Qualcomm and TDK in $3bn wireless component venture
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Qualcomm and Japan’s TDK are forming a $3bn joint venture intended to capture the growing market for wireless components used in mobile devices, cars and drones.
Despite its position as the world’s biggest manufacturer of smartphone chips by revenue, one area of weakness for Qualcomm was filters, an area that TDK is strong in. The filters — a key component that allows communication through radio frequencies — are also the fastest growing segment among the parts used in mobile devices.
The aim of the deal will be to fill that gap so Qualcomm can provide a single package including all the components needed by smartphone makers. It will also allow the company to break into new areas at a time when it is under pressure from a broader pullback in the smartphone market.
The deal will give the US chipmaker a 51 per cent stake in the Singapore-based venture. The remainder will be held by TDK, which will carve out its module design and manufacturing assets as well as related patents. The total transaction value is expected to be about $3bn.
For TDK, the deal will allow the Japanese company to expand its spending on product development and capital equipment. The transaction value includes payments Qualcomm will make to TDK for the sale of its filters, totalling up to $200m over three years.
In a statement, the two companies also announced that they will expand their collaboration in other fields such as sensors and wireless charging.
Citing data from market research group Mobile Experts, the companies said the market for components to make radio-frequency chips was projected to expand from $10bn to $18bn in five years.
Qualcomm’s attempts to break into new fields such as cars and robotics have accelerated on the back of slowing chip demand. Last year, the California-based company faced investor pressure for more aggressive cost cuts and a break-up of its structure. It was also hit by Samsung’s decision to use its own chips in its flagship Galaxy devices, instead of Qualcomm’s.
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