndUnbiased]

Not that useful besides the money. There's no need for Intel designs since they are nobody in smartphone chips. Meanwhile, they are not giving access to their own foundries nor are they employing the SMIC foundry.

 

[mike2000]

Loool lmao. Why are Chinese celebrating?
I thought you were 'powerful'/independent enough to challenge U.S /western 'hegemony'?lool
So why are relying on U.S tech companies in your chip market? And even celebrating Intel's investment in your chip manufacturer? Lol
If you were really so advance as some of you here claim, you wouldn't need anything from Qualcomm or much less Intel (who isn't even a top chip manufacturer in U.S).lol

Anyway its good for U.S companies, since it will spread Intel's chips even more in China and occupy the little space left by Qualcomm who totally dominates the Chinese and world market. So in all, a good deal for the U.S tech companies. China is just acting as a contract manufacturer/huge market, nothing more

 

[Beidou2020]

Loool lmao. Why are Chinese celebrating?
I thought you were 'powerful'/independent enough to challenge U.S /western 'hegemony'?lool
So why are relying on U.S tech companies in your chip market? And even celebrating Intel's investment in your chip manufacturer? Lol
If you were really so advance you wouldn't need anything from Qualcomm or much less Intel (who isn't even a top chip manufacturer in U.S).lol
Anyway its good for U.S companies, since it will spread Intel's chips even more in China and occupy the little space left by Qualcomm who totally dominates the Chinese and world market. So in all, a good deal for the U.S tech companies. China is just acting as a contract manufacturer, nothing more

China's Hisilicon will dominate the Chinese mobile chip market.
Chinese government is setting up for the dismantling of Qualcomm from China and replace it with domestic chips like Huawei's chip.
Rockchip and Allwinner are taking the tablet chip market.

Loongson is replacing Intel in Chinese companies.