Intel Inks Agreement with Rockchip - Analyst Blog

Intel Corporation INTC recently signed an agreement with Rockchip, a Chinese mobile chipmaker in a bid to produce chips for cheap tablet computers running on Google's (GOOGL) Android operating system. The financials of the deal were not disclosed.

The two companies will build a mobile systems-on-a-chip (SoC) platform called SoFIA under Intel's brand name. The quad-core platform will feature Intel's x86 Atom processor core and 3G modem technology and will be available in the first half of 2015. The chips will be manufactured by Taiwan Semiconductor Manufacturing Company.

Rockchip, a China-based fabless semiconductor company, offers SoC integrated circuits for applications in inexpensive mobile devices such as tablets, smartphones, e-readers, set-top boxes and many more that are usually priced less than $100 and are popular in China and other fast-growing markets. These chips are generally based on ARM Holdings' ARMH processor technology.

With the alliance, Intel will benefit from Rockchip's skill of releasing low-cost mobile chips and gain access to a big but low-margin marketplace without using too many of its own resources. This will help Intel to quickly deliver SoCs based on its own high-end architecture and communications-based technology into a market offering low-end, entry-level smart devices. This will help Intel ramp up its customer base and gain market share.

Moreover, the partnership will also broaden Intel's reach in China. With the decline in sales of high-end mobile devices in North America, more and more manufacturers have been turning their focus to low-end smart devices designed for customers in China. Therefore, the latest agreement seems to be a smart move for Intel.

Intel has had limited success in the mobile segment so far, but the company seems determined to meet its target of 40 million tablet units this year. The main hurdle for Intel has been the level of integration required in mobile devices, an area where it has yet to build expertise. The agreement illustrates the fact that Intel is unwilling to leave anything on the table in its race to take share in this fast-growing market.

Intel is applying a number of strategies to increase its foothold in mobile, wearables and the Internet of Things (IoT). This will help to reduce its dependence on the PC market, which is at present suffering from declining sales worldwide. These are emerging areas within the technology space where companies like Cisco, Google, Apple AAPL and Facebook among others are trying to build a position.

Currently, Intel holds a Zacks Rank #3 (Hold).