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Intel Will Invest to Boost Computer Use in China

Its new $200-million fund will help firms develop technology and Internet infrastructure.

June 14, 2005|From Bloomberg News

Intel Corp., the world's largest computer chip maker, said Monday that it was setting up a $200-million investment fund to accelerate the use of computers and the Internet in China.

Intel Capital, the investment arm of the Santa Clara, Calif.-based company, will operate the China Technology Fund to help businesses develop technology and build Internet infrastructure, the company said.

Paul Otellini, who took over as Intel chief executive May 18, is trying to grab sales in faster-growing areas such as China to counter slowing growth of personal computers in the U.S. and Europe. Intel recorded 47% of its sales in the Asia Pacific region in the first quarter, up from 40% a year earlier.

"The use of computing is continuing to develop in China, but one of the bottlenecks is communications, especially broadband, which is one of the areas that Intel can really help," said John Lau, an analyst at Jefferies & Co.

Intel shares rose 2 cents to $27. They have gained 15% this year.

The new fund, equal to about one-fifth of Intel Capital's $1.1 billion in total investments, marks an increase in the company's commitment to China, spokeswoman Colleen Rubart said. The fund initially will look for companies working on cellphones, high-speed Internet service and semiconductor design.

Intel uses investments to push the adoption and development of technologies it thinks will help sell future versions of its microprocessors. The company invests in the deployment of Internet connection technologies such as Wi-Fi and WiMax to make sure potential computer buyers can get online.

Intel, which has investment managers based in Hong Kong, Shanghai and Beijing, made its first strategic investment in China in 1998 and has invested in almost 50 Chinese companies. The company employs 5,000 people there and has invested $1.3 billion over 20 years in assembly, research and testing.

"It's positive that they are investing in a market that's considered the growth area for this sector," said Terry Daniels, an analyst at Edward Jones & Co. "The amount isn't that large itself, but China isn't the easiest market to crack politically, and maybe it provides them with a ... [foot in the door] for future work."

Since Intel first invested in a Chinese company, 11 of the 50 firms it has put money into have sold shares to the public or been acquired. Intel investments include AsiaInfo Holdings Inc., a telecommunications software supplier, and, an Internet portal. Intel doesn't disclose how much it has invested or its returns on a country basis, Rubart said.

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