Caixin
May 30, 2017 11:18 AM
BUSINESS & TECH

Qualcomm Makes New Call on China Smartphone Market With Low-End Chip Joint Venture

(Beijing) – Global telecoms giant Qualcomm Inc. said it has formed a joint venture to make low-end smartphone chips in China, as part of Beijing’s efforts to build up a local semiconductor sector capable of competing on the world stage.

Despite being the world’s largest consumer of high-tech microchips that power everything from smartphones to microwave ovens, China has to import most of those chips due to its own lack of design and manufacturing capabilities. To change that, Beijing has made billions of dollars available to local investors to build up a domestic sector capable of competing globally.

The new Qualcomm joint venture would come as part of that campaign, in a new partnership with local giant Datang Telecom Industry Group. The pair would team up with financial partners JAC Capital and Wise Road Capital in the venture, to be called JLQ Technology, according to a statement from the companies on Friday.

They said the venture would focus on design and manufacture of chips for “mass-tier” smartphones to be designed and sold in China, the world’s largest maker of such high-tech mobile devices, and also the biggest consumer market. No financial terms were given for the venture, which would be based in the interior province of Guizhou, where Qualcomm previously set up another joint venture in early 2016.

Chips from the new venture would compete with products from companies like Taiwan’s MediaTek and China-based Spreadtrum, which also focus on lower-end smartphones. By comparison, Qualcomm’s own chips are focused on the higher-end of the market.

“With China’s growing consumption of consumer chipsets and a well-developed smartphone ecosystem, this joint venture will be well-positioned to tap into the growing consumer demand in China,” said William Sun, general manager of JAC Capital. “We believe the establishment of this joint venture in (chip) design will be beneficial for consumers and boosting China’s (chip) design industry.”

The venture marks the latest collaboration between JAC and Wise Road, which earlier this year were cleared to buy the standard products design business of Dutch chip maker NXP Semiconductors N.V. for $2.75 billion. Last fall, Qualcomm signed its own separate deal to buy NXP itself for $47 billion, as part of its own diversification beyond smartphone chips.

Formation of the new joint venture comes as the latest signal that China will need to work with global giants like Qualcomm on self-developed projects at home, rather than relying on acquisitions of big global chip makers to build up its sector.

One of the most aggressive names in the space, Tsinghua Unigroup, previously embarked on a major global buying spree, including deals to purchase U.S. memory chip giant Micron Technology Inc. and major stakes in U.S. hard disk maker Western Digital Corp. and several Taiwan chip makers. But all of those deals ultimately collapsed due to political sensitivities, as local governments balked at the idea of selling some of their most cutting edge companies to Beijing-backed buyers.

Contact reporter Yang Ge (geyang@caixin.com)


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