Qualcomm and China Sign Strategic Cooperation Agreement To Form Joint Venture For Server Chipsets

The world’s largest mobile chipmaker has collaborated with China to design and sell high-tech chipsets for servers.

America’s largest mobile chipmaker, Qualcomm, has signed a joint venture with Chinese government, in the province Guizhou. The joint venture is named Guizhou Huaxintong Semiconductor Technology Co. Ltd. with an objective to develop, design, and manufacture chip sets for servers. The Chinese government and Qualcomm will have respective shares of 55% and 45% in the venture.

The startup venture is registered in Guian New Area, Guizhou and it will perform its operations in Beijing. It has an initial investment of $280 million –1.85 billion RMB along with Qualcomm’s support to carry out research and development. It forwards server chip technology licenses to the new joint venture for the smooth operation.

The US based company is likely to set up an investment business for the future investments in China, the world’s second largest country for server technology sales, according to analysts. This move can sabotage the telecom’s rival, Intel’s position in Chinese data-center market too.

The previous year has not been good for the American company in terms of revenue and profit. In 2015, its revenue and pre-tax profit respectively declined by 8% and 35%. It also lost significant market share in wireless modem and mobile application processors when its Snapdragon’s processors lost customers. Some of the smartphone maker’s clients chose to make their own ARM-based CPUs rather than buying Qualcomm processors.

In an attempt to revive its growth, the America’s fast growing company expanded its horizons by entering new markets with chips for drones, cars, cameras, etc. In collaboration with ARM Holdings, it also dared to enter the datacenter market, which was previously under Intel’s dominance. ARM Holdings provide chip design to the company on which its data-centers are based.

In 2015, Qualcomm carried out its first data-center chips sampling. It envisions that these chips would be economical and have competitive performance. It has also teamed up with Xilink and paired its CPU with the latter’s FPGAs (field-programmable gate arrays). This will make the reprogramming easier and attract the consumers who demand for custom-made chips.

The chipmaker sees the mutual collaboration as a potential step to yield mutual benefits for both partners. It has been working with Chinese collaborators for over 20 years and the outcome of the project looks promising. In addition to the recent joint venture, it has also invested in Qualcomm’s cooperation with Semiconductor Manufacturing International Cooperation (SMIC) to manufacture smartphone chips.

Qualcomm stock price was $48.07 at the market which closed on Friday.

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