Agere's alliance with China's Huawei threatens Intel, analysts say

Agere's alliance with China's Huawei threatens Intel, analysts say
ALLENTOWN, Penn. -- In what could be a threat for Intel Corp.'s communications chip business, Agere Systems Inc. here announced an alliance with Huawei Telecommunications Co. Ltd., China's largest networking equipment supplier.

Under the terms of the multi-million dollar deal, Huawei will use Agere's network processors and other chip products in its line of networking equipment, according to the Allentown-based company. The two companies will also co-develop chip products as well, according to Agere, formerly Lucent Technologies Inc.'s semiconductor business.

Initially, Huawei will use Agere's PayloadPlus family of programmable network processors and PI line of switch fabrics in its line of networking-equipment products.

The Huawei account is significant for Agere and other chip makers, according to analysts. China's communications market is apparently growing at a time when other regions in this sector are experiencing a deep and severe downturn, according to analysts.

But at the same time, Agere could threaten Intel's position at Huawei, a Shenzhen-based company that is considered by many as the "Cisco" of China, according to analysts.

Intel considers Huawei as one of its key accounts in the network processor space. The Chinese company reportedly uses Intel's line of network processors in its equipment.

Intel and Huawei are also co-developing a line of chip products in a laboratory in China, as part of a long-term alliance between the two companies.

Analysts believe that Huawei is working with Intel--at least for now. Huawei may be developing separate equipment based on chips from Agere and Intel.

But the deal between Agere and Huawei could weaken Intel's position at the Chinese company, according to analysts.

It's also a major win for Agere. "Agere's strength as a leading supplier of communications components confirmed our decision to partner with them," said Liu Ping, vice president of Huawei. "With Agere's technology, we believe we will gain significant time-to-market advantages over our competitors in the global networking marketplace."