Intel announced that it is paying as much as $1.5 billion to acquire a 20 percent stake in Spreadtrum Communications and RDA Microelectronics, which are two mobile chip manufacturers that have ties to the government of China.
Intel is making the acquisition as the company hopes to catch up in the smartphone chip industry, where it is lagging behind rival and industry leader Qualcomm.
Intel will be acquiring the stakes in the two companies through an agreement with Tsinghua Unigroup, which is a private equity firm that is affiliated with the Chinese government.
Tsinghua Unigroup owns both Spreadtrum Communications and RDA Microelectronics.
Intel, which is more known as a manufacturer for chips that are used in personal computers, has been struggling to establish its presence as a chip supplier in the mobile device market, which includes smartphones and tablet computers. However, through the completion of the deal, Intel will be gaining a stable foothold in the mobile chip market in China, which is quickly becoming a global center for the smartphone industry.
AS per Intel CEO Brian Krzanich, China is currently the biggest market for smartphones in the world, along with being the country with the highest number of Internet users.
Krzanich added that the partnership with the two Chinese companies will allow Intel to support more customers in China and the world through a faster delivery of Intel chip architecture expertise and communications solutions.
The completion of the deal will also allow the two Chinese chip manufacturers gain access to support from the U.S. chip manufacturer in terms of design and development, which the Chinese government deems is of very high importance in the long-term plans of the country.
"The adoption of Intel's architecture technology will enable us to accelerate the development of mobile SoCs that expand the breadth of our portfolio, benefiting handset makers addressing both China and the global market," said Spreadtrum CEO and Chairman Leo Li.
"It has become a national priority of China to grow its semiconductor industry," said Zhao Weiguo, the chairman of the Tsinghua Unigroup in a statement.
"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," he added.
Rumors regarding the acquisition by Intel have been present in Chinese media for several weeks, which were finally confirmed in an announcement by Intel.
The stake of Intel will be held through a holding company that will be created for the purpose, which will own both Spreadtrum Communications and RDA Microelectronics.
The deal is currently waiting for approval from the Chinese government.
