SHANGHAI, China—Qualcomm Inc. and Chinese firm China TechFaith Wireless Communication Technology Ltd. announced today the two companies would form a new venture, TechFaith Software China Ltd., to develop software applications for wireless devices. The deal is worth up to $35 million in cash and in-kind contributions from both partners. TechSoft initially plans to focus its efforts on developing 3G CDMA mobile phones.
The companies said the joint effort would serve the Chinese market as well as global markets. According to analysts, product development and manufacturing in China is crucial to foreign investors due to the country’s import quotas and tariffs that make it difficult to compete with Chinese products. Chinese labor costs would facilitate lower price points, making products destined for other markets competitive in price.
“TechFaith has always striven to shorten manufacturers’ time to market and to lower development costs, thereby helping to drive the growth of wireless technology in China and around the world,” said Dong Defu, chairman and chief executive officer of TechFaith. “Our further collaboration with Qualcomm to establish TechSoft reinforces our international focus with the goal of providing continually improved mobile handset solutions.”
According to Qualcomm’s Sanjay Jha, president of Qualcomm CDMA Technologies, “Qualcomm … is firmly committed to investing in the Chinese wireless industry as an area of tremendous growth and opportunity to serve global wireless markets.”
Qualcomm announced in June 2003 that it intended to invest up to $100 million in early- and mid-stage Chinese companies engaged in CDMA-based product development, and TechFaith became the San Diego-based chip maker’s first independent handset design partner in China in April 2004. TechFaith, then less than two years old, reciprocated by signing a CDMA modem card license agreement with Qualcomm for cdmaOne and CDMA2000 1x/EV-DO modem cards.
Despite its Qualcomm partnership, TechFaith is playing all sides in the global market, as it develops user interface software for GSM/GPRS and W-CDMA/HSDPA networks, CDMA EV-DO networks and China’s homegrown TD-SCDMA technology.
The timeframe for Qualcomm’s China investments—it’s been nearly three years since Qualcomm announced its intent to invest $100 million—may reflect the care the American company is taking on strategic investments in the world’s largest market. American trade officials are perennially at odds with Chinese authorities over patent infringement issues and product piracy by unlicensed vendors, which must concern American firms with proprietary technology and a dedication to protecting its intellectual property, such as Qualcomm.
By making the announcement from Shanghai, Qualcomm appears to have cooperated in its Chinese hosts’ well-known desire for respect in the international market.
