Intel, Spreadtrum, and the Chinese government team up to wipe out Qualcomm ‘monopoly’

The Chinese government has been doing everything it can to deter Qualcomm’s dominance of the mobile chipset market. It’s made that pretty clear with its anti-trust probe and threatening a record fine of over US$1 billion for allegedly practicing price gouging. Qualcomm has had little help from Chinese authorities as it struggles to obtain royalty fees owed to it by the country’s smartphone makers.

But slowing down Qualcomm isn’t a solution in and of itself. There’s still a huge demand from China’s up-and-coming smartphone makers for quality chipsets. So who can Chinese officials turn to?

Enter Intel and Chinese chip-maker Spreadtrum. Intel has struggled for some time against Qualcomm to get its mobile chipsets into new smartphones.

Late last month, Intel signed a US$1.5 billion deal that gave it a 20 percent stake in Chinese chip-maker Spreadtrum. The two companies will jointly develop and market new smartphone chips. It’s not a perfect solution since China will just be replacing one American company with an American-Chinese joint venture, but it’s a start.

A Beijing official from China’s Ministry of Industry and Information Technology (MIIT) enthusiastically approved the deal in hopes that China could build a serious competitor with Intel’s help, according to Reuters. If it succeeds, Intel and Spreadtrum will have disrupted a massive near-monopoly held by Qualcomm. Intel and Spreadtrum’s new chips will be made available in the second half of 2015.

The market is currently split up like this: Qualcomm owns two-thirds of the premium phone Android phone market with its Snapdragon line. Mediatek is in second place, filling many low-end models. Spreadtrum is pretty much limited to budget smartphones – often the variants that run on China’s biggest mobile carrier, China Mobile. Intel and Marvell straggle behind.

The real question is whether or not Chinese phone manufacturers will take the bait and, if they do, what phones the new chips will go into. Should phone makers like Xiaomi, Oppo, and Lenovo stick to Qualcomm for their flagship models, Intel and Spreadtrum would be relegated to lower-end models. In that case, it would just be throwing blows at MediaTek and Marvell, which aren’t exactly Beijing’s target.

Taiwan’s Asus recently announced it would use Intel chips in its hybrid smartphone-tablet model, the PadFone X Mini to be sold on US carrier AT&T.

Despite its ongoing success in the PC market, Intel’s last earnings report showed it lost US$1 billion during the quarter in its mobile division. With Chinese officials guarding its back and Spreadtrum at its side, Intel is betting that two losers can make a winner.

See: How deliberately crippling its 4G rollout will help China bust a global monopoly and make billions