Intel Corp said on Wednesday that it will invest 120 million yuan ($19.3 million) to promote grass roots technology innovation in China amid deepening mistrust over information security between the United States and China.
Chief Executive Officer Brian Krzanich has sought to placate the Chinese authorities by pledging wider collaboration with local institutes and universities.
The moves came as the US added three major partners of Intel in the supercomputing sector to a technology embargo list.
Krzanich said that the vibrant atmosphere of innovation in China will help Intel find new business opportunities beyond personal computers and other traditional information technology sectors. "There is a huge opportunity for Intel to continue to grow together (with China). This growth is being driven by the public cloud, network transformation, big data and new IT services," he said.
About 80 million yuan of the investment will be used to set up an angel investment fund. It will be the first seed-stage fund for Intel, and it will focus on companies preparing for going public.
The investment is evidently an attempt to butter up the Chinese officials. Earlier this year, in a move to boost the slowing economy, the central government encouraged individuals to start their own businesses. Ian Yang, president of Intel China, said that the newly announced investments are in line with that strategy.
Intel said that it is also considering deeper research ties with local universities. Chengdu-based Southwest Jiaotong University and Tsinghua University in Beijing are the first partners of the Intel innovation project.
"It is not good enough to bring products that we already developed or already used elsewhere. A real partnership means you bring it first to China," Krzanich said. "We want to share pioneering ideas up front with China."
Antonio Wang, an analyst at consultancy International Data Corp, said a good relationship with the government is becoming critical for Intel and other overseas technology companies because of the "panic" over IT security.
Intel may have to cut loose some of its top research partners in China because of a new order from the US government. Supercomputer centers based in Guangdong province and Tianjin municipality and one at a military academy－the National University of Defense Technology in Hunan province－have been added to a US "Denial List" that bans advanced technologies from being sold to these organizations, US-based technology Website vrworld.com reported on Tuesday.
The report said the ban may damage sales of Intel's Xeon Phi accelerator because the institutes are making the world's fastest supercomputers and will need vast volumes of high-end Intel devices.
Multiple sources at Intel confirmed to China Daily that the US had blacklisted these customers, but they said it was unlikely to harm Xeon products' sales.
"The ban only covers research cooperation that may pose threats to the US. On-market product sales will not be affected," one of the sources said.
China and the US have stepped up information security in the past year, with both claiming to be victims of online espionage.
China is also seeking to ensure IT security by imposing new industry standards. Some foreign technology providers have said these moves are intended to oust foreign companies from the government procurement sector.
Chinese regulators have denied that accusation, saying that local companies must also abide by the regulations.