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Qualcomm to manufacture custom chips for Chinese market

Fri 27 May 2016

Qualcomm president Derek Aberle has suggested that the semiconductor giant is preparing to produce its own custom chips for the Chinese market.

A Wall Street Journal interview with Aberle revealed that the American company had entered into a joint venture with the local government in Guizhou province to manufacture custom chips starting in the second half of 2016. According to Aberle, the Guizhou government owns 55% of the venture, while Qualcomm owns the remaining 45%.

Qualcomm, the world’s leading supplier of smartphone chips, now sees servers as a key growth market in the face of a slowing smartphone sector. The custom chips for the Chinese market will run these servers and the computers that run websites, store companies’ data and power data centres.

Aberle told the Journal that he expects China’s server demand to dwarf that of the U.S. He said of the government-backed venture: “This is really going to be the primary vehicle from which we build our data center business in China… We are actually trying to create the company that is going to be able to win the market here as opposed to just licensing old technology.”

This strategic step for Qualcomm comes after a year of difficulties in collecting royalties and cementing new licensing agreements following an investigation by the Chinese National Development and Reform Commission. As part of a settlement deal the company said it would pay $975 million (approx. £667 million) for violating the country’s antimonopoly law.

Last December, the firm received a major boost when it completed a 3G and 4G patent license agreement with Chinese smartphone company Xiaomi. Qualcomm agreed to grant the electronics company a royalty-bearing patent license to develop, manufacture and sell 3G and 4G devices. Xiaomi CEO Lei Jun said that the deal would ‘play an important role’ in advancing the company’s Mi product range.

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Asia China chips news
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