Two kids in Yangshang county, Anhui province, play games on a mobile phone. [Photo/Xinhua]

Output for basic smartphones will complement high-end products

US chip giant Qualcomm Inc announced on Friday it will set up a new joint venture in China to build chips for entry-level smartphones, in a move to complement its existing high-end product portfolios.

JLQ Technology, with a registered capital of 2.98 billion yuan ($434 million), will be established by Qualcomm, State-owned telecom company Datang Telecom Technology Co Ltd and two local investment groups.

Qualcomm will pour 720 million yuan into the venture for a 24 percent stake, as well as transfer and license technology to help JLQ design chips for smartphones priced at around $100.

Datang will hold a 24 percent stake, with investment company JAC Capital accounting for 34.6 percent. Local private equity firm Wise Road Capital will have a 17.4 percent stake.

Cristiano Amon, executive vice-president of engineering, research and development unit Qualcomm Technologies Inc, a unit of Qualcomm Inc, said it took several months for the sides to reach a deal and said he believed the agreement would benefit all partners.

"Annual smartphone shipments in China total about 450 million units. Despite the fierce competition, this presents huge opportunities," Amon said.

The company said the joint venture is ideally positioned to compete with MediaTek Inc and Spreadtrum Communications Inc to supply chips to the lower end of the smartphone market and will not take sales or market share away from Qualcomm's existing high-end chip business.

Brighten Li, chairman of the investment evaluation committee at JAC Capital, said that as the major shareholder, the company would ensure a stable supply of capital to JLQ and help staff it with top international talent.

"We will start with smartphone chips and are likely to branch into new areas such as chips for the internet of things and virtual reality equipment," Li said.

He added that the new venture would also tap into countries and regions taking part in the Belt and Road Initiative and could serve as a platform to give full play to different countries' competitive advantages in technology, market and capital.

Michael Zhang, managing partner at Wise Road Capital, said China is no longer just a consumer market for global tech heavyweights.

"China excels in absorbing foreign cutting-edge technologies and reinnovating them to accelerate commercial applications in the local market," Zhang said. "Such strength will help make multilateral cooperation a success."

JLQ Technology is registered in Guiyang, capital of Guizhou province, where Qualcomm already has a joint venture with the local government to produce chips for servers.

The company poured another 1 billion yuan into it earlier this year, bringing its total investment to 2.85 billion yuan.

It is part of broader efforts by Qualcomm, which dominates the smartphone chip sector, to compete with Intel Corp in server chips.