Intel Creates $200M China Fund

The world’s largest chipmaker is planting its roots deeper into China and Asia.

Intel Corp. (Nasdaq: INTC) says it has established the Intel Capital China Technology Fund with a $200 million investment. It will put money into Chinese technology companies developing hardware, software and services that are building out the Internet infrastructure in the world’s most populous country.

Cadol Cheung, a managing director of Intel Capital Asia Pacific and head of venture capital investing for Intel in China, told PE Week that the new fund announcement was intended to demonstrate the level of Intel’s commitment to China and show “our awareness of the important growth in the IT industry taking place here.” Indeed, it was the second visit to China for Intel Capital President Arvind Sodhani, who became president of Intel Capital just two months ago.

Cheung says that he and his team of seven investment professionals are eager to begin investing from the new fund. Intel Capital has offices in Hong Kong, Shanghai and Beijing. The VC unit made its first strategic investment in China in 1998 and has backed about 50 Chinese companies since. Eleven of Intel Capital’s portfolio companies in China have gone public or have been acquired. Current Intel Capital investments in China include BCD Semiconductor Manufacturing Ltd., an analog power integrated circuit design and manufacturing company; Comlent Holdings Inc., a radio frequency chip maker; HiSoft Technology International Ltd., a software outsourcing company; Maipu Holdings Ltd., a router and data communications company; and Pollex Mobile Holdings, a cellular phone software applications provider.

Cheung said that there are no plans for more country-specific funds at present. But, Intel is certainly eyeing Southeast Asia for expansion.

“Intel plans to stimulate local technological innovation and the continued growth of China’s IT industry,” says Intel President and CEO Paul Otellini, in a prepared statement. “We will invest in Chinese companies to accelerate technology adoption locally and to foster development of innovative technologies with potential for global distribution.”

Otellini and Sodhani were at a ceremony in the firm’s Beijing offices to celebrate Intel’s 20 years of working in China. Intel began operations in China in 1985. The company currently employs about 5,000 in the country and says it has invested $1.3 billion dollars in China-based R&D facilities, microprocessor assembly and testing factories, education programs and portfolio companies through its venture capital funds.

In his speech to Chinese officials, Otellini also promised to double the “Intel Teach to the Future” program’s instruction efforts in China, saying that the Santa Clara, Calif.-based chipmaker plans to train 1 million teachers and more than 45 million students over the next three years. Intel spokesperson Laura Anderson told PE Week that the education effort expansion is part of a program under which Intel representatives visit schools across the nation to provide free IT training.

After he made the China Fund announcement, Otellini went to Vietnam, where he told local reporters that Vietnam and other countries were being scouted for possible locations of Intel’s $400 million chip assembly and test factory. The facility takes completed chips and puts them into a finished package. While there, Otellini also signed an agreement with the Vietnamese government to increase computer and Internet use in that country.

Meanwhile, Dayanidhi Maran, minister of India’s Information Technology and Telecommunications Ministry, announced that Intel is close to choosing India as home to the chip testing and assembly plant in India. Bangalore, India is already Intel’s largest chip design center outside of the United States. Maran made his announcement having just returned from a trip to the United States, where he met with Craig Barrett, Otellini’s predecessor.