Intel Corporation (INTC) recently announced its decision to invest nearly $1.6 billion over the next 15 years to upgrade its chip plant in Chengdu, China.
Intel stated that it plans to upgrade factories that assemble and test chips, while bringing an advanced chip-testing technology to China.
The news comes soon after Intel purchased 20% stake in two leading Chinese chipmakers — Spreadtrum Communications and RDA Microelectronics — to gain traction in the country’s smartphone chip market. Both the companies manufacture chipsets for mobile devices and other consumer electronics products that support 2G, 3G and 4G wireless communications.
Intel’s growing investments in China are strategic as it has been struggling to spur growth in the smartphone and tablet markets. These will help Intel broaden the company’s foothold in the Chinese mobile chip market by reaching out to a larger audience with products based on its technology.
The investment is particularly important because of the decline in sales of high-end mobile devices in North America, which prompted more and more manufacturers to turn to low-end smart devices designed for Chinese customers.
Previously, in May, Intel signed an agreement with Rockchip, a Chinese mobile chipmaker, to manufacture chips for low-cost tablet computers running on Google’s (GOOGL) Android operating system.
Intel seems determined to meet its target of 40 million tablets this year. The main hurdle for the company has been the level of integration required in mobile devices, an area where it is yet to gain expertise. The investment illustrates the fact that Intel is unwilling to leave anything on the table in its attempt to gain share in this fast growing market.
Intel currently has a Zacks Rank #2 (Buy). Other stocks worth considering are NVIDIA Corporation (NVDA) and Texas Instruments Inc. (TXN), both carrying a Zacks Rank #2.
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