TELECOMS: Intel Adds Incutabor To Long China March
Bottom line: Intel’s latest drive to fund wireless-related Chinese start-ups is part of a growing strategy to promote its struggling telecoms chip business, but it could face big obstacles due to China’s lackluster record at innovation.
I have to commend Intel (Nasdaq: INTC) for its perseverance in the telecoms space, with news that the fading microchip giant is adding an incubator initiative to its drive into the sector using China as a backdoor. But that said, this latest project looks pathetically small, with Intel earmarking a meager 120 million yuan, or less than $20 million, to the initiative.
This project is just one of several recent initiatives for Intel in China, and we should point out that many of the companies it’s targeting would probably be happy for just $1 million or less to fund their early development. But that said, this particular initiative looks mostly like a public relations ploy than anything really substantive, and Intel might be advised to get a little more aggressive if it’s serious about promoting a China-based ecosystem for its struggling telecoms chip business.
Intel was one of the earliest major chip makers to enter China, and has held its regular developer forums in the country for more than a decade now. It announced this new incubator initiative at its latest developer forum taking place in the southern boomtown of Shenzhen. It said it will allot the 120 million yuan to its first “Mass Makerspace Accelerator” program, aimed at funding start-ups that can help to popularize its chips, especially ones in the telecoms space. (English article; Chinese article)
Intel also announced the launch of an 80 million yuan angel investment fund specifically for China, adding another modest sum to the pot of money it is ear-marking for start-up companies. News reports are pointing out the 120 million yuan program is a first-of-its-kind for Intel, and the location for the initiative highlights the company’s strategy of using China to play catch-up to technology from rival ARM that now dominates the wireless chip space.
I’m not familiar enough with the differences in technology to comment on the Intel-ARM rivalry, but it’s certainly clear that few design houses have decided to use Intel’s technology to date for their wireless chips. Intel has launched a couple of major new investments in China to try and change that, hoping to woo local developers and also central leaders in Beijing to its products.
One of those came last September, when Intel invested $1.5 billion for 20 percent of a telecoms chip maker being assembled by Beijing-based Tsinghua Unigroup through the consolidation of a couple of leading Chinese design houses. In December, Intel followed that move by announcing another $1.6 billion upgrade for its chip-making plant in the interior city of Chengdu, which was initially built about a decade ago. (previous post)
Intel certainly seems to be placing its China bets in many places, both geographically and strategically. The Tsinghua Unigroup investment involves chip design at a relatively mature company based in Beijing; the Chengdu plan involves chip manufacturing in Chengdu, one of China’s largest interior cities and a priority for development by Beijing; and now this latest initiative is aimed at start-up company development centered in Shenzhen, a boomtown near Hong Kong that has become a high-tech hub.
I have to commend Intel for its multi-tiered China approach, and expect we could see 1 or 2 more major initiatives in the year ahead, perhaps similar in scale to the Unigroup and Chengdu projects. At the end of the day, China is certainly an important center for the manufacture of wireless devices, though it has yet to emerge as a strong base for chip design and manufacturing. Intel wants to help China make that transition and boost its own prospects, though its late arrival to the space and China’s lackluster record at innovation could be big obstacles in that drive.
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