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Qualcomm Inc., the U.S. company that makes the chips used in many popular smartphone models, has decided to terminate a joint venture with the government of China’s Guizhou province.
The company established by this venture in 2016, Huaxintong Semiconductor Technologies (HXT), will reportedly cease operations by April 30.
Report - HXT - Demise - Thursday - Information
The report on HXT’s demise, published on Thursday by The Information, cited ten anonymous employees of the company. Neither HXT nor Qualcomm made an official announcement as of Friday morning.
The joint venture was expensive, consuming about $570 million in investments from the U.S. company and the Guizhou government, but evidently underperforming. Previous reports by The Information quoted employees who said long-term projects began winding down in early April after HXT replaced its CEO.
Company - Chips - Servers - Data - Centers
The company was founded to produce chips for the powerful servers in data centers. Qualcomm was to provide technology for the venture, while Guizhou is a relatively poor province that has been trying to attract tech business by offering cheap labor, real estate, and electricity.
The Information posited a number of reasons for HXT’s failure, including a questionable choice of architecture for the chips it produced, Qualcomm miscalculating the difficulty of breaking into a market dominated by rival Intel, and Qualcomm becoming distracted by a fierce legal battle with Apple.
Problem - Interference - Side - Partnership - Percent
Another problem was political interference from the Chinese side of the partnership, which owned 55 percent of HXT versus 45 percent for Qualcomm. The venture was disturbingly politicized from the beginning:
The pairing of the two parties was routine. When U.S. tech companies expand into China, they often have to form joint ventures with local partners, taking a minority stake in the new entity while ceding control to their Chinese counterparts.
Politics - Pact - Guizhou - Location - Venture
Politics were central to the pact. The Guizhou location selected for the venture had a dynamic provincial chief, Chen Min’er, a rising star now seen...
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