Intel said it will pay as much as $1.5bn for a 20 per cent stake in two mobile chipmakers with ties to the Chinese government.
The US semiconductor firm has struggled to gain a foothold in the smartphone and tablet market, lagging behind industry leader and rival Qualcomm, but the deal would give it a bigger slice of the Chinese mobile chip market, where growth is still strong compared to maturing Western markets.
Intel has struck the deal with Tsinghua Unigroup, a government-affiliated private equity firm that owns mobile chipmakers Spreadtrum Communications and RDA Microelectronics, and the deal will also provide the two Chinese firms support from a US semiconductor giant on chip design and development.
"It has become a national priority of China to grow its semiconductor industry," said Tsinghua Unigroup chairman Zhao Weiguo in a statement released by Intel today.
"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."
The deal is still waiting for government approval, according to Unigroup, which is controlled by the prestigious Tsinghua University in Beijing that counts China's President Xi Jinping as one of its alumni.
The government in Beijing has said in published policy papers that it views semiconductors as an industry of vital strategic importance and hopes to spur its development domestically.
While Intel excels at developing processors for laptops and desktop computers, it has less experience designing 'system on chips' or SoCs, the key processors on mobile devices, which combine features such as modems, Wi-Fi and memory.
The firm’s new CEO Brian Krzanich, who took the helm last year, has been keen to ensure its chip technology gets into more smartphones and tablets and this latest investment comes less than six months after Intel reached an agreement with Chinese chip maker Rockchip to make inexpensive tablet chips with Intel's architecture and branding.
Krzanich has also opened the chipmaker's prized, cutting-edge factories to paying customers, and more recently he struck partnerships in the fashion world with companies such as Fossil Group and Opening Ceremony to design stylish smart clothing.
"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, an analyst at Topeka Capital Markets, before the announcement. "They should do as much of this as they need to be in markets that are important to them."