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Business Management

Intel's Chinese Stake and the Rise of Global Tech M&A

After the ‘Aliblahblah’ IPO excitement has died down and popped eyes have been returned to sockets, it’s clear that globalisation is having more and more effects on our technological futures. Some of these will be hard to miss, like the rise of juggernauts such as Alibaba, Tencent, Infosys and so on. Others will be more subtle, however, and one area that it’s timely to look at is mergers, acquisitions and investments, where matters are increasingly becoming more cross-continental than was ever the case previously.

Today the news wires were full of Intel taking a $1.5bn stake in Chinese firm Tsinghua, a holding company that incorporates Spreadtrum, a maker of wireless chipsets that Intel hopes will help it drive deeper into the vast Chinese market for mobile devices. This, it seems to me, is one example of how, metaphorically and literally, the chips will fall. Large Western companies, often American, will look further afield for investments because not only key markets but even investment markets too are becoming saturated.

Intel has long dominated the market for PC and volume server processors but has struggled for other sources of income and that issue has become acute as the PC market has dwindled and as prices have fallen. The company is of course pursuing other device formats but has done less well in phones and tablets, and margins in those categories are very tight anyway. Sitting on a vast cash pile it makes sense for Intel to pursue related opportunities in smart TV, wearable devices and so on. Buying or teaming up with specialists will hasten time to market and a lot of the people it will need to talk to aren’t in the US.

That’s why we’re seeing Intel work with Samsung on the Tizen operating system and today buying a chunk of Tsinghua. As Intel president Renée James hinted in an interview with the Wall Street Journal late last year, this is part of a broader strategy: to get tight with the “China Tech Ecosystem” – a wide range of companies that can unlock this enormous opportunity and help reinvent Intel for a market where speed and cost management will be enormously important. Thus Intel is buying quasi-insider status that will translate into manufacturing, R&D, B2B supply chain and market opportunities.

Another international play is exemplified by the recent news that Yahoo is buying an Indian startup called Bookpad. Yahoo is of course scrambling to remake itself as a leader in consumer internet services and has that huge stake in Alibaba (back to them again) to give it a puncher’s chance. The flood of startups in India and elsewhere will be increasingly attractive to US firms because they provide access to talent as well as potential new products. As The Next Web notes, Facebook recently bought Little Eye Labs, another Indian startup. Expect more of this as Silicon Valley becomes tapped out for options. 

A third and final type of M&A is exemplified by Huawei’s agreement to buy Neul, a UK Internet of Things-focused startup. Here we see successful companies from fast-growing nations, in this case China, scouting the western world for opportunities.

It’s not so long ago that the technology markets of China, India, Russia and other countries appeared to be closed shops. Now the need to compete globally is seeing deals pop up everywhere. This will be a golden age for those that can translate not just language but culture, law and all the other factors that will go into making these combinations successful.

 

Martin Veitch is Editorial Director at IDG Connect

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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