UPDATE 2-Intel to make tablet chips with China's Rockchip

Tue May 27, 2014 2:46pm EDT

(Adds comments from analysts, detail on agreement)

By Noel Randewich

SAN FRANCISCO May 27 (Reuters) - Intel Corp said on Tuesday it reached an agreement with Chinese mobile chipmaker Rockchip to make chips for inexpensive tablets running Google Inc's Android platform.

The deal teams Intel up with a chipmaker specializing in low-end mobile devices that often cost less than $100 and are popular in China and other fast-growing markets. This represents a major move for the Santa Clara, California company that has struggled to gain traction in smartphones and tablets.

The collaboration is unlikely to drastically increase Intel's overall mobile chip business, but it shows the chipmaker's determination to be successful in the mobile arena at nearly any cost, said FBR analyst Chris Rolland.

"It speaks to (CEO Brian Krzanich) being willing to think somewhat out of the box and be a little more flexible in his approach," Rolland said.

Intel gains access to Rockchip's ability to quickly launch inexpensive mobile chips as well as access to the company's strong relationships with local Chinese manufacturers focused on the country's fast-growing consumer market.

"They're absolutely bringing us speed and execution and proliferation for us that would not otherwise get done," Krzanich said on a conference call. "They also bring these relationships and partnerships that go well beyond what ours are."

With sales of high-end mobile devices losing steam in North America, manufacturers have been turning their attention to lower-end tablets and smartphones designed for consumers in China.

Under the agreement, Rockchip and Intel will make a quad-core mobile chip using Intel's architecture and branding, Intel said.

While Intel excels at developing processors for laptops and desktop computers, it has less experience designing "system on chips," or SoCs, that combine features like modems, wifi and memory.

Fuzhou, China-based Rockchip and other mobile chipmakers focus on making SoCs for smartphones and tablets. Those chips typically include ARM processor technology that competes against Intel's technology.

"It's to some degree an acknowledgement of Intel's limited capability in SoCs and very limited presence in China, particularly as you get cheaper and cheaper tablets," Ascendiant Capital analyst Cody Acree said of the agreement with Rockchip.

Intel said the agreement with Rockchip does not include an investment between the two companies.

Intel said the chip will include 3G connectivity and be available in the first half of 2015.

Shares of Intel were up 1.22 percent at $26.60, in line with trading levels ahead of the announcement. (Reporting by Noel Randewich; Editing by Richard Chang and Cynthia Osterman)

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