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Intel deal gives its 5G modems a big door into China

Tsinghua Unigroup unit to sell whole chipsets in second half of 2019

TAIPEI -- Intel has made a deal that could help a mobile chip unit of the Beijing-backed Tsinghua Unigroup end up with fifth-generation modems faster than its rivals.

Unigroup Spreadtrum & RDA could then start delivering whole chipset solutions to smartphone makers in the second half of 2019, according to announcements Thursday by Intel and Unigroup Spreadtrum & RDA.

The move will also help Intel's smartphone chips gain share in China's massive market, likely at the expense of Qualcomm of the U.S. and MediaTek of Taiwan.

The deal comes with Chinese companies using government funds to aggressively pursue their own technological advantages that they can use to compete against today's dominant global players.

It also comes with Washington blocking almost all tech companies backed by Chinese funds from completing deals in the U.S. due to national security concerns.

Intel will offer its most advanced 5G modem chips to Unigroup Spreadtrum & RDA. Spreadtrum will then combine these XMM 8000 series chips with its own application processors to provide a total chipset solution to smartphone makers like Huawei and Oppo no later than the end of 2019.

"This is a multiyear collaboration working with Spreadtrum," Robert Topol, Intel's general manager of 5G advanced technologies, told reporters. "We are excited about this development because it's a great opportunity to bring the XMM 8000 series not only in the PC form factor [but] now in mobile and smartphone handset form factors, and of course in other form factors."

Spreadtrum said in a statement that the collaboration with Intel will mark the kickoff of its 5G Global Leading Strategy, and that the company will continue to invest in 5G technology, aiming to be one of the world's leading 5G chipset brands.

Intel said its 5G modem will be available to go into electronic gadgets in mid-2019 (photo by Cheng Ting-fang)

It is unclear if Intel will transfer any of its leading-edge wireless communications technology to its Chinese partner. Spreadtrum has an array of Chinese and Indian smartphone maker clients. They include Vivo, ZTE, Lenovo, Micromax and Lava. Spreadtrum also makes the mobile chipsets that go into Samsung Electronics' entry-level handsets.

Intel became the world's largest chipmaker when the PC was king but is playing catch-up in the smartphone age. Its first break came in 2016, when it began supplying modems for Apple's iPhones. A year later, it became the iPhone's main modem supplier as Apple-Qualcomm relations soured.

Qualcomm is the world's No. 1 mobile chipmakar and smartphone modem producer. It and Apple remain locked in a bitter legal dispute over license fees.

While Intel has been struggling to develop competitive and power-efficient mobile application processors, Spreadtrum has been lagging far behind in modem technology. It has been striving to provide improved voice connectivity and faster data transmission speeds for mobile devices.

In early 2017, Tsinghua Unigroup Chairman Zhao Weiguo pledged that his company would advance its technology to match rivals Qualcomm and MediaTek.

Spreadtrum in 2017 had an 11% share of the global market for application processors; Qualcomm held 36% and MediaTek 24%, according to Roger Sheng, an analyst at research company Gartner. Research companies often use application processors, or mobile CPUs, rather than the whole chipset to calculate market share.

Tomorrow's 5G mobile wireless standard promises faster data transfer speeds and low latency, which will be essential in satisfying the demands of power-hungry artificial intelligence services. Qualcomm said its 5G modem will be ready to support smartphones and networks in the first half of 2019. MediaTek has said it will have its 5G solutions sometime in 2020.

Intel had previously said it would roll out 5G modem chips in mid-2019.

Meanwhile, mobile service providers and chipmakers are beginning 5G trials this year.

Consumers should get 5G service beginning in 2020.

Tsinghua Unigroup Chairman Zhao Weiguo

Lin Jian-Hong, an analyst at Taipei-based Topology Research Institute, said Intel's collaboration with Spreadtrum is mainly meant to grow its mobile business, which is behind the rest of the industry. Intel can also expect the deal to expand its footprint in the massive China market, Lin said.

"Intel hopes to manufacture more smartphone-related chips besides modems," Lin said. "These include core processors for Apple and even for other handset makers later."

Despite U.S. regulators blocking deals that could give China sensitive technology, it is not unusual for Western companies to share some of their tech with Chinese partners. These arrangements help U.S. companies gain access to the world's second largest economy.

In 2014, Intel invested $1.5 billion for a 20% stake in Tsinghua Unigroup's holding company Unigroup Spreadtrum & RDA. Last year, it offered to help Spreadtrum produce two 4G chipsets using the U.S. company's leading-edge manufacturing capability. 

In January, Intel was in talks to license its 3-D NAND flash memory technology to Tsinghua Unigroup's memory chip arm, according to Digitimes, a Taiwan-based news outlet that focuses on the semiconductor and other tech industries.

Intel declined to comment on whether it will offer memory technology but reiterated its Tsinghua partnership is strong.

NAND flash memory is one of the most crucial components in a smartphone, along with core processors and modems. Industry sources say an Intel NAND flash memory deal with a Chinese partner would face close scrutiny from U.S. authorities.

Intel is not alone in this regard. Qualcomm, Western Digital, ARM Holdings and AMD all formed joint-ventures by taking minority stakes in Chinese government-backed partners. China's rapidly growing market has persuaded these companies to develop technologies with Chinese companies.

Yet Uncle Sam lurks in the background. In September, President Donald Trump banned the sale of Lattice Semiconductor, a small rival of Xilinx and Intel's Altera, to a China-based fund. At the end of December, the Committee on Foreign Investment in the United States said it would require more time to review a proposal from Xcerra, a chip-testing equipment maker, to be acquired by a Beijing-backed semiconductor investment fund.

So far this year, U.S. regulators have killed two notable transactions involved Chinese investors -- a takeover bid of the Chicago Stock Exchange and Ant Financial's intended purchase of money transfer company MoneyGram International. Ant Financial is an Alibaba Group Holding unit.

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