NEW YORK (TheStreet) -- Intel (INTC) , the semi-conductor maker, confirmed Friday that it had made a $1.5 billion investment for a 20% stake in Chinese state-backed Tsinghua Holdings, a chipmaker that will produce Intel-branded chips for mobile phones and other electronics.
Intel's bet is that Tsinghua Holdings, which owns wireless chipmaker Spreadtrum (SPRD) , will give Intel much-needed exposure in the low-cost smartphone market, particularly in China, which is the world's largest smartphone market and has the largest base of Internet users.
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Research firm IDC forecasts that tablet shipments will grow by 80% over the next three years, reaching 386 million (72 million in 2010). If Intel is successful at producing its own branded tablet in a fast-growing Chinese market, it could have a meaningful impact on revenue given that the company had already set a goal of shipping 40 million tablets for 2014.
This is a solid deal for Intel and its shareholders because it will help Intel narrow the gap that exists between Intel and wireless leaders Qualcomm (QCOM) and ARM Holdings (ARMH) . The deal comes only four months after Intel announced a partnership agreement with Rockchip, a Chinese-based semiconductor company, aimed at expanding Intel's mobile/tablet presence in Asia.
The move comes with the resurgence of PCs and Intel's advances in the Internet-of-Things, from which management expects 17% growth (compounded) by 2020. Intel was dropping 0.6% to $33.94, trimming its 2014 advance to 31%.