A plan proposed by MediaTek Inc. (—üᢉÈ), Taiwan's largest integrated circuit designer, to set up a joint venture with a Chinese firm needs regulatory approval, according to the Ministry of Economic Affairs (MOEA).

The MOEA said that MediaTek will have to submit an application for the joint venture plan with the ministry's Investment Commission and the commission will form a special screening committee to review the proposal.

On Friday, MediaTek announced that it has partnered with Chinese electronic navigation map provider NavInfo Co. (ŽlˆÛš¤V) through a cooperation framework in a bid to explore the automotive chip and the Internet of Vehicles (IoV) markets.

Under the cooperation framework with NavInfo, MediaTek will sell its automotive chip subsidiary AutoChips, headquartered in Hefei City, eastern China, to NavInfo for US$600 million, while the Taiwanese firm is also planning to spend up to US$100 million to set up a joint venture with NavInfo in the future.

Since AutoChips is incorporated in China, the plan to sell the subsidiary to NavInfo will not necessitate a request for regulatory approval from Taiwanese authorities. However, the proposal to set up a joint venture with NavInfo needs approval as long as MediaTek's investment in the joint venture tops the threshold of US$50 million set by the government to require a review, the MOEA said.

The MOEA said that the ministry will have to make sure MediaTek's joint venture plan will not cause any leak of talent, technology or funds out of Taiwan and will impose no adverse impact on the local job market.

In addition, the MOEA said that it will look at whether the joint venture plan will create synergies for Taiwan's industries, and whether the partnership will boost the country's global competitive edge.

According to MediaTek, NavInfo, founded in 2002, is the largest digital map provider in China and the third-largest in the world. Its major clients include BMW, Mercedes Benz, Volvo, Toyota and China's Great Wall Motor. Currently, shares of NavInfo are traded on the Shenzhen Stock Exchange.

MediaTek specializes in smartphone chip development and smartphone chips account for about 60 percent of the IC designer's total sales. Faced with escalating competition from its rivals, including China-based Spreadtrum Communications Inc. (“Wu), MediaTek witnessed its gross margin for the first quarter fall 0.4 percentage points from a quarter earlier and was down 9.2 percentage points from a year earlier to 38.1 percent.

As a result, MediaTek is gearing up to extend its reach beyond smartphone chips and it has set its sights on the automotive chip business.

Foreign brokerages generally applauded MediaTek's move to team up with NavInfo, saying such a strategic partnership will help the Taiwanese IC designer cut risks, while entering China's IoV market.

The disposal of AutoChips is expected to generate NT$10 billion (US$307 million) to NT$12 billion in profit for MediaTek. Foreign brokerages said that the deal could boost MediaTek's cash position to NT$80 per share from the current NT$70.

By: DocMemory
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