Intel Forms $500 Million Fund for China

Beijing, April 8 -- Intel Corp., the world's largest computer-chip maker, formed a $500 million China fund to more than triple investments in companies in the world's biggest semiconductor market.

Holdfast Online Technology Co. and Newauto Video Technology Inc. will be among the businesses targeted by Intel Capital's China Technology Fund II, the chipmaker said in a statement in Beijing today. The previous China fund spent $200 million in more than 28 companies, the Santa Clara, California-based company said.

Intel, whose processors power three-quarters of the world's personal computers, boosted spending in the country as it seeks to gain a bigger share of the world's fastest-growing major economy. Chip sales in China will surpass $28 billion in 2011, driven by demand for computing and consumer electronics, according to February estimates at research firm IDC.

``We want to foster innovation and entrepreneurship in China,'' Arvind Sodhani, president of Intel Capital, said at a briefing in Beijing today.

Sodhani said the fund, which should be used up in five to seven years, is the chipmaker's single largest in one country.

``That should give you a pretty good idea of the importance and size of commitment to China,'' he said, declining to say what returns the company's investments had made in the country.

Build Factory

Intel is building a $2.5 billion chip factory, its first in Asia, in the Chinese port city of Dalian. The Asia-Pacific region, including China, generated $5.3 billion, or 50 percent, of the company's sales in the fourth quarter.

Holdfast Online is a developer of technology for online gaming, and Newauto Video makes video equipment and network gear for use at the Beijing Olympics, the statement said, without specifying the amount that will be spent on the two companies.

Intel shares fell 67 cents to $21.08 at 4 p.m. New York time in Nasdaq Stock Market trading, leaving them down 21 percent this year.

The company, which has investment managers based in Hong Kong, Shanghai and Beijing, made its first strategic investment in China in 1998.

Last year, Intel Capital invested about $639 million, 37 percent of which was being spent outside the U.S., compared with less than 5 percent in 1998. Since 1991, Intel Capital has invested more than $7.5 billion in about 1,000 companies across more than 45 countries.

Last year, U.S.-based venture capitalists invested a record $1.4 billion in China, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association.


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