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Qualcomm & TDK Form $3 billion Venture To Develop Smart Phones Using Radio Frequency Chips

January 15
8:50 AM 2016

Qualcomm Inc., The San Diego, California based chipmaker and Japan's TDK Corp. has entered a partnership worth $3 billion. The partnership deal aims to develop components for smart phones and other appliances to communicate wirelessly. The Singapore based joint venture's produce will cover the growing market of radio frequency chips used in handsets, robotics, cars and drones.

Qualcomm has agreed to invest $1.2 billion. However TDK will rotate its design and manufacturing assets and related patents. The chip maker will own 51% of the new company naming RF360 Holding. The electronics pioneer will also enjoy the opportunity to acquire TDK's stake at a later date, reports International Business Times quoting a joint statement published on Wednesday.

Qualcomm expects the transaction to add non-GAAP earnings per share within a year following the closure of the deal. However, TDK forecasts the transferred business will employ about 4,200 employees and $1 billion annual sales. The deal is expected to close by early 2017, reports Business Insider.

The market for the electronic components is expected to grow 13% a year and reached to $18 billion by the year 2020. Tying up with TDK allows Qualcomm to offer modules containing all the components required by smart phone makers through a single package, reports Bloomberg quoting Cristiano Amon, the head of Qualcomm's chip division.

Due to sluggish growth, Amon has been seeking for new growth areas for selling chips. He has also been reported to try for stepping into the computer server market and get its chips into a variety of devices including drones and robots.

Following the deal, TDK share price has rose by 5.5% to 7080 yen and recorded the biggest gain two months in Tokyo Stock Market. Meanwhile, Qualcomm share has slipped less than 1% at the end of Wednesday in the Wall Street.

Increase in mobile data speeds has made it more difficult to bring radio signals into phones. It appears to be a difficult task for handset makers to handle through discrete components.

Modern smart phones have to deal with about 49 different frequency bands, compared to just three in early data-capable phones more than a decade ago. Through solving the existing complexity, Qualcomm will help makers to develop new categories of devices and add cellular functions more quickly.

Qualcomm Inc. has been reported to witness sluggish sales growth due to huge competition in electronics market and seeking for potential growth area. Christiano Amon, head of Qualcom's chip division has perfectly utilized the opportunity to build a $3 billion joint venture in Singapore. The partnership deal aims to develop components for smart phones and other appliances to communicate wirelessly.

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