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Qualcomm eyes China's entry-level smartphone market

American chipmaker seeks fresh growth amid legal tangle with Apple

Qualcomm is getting into the PC and server core processor market to take on Intel.

TAIPEI -- Qualcomm, the world's largest mobile chip provider, is seeking further growth in China by tapping into the entry-level smartphone market through a joint venture with a local partner, company president Derek Aberle said on Friday.

Qualcomm will be working with Leadcore Technology, a subsidiary of Beijing-backed Datang Telecom, according to Aberle.

"China is a very large market for smartphones ... It's actually difficult for any company including Qualcomm to be able to work with and support all of the customers in a market that is that large. One of the reasons for the [Qualcomm-Leadcore] joint venture is actually to partner with local companies to support smaller local companies there," Aberle told reporters in Taipei.

He added that the new entity, announced in May, will focus on developing chips for entry-level handsets and addressing the needs of emerging markets, where Qualcomm paid less attention in the past.

Previously, Qualcomm focused on supplying premium smartphone makers such as Apple and Samsung Electronics.

The high-end to mid-tier and low-end handsets in China mainly adopted chips made by Taiwan's MediaTek and China's Spreadtrum Communications.

Qualcomm president Derek Aberle says his company seeks to expand in China’s entry-level smartphone market.

But Qualcomm is set to grab 40 million to 60 million units from MediaTek in China, according to research company Gartner. Meanwhile, MediaTek chairman Tsai Ming-Kai vowed earlier this month to regain market share in China within the next 12 to 18 months.

Qualcomm's aggressive moves in the Chinese market, taking on MediaTek and China's Spreadtrum Communications, come as the American chipmaker is entangled in lawsuits with Apple, its major customer, over payments.

Apple is refusing to pay licensing fees to Qualcomm, which was forced to lower guidance for the current quarter.

Intellectual property

On May 17, Qualcomm sued Apple's four top Taiwanese suppliers -- Hon Hai Precision Industry, Pegatron, Wistron and Compal Electronics -- for refusing to pay royalties to the chipmaker at the iPhone maker's request. The move escalated the battle over the value of Qualcomm's intellectual property.

But Aberle said his company's longtime engagement with Taiwanese suppliers will not be affected by the complaint against them, since it is Apple which should be responsible for all the royalty fees.

"We really did not have the choice, we have to file those actions. [The four Apple suppliers] are unfortunately being caught in the middle given Apple's actions. But at the end of the day, I think they are not really financially exposed given that Apple will have to pay them whatever they have to pay us," said Aberle.

Meanwhile, Qualcomm vowed to get into the core processors market for PCs and data centers, which was previously dominated by Intel, the world's largest semiconductor company.

The PC market has been a very attractive place for Qualcomm for a very long time and the company is also shipping commercial samples made with the latest chip technology for data center customers, Aberle said.

Apple has turned to Intel to supply some baseband modem chips for its flagship iPhones since last year and will add more orders this year to lower its dependence on Qualcomm.

Previously, Qualcomm was the sole supplier for iPhone modems. Modem chips are one of the most important components that determine data transmission speeds and phone call qualities.

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