QUALCOMM, Inc. (NASDAQ:QCOM) has decided to have a joint venture with a Chinese province to produce chips for server systems. This move will help Qualcomm diversify from mobile chips to the server chips market. Qualcomm disclosed its plans in October 2015 to venture into the Server CPU market. Intel Corporation (NASDAQ:INTC) dominates that market and Qualcomm would introduce a customer processor chip manufactured utilizing the ARM architecture. The company announced in November that it would co-develop the technology with the local companies in China.
The joint venture will be registered in Guian New Area, Guizhou with Beijing hosting operations. Qualcomm will supply, its server chip technology as well as research and development procedures to the joint venture. Other than the joint venture it will establish an investment company in Guizhou for making future investments in China.
Officials from Qualcomm as well as the province of Guizhou declared plans for the new semiconductor company in Beijing. Guizhou’s investment arm will hold 55% of the venture while Qualcomm will own the remaining 45%. They will have investments proportional to their ownership stakes to give the new company an initial startup capital of about $280 million.
Similar to several U.S. tech companies Qualcomm wants to take advantage of partnering with local companies to obtain easier entry to the Chinese market.
Qualcomm has earlier had collaborations in China such as the local manufacturing of its Snapdragon mobile processors by the Semiconductor Manufacturing International Corporation. China has demonstrated interest in developing its own semiconductor industry.
According to Derek Aberle, president of Qualcomm, global revenue for the server chip sector is forecasted to reach $15 billion by 2020 out which $6 billion will originate from China.
Qualcomm also had issues in China in the past. In February 2015, it said it had made a compromise with China’s National Development and Reform Commission (NDRC) regarding the agency’s probe of Qualcomm under the country’s anti-monopoly law. This included Qualcomm shelling out S975 million to the NDRC.
Executive Vice-governor of Guizhou, Qin Rupei, opined that the collaboration with Qualcomm will assist the region in developing its high-tech industry.