Intel's investment of up to US$1.5 billion (S$1.9 billion) in two fast-growing Chinese mobile chipmakers has effectively aligned the US giant with a third party - a Beijing government intent on producing a viable domestic challenger to the likes of Qualcomm and Samsung.
For more than a decade, China has targeted semiconductor design and manufacture as a major focus of its industrial policy. Activity has picked up markedly over the past year with a spate of cross-border mergers and cooperation deals. "We've entered an inflection point where government policy has started to work - it's started to help the local semiconductor industry," said Nomura analyst Leping Huang.
The deal hashed out by Intel Corp Chief Executive Brian Krzanich over 24 hours in Beijing in early August extends Intel's beachhead in China, the biggest battleground in the smartphone industry, and boosts the company's years-long effort to catch up to leading mobile chipmaker Qualcomm Inc.
A key visit during the trip was to Yang Xueshan, the deputy chief of China's Ministry of Industry and Information Technology (MIIT), who gave his blessing for the deal.
The agreement, unveiled on Sept. 26, gives Intel a 20 per cent stake in Spreadtrum Communications and RDA Microelectronics through shares in a Tsinghua University holding company, with the aim of jointly developing and marketing smartphone chips.
China is the world's largest consumer and manufacturer of smartphones yet relies heavily on imported chips - particularly the processors that power the latest devices - made by San Diego-based Qualcomm, South Korea's Samsung Electronics Co , or MediaTek Inc of Taiwan.
China's ramped-up activity also arrives on the heels of revelations about the US surveillance programme PRISM, which has prompted Beijing to undertake a slew of actions to enhance the security of its information technology industry.
For Intel, the world's leading manufacturer of chips for personal computers, the Tsinghua deal offers an additional path into the world's biggest chip market after it was slow to recognise the mobile revolution and design new processors for smartphones and tablets.
Intel spokesman John Mandeville declined to comment.
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