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China's Top Chip-maker Gets US Boost

US wireless firm Qualcomm on Friday announced a strategic agreement with China's top semiconductor manufacturer Semiconductor Manufacturing International Corp (SMIC). The deal is considered a boon for China's semiconductor market.


SMIC will now make Qualcomm's chips at its plant in Tianjin, which the Chinese firm acquired from Motorola in 2003.


The agreement will combine SMIC's wafer fabrication capabilities and subcontractor infrastructure with Qualcomm's leadership in 3G (third generation) wireless technologies, with a focus on power management integrated circuits (ICs), the two firms said.


Qualcomm is the world's leading mobile phone solutions provider. The San Diego-based firm does not make chips, but instead it uses foundry giants such as IBM, Intel, Samsung, Taiwan's TSMC (Taiwan Semiconductor Manufacturing Co) and UMC (United Microelectronics Corp).


SMIC will be the first Chinese mainland firm to provide foundry services to Qualcomm, the world's most aggressive cables supplier in terms of research and development (R&D) spending.


According to research firm IC Insights, Qualcomm spent US$3.1 billion in semiconductor R&D during 2001-05, which accounted for 15 per cent of its total sales in the period.


The agreement with Qualcomm is expected to help improve SMIC's performance. SMIC posted a net profit of US$2.2 million for the second quarter of this year after a string of quarterly losses.


"We are proud to support Qualcomm with our proven business model and established supply chain network," said Richard Chang, president and chief executive officer of SMIC.


"This agreement demonstrates the success of SMIC's continued efforts to offer turnkey solutions to our valued customers."


Qualcomm provides the largest portion of chips used in the 3G mobile phones sold globally.


The firm sold about 151 million chips for 3G phones in the financial year of 2005. Statistics showed that about 210 million 3G phones were sold globally last year.


Qualcomm said the deal with SMIC underlines its increasing commitment to China, the world's largest mobile phone market by subscribers.


The agreement will enable China's leading telecoms firms such as Huawei Technologies and ZTE Corp to get Qualcomm's chips more easily. Huawei and ZTE are also partners of Qualcomm.


Huawei and ZTE, both based in Shenzhen in south China's Guangdong Province, are the top two Chinese telecoms equipment makers. The two firms have been making a big push into the mobile phone market and have started providing customized mobile phones to the world's leading operators such as Vodafone.


"This strategic agreement with SMIC will allow Qualcomm to leverage the foundry's operation and management expertise in mixed signal technology manufacturing and supply chain management to serve our customers in China and around the world," said Sanjay K. Jha, president of Qualcomm CDMA (code division multiple access) Technologies.


"Not only is this agreement in line with our continued commitment to China, but it also will allow us to further streamline our operations, shorten the development cycle and focus on our core technology offerings."


(China Daily July 29, 2006)

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