Qualcomm enters venture in China to build server chips

Qualcomm has entered an agreement with the Chinese province of Guizhou to enter into a joint venture to develop chips for server systems.

This is the latest bold step by Qualcomm, who is keen to expand from relying on manufacturing chips for the smartphone and communications market. Though this could be seen as a risky strategy as Intel dominates the server chip domain with over 90 per cent of the market, and with addition worries regarding both the Chinese economy and the global drop in technology demand, Qualcomm is pressing ahead with a $280 million dollar commitment for a 45 per cent stake.

For the Chinese, the joint venture (55 per cent) is in line with recent government policy to try and turn the province of Guizhou (with its 35 million residents) into a technology and cloud hub. The Chinese policy to strive to become less reliant on US technology, both in server semiconductors and also back-office systems has seen them launch several antitrust investigations against both Qualcomm and Microsoft in recent months.

Qualcomm agreed both during and after the investigation to commit $150 million to Chinese startups and also announced a further collaboration with a Chinese semiconductor company to make Qualcomm semiconductors. However, Qualcomm’s move into the server chip market is risky as it is licensing ARM Holdings technology despite failing to ship a product since first announcing its intention to enter the market in 2014. However, there is little doubt that there is an appetite for more competition in the server chip marketplace.

“Data center customers would prefer more than one participant in the supply chain,” said Anand Chandrasekher, a Qualcomm senior vice president, in reference to Intel. “Having multiple players will speed up innovation.”

Image source: Flickr / Kārlis Dambrāns