Intel said it will pay as much as $1.5 billion for a 20 percent stake in two mobile chipmakers with ties to the Chinese government, in the hopes of catching up in a smartphone chip industry dominated by rival Qualcomm.
Intel will acquire the stake in Spreadtrum Communications and RDA Microelectronics through a deal with Tsinghua Unigroup, a government-affiliated private equity firm which owns the two mobile chipmakers.
The U.S. semiconductor company, more known for chips used in personal computers, has struggled to gain traction in the smartphone and tablet market. The landmark deal would give Intel a greater foothold in the Chinese mobile chip market, which has become a nexus of the global smartphone industry.
Conversely, the deal would provide two Chinese chipmakers support from a U.S. semiconductor giant on chip design and development, an area deemed to be of vital strategic importance by the government in Beijing.
"It has become a national priority of China to grow its semiconductor industry," said Tsinghua Unigroup Chairman Zhao Weiguo in a statement released by Intel on Friday.
"The strategic collaboration between Tsinghua Unigroup and Intel ranges from design and development to marketing and equity investments, which demonstrate Intel's confidence in the Chinese market and strong commitment to Chinese semiconductor industry."
Speculation of the deal has been rife in the Chinese press for several weeks. The announcement confirmed a report by Reuters earlier Friday.
Intel's stake will be via a newly created holding company that owns the units Spreadtrum Communications and RDA Microelectronics, Unigroup said, adding that the deal is still waiting for government approval.
Unigroup is controlled by the prestigious Tsinghua University in Beijing.
The institution counts China's President Xi Jinping as one of its alumni.
The government in Beijing has said in published policy papers that it views semiconductors as an industry of vital strategic importance and hopes to spur its development domestically.